Cannabis Industry Pushes for Federal Funding During COVID-19 Outbreak

How Has COVID-19 Effected Cannabis?

When the nationwide quarantine began, it made headlines that cannabis was considered essential. Alongside these headlines were discussions as to how sales had spiked due to people hoarding a couple of month’s supply of the plant.

However, since this time, cannabis sales have dropped back down to a stable level. The industry has had the benefit of remaining open in most states, but not without the costs of this epidemic.

When the world economy falls as much as we’ve seen over the last few months – when people lose their jobs and can barely afford to pay rent – cannabis, in many regards, becomes a luxury. The industry, just like any other industry, depends very much on the overall well-being of the financial institution. Therefore, it has been affected.

“In my view, there are businesses that are doing well and businesses that are not doing as well,” claims Michael Bronstein, president of the American Trade Association for Cannabis and Hemp (ATACH). “The pandemic has been a place that’s accelerated the normal marketplace of choosing winners and losers. And I think what we’re finding is those who have run solid businesses will be able to weather the storm.”

Though it took nearly a decade of advocacy, the cannabis industry now operates nearly identical to other industries (with a few exceptions that we’ll get to later). Big corporations within the industry that have developed a stable marketplace for themselves have got a solid foundation for this financial collapse. However, the little guys that have been getting by on a month-to-month basis are the ones who are going to be most affected.

“As I see it, there’s a lot of opportunity within the cannabis market that didn’t exist prior to this pandemic,” Bronstein informs us. “For some companies, it’s created a place where they’re assessing the markets they’re in, they’re assessing their business model, they’re assessing what it is that they can do in this marketplace. For others, it’s been intensely damaging.”

“I think there’s a mythology out there that since cannabis has been deemed an essential business, they haven’t felt an economic impact from the response to COVID-19. And that’s just not true.”

Just like much of the United States economy, much of the cannabis industry is made up of smaller businesses. As we’ve discussed, these Mom-and-Pop operations are the ones struggling most through this economic shutdown.

“Even big cannabis businesses are struggling,” Bronstein continues. “The capital market has frozen, and cannabis businesses do not have access to traditional financing. And this has caused a number of hard issues hitting the industry all at once.”

What Does the Letter to Congress Propose?

Congress is already in a heap of trouble due to this financial struggle. Much of their efforts are currently to maintain the economy in one way or another to what we knew just a few months ago. The big issue is, nobody knows when all this will end.

News has come out that states are reopening and this is a promising sign, in terms of the economy. However, there are a lot of factors to consider. For example, who’s to say we won’t see another spike in coronavirus infections once the colder weather comes back later in the year? Or, if people remain fearful of infection when the country re-opens, are they going to go out and fuel the economy the way they did before?

This has always been one of the most difficult aspects of trying to make it in the cannabis industry. Unlike other industries, you can’t walk into a bank and receive a loan for your cannabis business. Many businesses currently in operation were funded out of pocket.

And though this is something nearly impossible for a young entrepreneur to handle him/herself, we can’t forget the fact that there are a number of taxes and strict regulations surrounding this industry. For example, most states require a license to grow cannabis and, in some of these states, licenses can easily enter into the thousands of dollars annually.

Making a Cannabis Industry for Everyone

Ideally, you want regulations to be on comfortable middle ground. The Hemp and CBD industry is a solid example of this. Since hemp was legalized under the 2018 Farm Bill, little regulations have been set into place to help stimulate this industry. CBD itself still remains unapproved by the Federal Food & Drug Administration (FDA).

There are a number of problems when it comes to lacking regulations. For example, plenty of shady businesses have been able to enter the CBD marketplace, selling illegitimate products to people and local businesses. When this practice continues, we become vulnerable to damages such as that outbreak of vaping lung disease just last year. That outbreak, by the way, was linked to cannabis products on a number of occasions.

“What we’re really looking for is standardization of the market,” Bronstein explains. “And not to operate in a regulatory grey area.”

Though the proposal of this letter to Congress was made in order to provide relief for the cannabis industry now, the true goal is to offer a framework for how the industry should operate alongside the federal government once this is all over.

“We have had conversations with some members of Congress that have been intimately involved with these issues,” Niehaus tells us. “and with some of the states that have been involved with this issue. And the response has been extremely positive.”