Yesterday, we took at look at California Proposition 64, an upcoming ballot measure that would legalize recreational marijuana use and sales in the Golden State. The measure, which looks almost certain to pass – some polls have put support as high as 71% – is likely to have significant impacts on the industry nationwide. Today, we’ll consider what aftershocks we’ll likely feel from cannabis legalization in California.
To those who are unfamiliar with the power of regulatory processes in California, cannabis legalization in the state may not seem more important than the measures currently on ballots in Arizona, Maine, Massachusetts, or Nevada. But to understand the impact that California can have on regulation across the country, it’s important to understand the outsized role that California has come to play in the nation’s regulatory regime.
Because of California’s progressive regulatory history, the state has a history of shaping policy beyond its borders. The most notable instance of California’s rulemaking power is found in the exemptions created for California in the Clean Air Act. Because air quality problems had led to strict state standards for vehicle emissions before the nationwide Clean Air Act was enacted in 1963, California successfully petitioned the EPA for the right to be exempted from federal regulation of vehicle emissions. In cases in which state regulation is “at least as protective of public health and welfare” as national standards, California is able to obtain a waiver from the EPA to promulgate its own standards.
Since then, not only has California regularly petitioned the EPA for such authority (most notably with regards to the regulation of carbon emissions in 2007), but thirteen additional states follow the more restrictive California standards.
All of this matters because about one in ten Americans live in California. And though the federal government often looks to California standards when it upgrades national regulatory frameworks, the more important force might be the sheer size of the market. When manufacturers make cars in America today, they don’t make a separate set of cars with lower emissions for California, they simply make better cars for the country as a whole.
When it comes to cannabis legalization in California, the same effect is likely to be seen. Today, according to market estimates by industry investor network ArcView Group, California’s medical marijuana program accounts for 49% of legal cannabis sales in the United States. Post legalization, the vast majority of American legal cannabis sales are likely to come from the state.
This will mean changes for the rest of us. Not only is California’s legislative heft likely to push forward the cannabis conversation in the Capitol, but the massive quantity of newly legal weed money can’t help but change the way that cannabis business is done. From interstate commerce to banking practices to industry investment, we’ll take a look at what changes we’re likely to see tomorrow.