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California Cannabis Businesses Face Illegal Competition, Litigation and More

Recently, cannabis growers and distributors have been facing a storm of complications from robocalls to illegal growers. As the cannabis industry grows, so do the challenges. Read on for important updates regarding marijuana in the golden state.

What are Robocalls?

You’ve probably gotten a call recently asking about “your car’s extended warranty.” These calls are incessant and annoying, but where do they come from?

Robocalls come from a computerized autodialer with a prerecorded message. The messages can be about anything from political campaigns to insurance. Most of us know that most robocalls are scams, but sometimes they can alert the public about a public safety issue or provide other information.

So, what do robocalls have to do with cannabis?

It’s All About Reach

The most important thing for small businesses or those new to the cannabis industry is reach – alerting your consumers to the product. One cost-effective way to ensure that you can answer calls and distribute information is with an automated calling system.

Some growers and sellers use robocalls to reach their customers, but many are unaware of the legal limitations. The Telephone Consumer Protection Act, prohibits the use of auto-dialing without the written consent of the receiver. This means that unless these cannabis businesses obtain permission from their consumers, they could be legally liable for hefty fines under the TCPA.

Unlawful robocalls can result in fines ranging from $500-1,500 per call, which can add up very quickly. Business owners just starting in the cannabis industry aren’t aware of the cost of a robocall, and many are buried under the weight of class action lawsuits. The best thing these companies can do is work with an experienced attorney and keep extensive records of all correspondence with consumers.

Illegal Competition

In Nevada County, California, there’s a growing conflict between legal and illegal marijuana cultivators. Since the first medical marijuana law in 1996, Prop 215, growers in the Nevada County area have multiplied steadily due to the favorable conditions and fertile soil.

Now that state-wide regulations regarding cannabis are more relaxed, growers in the region have quadrupled rapidly with no regard for cultivators who began their business in the days of Prop 215.

As the younger, bolder crowd of growers moves in, authorities are taking direct action to curb illegal marijuana cultivation. Citizens and local police are constantly looking for unlawful practices, but it takes a herculean effort to stop cannabis crimes.

To bring order to Nevada County, the Board of Supervisors passed Ordinance No. 2405 in 2016. The ordinances ban outdoor cultivation and list the negative impacts illegal cultivation has on the community, like widespread theft, attempted homicide, and counterfeiting.

The Nevada County Board also attempted to put the ordinance on the ballot, but their efforts failed miserably at the polls. Later in 2016, California passed Proposition 64, which legalized the production, cultivation, and sale of cannabis but only if growers follow a strict set of rules.

At this point, your drowning in information and probably wondering why all of this matters. Let’s take a look.

The Wild West

Nevada County officials estimate that over 3,5000 cannabis growing sites are in the region, but less than 100 of those sites have the correct permits. As you can imagine, getting a permit to grow marijuana is expensive, almost too expensive for small cultivators. That said, while the licenses cost a pretty penny, they ensure that the grower is following state guidelines and that the product itself is being cultivated properly and prepared correctly for the consumer.

In addition to cost, another issue for many growers in California is that cannabis is still illegal at the federal level. Even if they can afford the expensive permits, cultivators can’t write off business expenses on their expenses. Cannabis businesses have to rely on cash and capital to keep the lights on.

Until the state can devise a way to make legalizing operations more affordable, illegal growers will continue to do business. Legal cultivators will continue to struggle with unlawful competition, and the community will have to bear the brunt of the consequences.

So, What Now?

The main takeaway from all of this is that while the cannabis industry is booming, there are real consequences to doing business illegally. Not only that, but many growers who have been in the game for years can attest to the fact that building a business that is illegal according to the federal government is no small task.

The best thing you can do as a new cannabis grower or distributor is consulting an attorney. Lawsuits, permits, and evolving legislation are challenging to keep up with if you don’t have proper guidance. Legal issues can cost you your business – don’t wait to contact a licensed attorney about your cannabis business needs today!

For more information, contact Purdy & Bailey, LLP.

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