PORTLAND, Ore. — When Oregon legalized recreational cannabis use eight years ago, people flocked from all over the country to either use it for themselves or get in on the ground floor of the burgeoning business. Today cannabis is a billion-dollar industry, producing hundreds of millions of tax dollars each year for state coffers.
Across the U.S., attitudes about cannabis use have been shifting as well. A whopping 88% of Americans now support legalization of cannabis in some form, according to Pew Research, and cannabis is now legal in 23 states, three U.S. territories and the District of Columbia.
But still the industry is plagued by issues stemming from the federal level, where it remains a Schedule I controlled substance alongside heroin and crack cocaine. Meanwhile, local crime, oversupply, the black market and high fees pose a threat to cannabis businesses in an industry that's still less than a decade old.
This week on Straight Talk, KGW's Ashley Korslien was joined by Joy Hudson and Marissa Rodriguez. They're the co-founders of Nimble, an Oregon-based wholesale cannabis distribution company. Hudson is a board member for the Cannabis Industry Alliance of Oregon and Rodriguez serves on the Oregon Liquor and Cannabis Commission and the Oregon Health Authority's rules advisory committees and workgroups.
Both Hudson and Rodriguez were recognized as "women of influence" this year by the Portland Business Journal.
Attitudes about cannabis
The Pew polling shows that the vast majority of Americans are open to cannabis legalization in some form, which could be medical only, but they also found that 60% of Americans think it should be legal for both medical and recreational use. Half of adults now say they have tried marijuana at least once, according to a Gallup poll, which is a new record.
With that it mind, we asked Hudson and Rodriguez if they think cannabis use is becoming normalized.
"I would say that I've seen a tremendous difference even in myself," Hudson said. "I wasn't a consumer before I came into the industry. And in 2015, when I entered the industry and began consuming, I found all kinds of both recreational medical uses for it that I still use today. So it is changing."
"I'm grateful for a regulated marketplace," added Rodriguez. "With regulation ... we've had a lot of product innovation, which I think has inspired curiosity with potential new consumers, you know, being able to dose carefully or eat candy instead of smoke something, and that lessens the stigma the more that we reach out to folks who have curiosity."
Seniors are the fastest-growing population of cannabis users. A federal survey found that the share of Americans over 65 using cannabis has tripled in the past decade from 11% in 2009 to 32% in 2019.
"I think that there's a handful of those seniors that maybe had consumed cannabis before, and they're returning to it — they're at an an age and the market is opening itself up for safe access. And you are seeing generations return to cannabis," Hudson said.
"They can go to a store, they don't have to find someone in their neighborhood, they can get a particularly dosed product, there's an expert behind the counter who can advise them and they're not worried about breaking the law," Rodriguez said.
The cannabis economy
"In 2022, we were $170 million in tax dollars to Oregon, and we're tracking the same for this year," Hudson said of the cannabis industry's impact on the Oregon economy. "And those funds go to education, they go to law enforcement and they go to health and rehabilitation."
Of course, the lion's share of cannabis tax dollars since 2020 go toward Measure 110 grants for drug treatment and related programs, something that other stakeholders have not been thrilled about.
While cannabis tax revenue has been relatively stable, the cannabis business is not as lucrative as it once was. The glut of different businesses eventually oversaturated the market and prices started to tank.
"It absolutely is the case," Hudson said. "I mean here in Oregon alone we have over 800 cannabis retailers and, to give you an example, we have 519 Starbucks and McDonald's combined. We have 282 liquor stores. So having over 800 retailers is way too many."
"I would say even as early as 2019, we started to be concerned about the number of licensees," agreed Rodriguez. "The number of producers — who are the farmers who are growing the product — processors, all of the license types, there were more of us than than consumers in Oregon. And we do have a lot to contend with."
At the Cannabis Industry Alliance, Hudson said, they were active in a license moratorium which extends until April 2024. Now they're looking at a "per capita" model, like liquor stores currently operate under, which would limit the number of overall licenses.
A long-term fix for the oversaturation issue is sorely needed. The last time a moratorium on licensees lifted, according to Hudson and Rodriguez, they received about 500 applications within the first few days. Most of those were for growers.
The black market and banking
Despite legalization, there's a thriving black market marijuana industry operating throughout Oregon, with illegal operations often posing as legal cannabis or hemp farms. It's a major problem particularly in southern Oregon, where legal outdoor grows are common — allowing black market operations to blend in.
Hudson said that she's glad the state of Oregon hasn't driven up cannabis taxes, as that's something that could push buyers toward the black market product.
"I would like to see — and you know, what I believe is happening, but I'd like to see it happen in a deeper way — where both our regulators and our legislators are working more hand-in-hand with the industry through our associations or otherwise to build the framework for a more successful future," Hudson.
Cannabis businesses weren't eligible for any federal COVID relief funding, and banking remains a major issue in for the industry due to the federal classification of cannabis as a Schedule I substance. That scheduling means cannabis businesses have to do their banking in cash.
But the U.S. Department of Health and Human Services recently recommended cannabis be reclassified from Schedule I to Schedule III under the Controlled Substances Act, which would be a huge breakthrough for the industry, changing cannabis to a substance with an "accepted medical use and low risk of abuse."
"It's actually really important," Rodriguez said of the potential change. "One of the things that affects all cannabis businesses across the country is a little known tax code called 280E, and it doesn't allow us to deduct our business expenses, other than cost of goods sold, before our tax liability is calculated. So we are essentially paying income tax on payroll, on our rent, on our insurance, on all of our regular business expenses. And this is because we are a Schedule I drug.
"If and when we are to be a Schedule III drug, 280E immediately goes away and it creates a lot more cash flow for Oregon businesses. Everybody is operating at razor-thin margins or just losing and waiting for this change and to be able to have cash flow."
Hudson and Rodriguez are still skeptical about this potential schedule change at HHS because very little specific information has come out as yet. But if it were to happen, it would a game-changer for the cannabis industry.
What they are optimistic about is the SAFER Banking Act, which would lift restrictions at the federal level that have prevented state-licensed cannabis businesses from accessing many banking and financial services. Sponsored by Oregon's U.S. Senator Jeff Merkley, the idea behind the bill has been kicking around for a long time. But the most recent iteration of the bill has bipartisan support and is making some headway, it seems.
"We are so fortunate in Oregon, Maps Credit Union in Salem has been banking cannabis since the very early days. They're really reasonable, thoughtful, organized, professional — they have been a great partner to a lot of businesses — but SAFER Banking will get us more banking services," Rodriguez said. "You know, we can't get a line of credit even if we're a remarkably successful company ... payment processing, you know, we can't even sell a T-shirt on the website."
Even if it doesn't happen this year in Congress, Hudson and Rodriguez think SAFER Banking will pass sooner rather than later.
Straight Talk airs Friday at 7 p.m., Saturday and Sunday at 6:30 p.m. Straight Talk is also available as a podcast.