December/19/2019

Several delivery companies officials said that last year California adopted a controversial policy that permits the delivery of cannabis products throughout the states even in the towns and cities where recreational marijuana dispensaries prohibited. 

Speaking to Marijuana Business Daily, the same officials said that their concern is the outcome of the court case challenging the policy which will be held in Fresno Superior Court on April 20, 2020. 

If the case is successful in prohibiting delivery in those areas, many delivery companies will be out of business and looming possibility of strengthening the state’s black cannabis market. 

The lawsuit which was filed by 24 municipalities and Santa Cruz County said that by approving statewide delivery of marijuana, the California Bureau of Cannabis Control surpassed its authority. 

The lawsuit quotes Proposition 64, which allowed the local government in states where marijuana is legal to prohibit commercial marijuana activities in their jurisdictions, and the BCC undermined the cities rights.

 The CEO of Fune Brand, which is located in Clearlake, Eric Sklar, said that if the case is passed, many marijuana businesses California will suffer from loss of business. Fume Brands is a retailer and delivery business, and it serves the most significant part of the wine region in the state. Sklar is also a member of the States Fish and Game Commission. 

Sklar said the outside-in delivery is what sustaining marijuana businesses because there are many marijuana dispensaries, and the ability to supply people who are in cities where marijuana businesses are banned is what is saving these businesses. 

Sklar further estimated that about 75% of the deliveries made by his companies into the seven bordering counties are done under the BCC statewide delivery provision. And without the policy, the cities and towns would be inaccessible. 

He also noted that many of the other marijuana businesses face similar issues because about two-thirds of cities, towns, and villages in California have prohibited set up of licensed marijuana dispensaries or outlets within their jurisdiction. This leaves approximately 260 delivery companies to service the entire state of California. 

Marijuana company, East of Eden, which is located in Salina, filed a countersuit against Santa Cruz County, and it is scheduled for hearing in July in Santa Cruz Court. Asking to join the lawsuit is Attorney General Xavier Becerra, who is acting in defense of the BCC policy. Sklar said that this is a significant move by the state to support the BCC policy because, without it, there will no-longer be outside-in deliveries in California. 

According to a board member of the California Cannabis Association, Zach Pitts, the BCC announcement of the outside-in delivery model in California was a gamechanger for delivery companies since they did not require to have a delivery hub within the restricted cities and towns. 

The statewide delivery policy was launched in January of 2018, and only delivery companies legally permitted to conduct business were those that were locally licensed by the cities and countries. 

Some delivery businesses were forced to relocate to cities that were quick to license, and this saved many companies that were on the verge of shutdown. 

 Eaze is a tech company that helps sell marijuana online, and since July of 2018, the has made 595,000 deliveries of which 376,000 has been from areas that have prohibited retail marijuana outlets. 

Pitt said that if the outside-in policy were not existence, the probability of the business going to the thriving back market in California is high. He further noted that the statewide delivery policy had contributed significantly to offsetting and preventing the growth of the illicit market. 

Pitts estimated that about 90% of their deliveries are from the cities and towns with the ban for marijuana business in place. 

Driven Deliveries is based in Los Angeles, and its president Brian Hayek said that the outside-in policy gave its business access to 30% of deliveries, which equates to an additional 9-10 million potential customers. 

Although the delivery companies are hoping that the state will win the case, the outcome is still uncertain. 

In case the state loses, some businesses are located strategically, which could ensure their survival despite the low customer’s base. 

There is also the probability of the case being stalled in the court for a long time such that it won’t matter. 

In case the state loses, it will be impossible for cities and towns to know what is being delivered; therefore, the business can continue operating despite the risk of being caught. The black could also continue with their illegal delivery operations as they have been doing without getting nabbed.