Not Quite Legal: Canada’s New Cannabis Regulations

Not Quite Legal: Canada’s New Cannabis Regulations

Recreational use of cannabis has been legalized in Canada, but it isn't quite the legalization advocates have long fought for.

In November 2017, Parliament passed the Cannabis Act (C-45) to fully legalize cannabis for all uses in the country. When it goes into effect October 17, it will make Canada the second nation in the world to do so, after Uruguay. Legalization coming to Canada is bittersweet (or even just plain bitter) for the small-scale businesses and activists that have worked to pave the way for this moment and are now getting shut out of the legal industry. Because Canada already has had a publicly-traded and federally legal medical marijuana market since 2013, it is on course to dominate the global marijuana trade at the expense of locally owned small businesses everywhere.

From Compassionate Use to Capitalist Use

In 2001, Canada became the first country in the world to legalize marijuana for medical use. Like similar legislation passed in California five years earlier, patients could grow their own or designate another grower to do it for them. In this way, Canada’s “designated growers,” or “DG’s,” had a similar rise in early medical markets to “collectives” and “caregivers” that were directly serving patients in the U.S. Canada’s road to legalization has mirrored that of its southern neighbors’ in many ways, but with one notable exception; sweeping federal medical legislation paved the way for Canada to corporatize the industry while maintaining a criminal element and securing domination in the global marijuana trade.

In 2013, influenced by the momentum generated by the recent passage of legalization initiatives in Colorado and Washington, the Conservative government under then-Prime Minister Stephen Harper passed the Marihuana for Medical Purposes Regulations (MMPR). The MMPR replaced the smaller-scale DG’s, often criticized as being a front for organized crime, with large-scale corporate Licensed Producers (LPs).

Because LPs have been legal cannabis producers nationwide in Canada since 2013, they have been public entities for just as long. When Liberal candidate Justin Trudeau was challenging Harper in the 2015 elections, he vowed to legalize marijuana nationwide “right away” if elected. In 2016, the Liberal government began discussing plans to carry out the campaign promise and, in November 2017, approved C-45, set to go into effect October 17.

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Because LP’s will now be serving an adult use market the size of California, there has been a rush of mergers and acquisitions in Canada and the U.S. as global investors seek to stake their claim on these foundational global markets. State-legal companies profiting from the sale of cannabis have been unable to make the leap to Wall Street in the U.S. and many have joined forces or sold out entirely to Canadian LPs with Wall Street ambitions when federal law changes stateside.

In February of this year, Toronto-based Cronos Group (CRON) became the first Canadian corporation to be listed on the NASDAQ, marking a milestone for Wall Street. Cronos also has research holdings in Israel and makes pharmaceutical cannabis products, an industry that has been brewing in Canada since the MMPR and the looming FDA approval of GW Pharmaceuticals Epidiolex in the U.S. market. In March, Cronos acquired California-based MedMen, a billion-dollar company with a corner on the Los Angeles market, now the largest adult use marijuana market in the world. Cronos plans to roll out the MedMen brand in Canada when C-45 goes into effect.

Until recently, Cronos has boasted that it had the largest marijuana cultivation facility in the world at 315,000 square feet. In February, Canopy Growth Corporation (WEED) announced an over 1 million square foot facility in British Columbia. Other competitors may seek to top that ahead of the October roll out as well.

In the meantime, patients have suffered from lack of access to DG’s, and small businesses have been shut out of the legal market, meaning the multi-generation growers in places like British Columbia will remain outlaws after legalization takes effect and will potentially face stiffer penalties than before if caught.

Not Legal Enough

The grassroots activists who paved the way for the Canada’s C-45 aren’t exactly thrilled. Just as in the United States, medical or adult use cannabis legislation has often come at a big cost to the small businesses and compassion communities that drove the issue into the mainstream.

Cannabis legalization should be about civil liberties, not about making big money on the stock market,” says well-known Canadian activist Jodie Emery.

Emery was speaking to Global News Canada from a 420 celebration this year in Vancouver, British Columbia, about why the work isn’t done and they will still be practicing peaceful protest next 420.

420 will definitely be a protest as long as there is still stigma and discrimination against people for cannabis. Even if the federal government legalizes it, their legislation actually introduces tougher penalties, so everything that happens here today will still be illegal next year. That’s why we have to keep protesting,” Emery said.

Canadian legalization does not take place until October 17, and not a minute before. In January, Prime Minister Justin Trudeau made it clear that, right now, there is no plan to retroactively remove marijuana offenses and there will be no stop to arrests and prosecutions until legal sales begin this fall.

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We recognize that anyone who is currently purchasing marijuana is participating in illegal activity that is funding criminal organizations and street gangs. Once the law is changed, we will, of course, reflect on fairness in a way that is responsible going forward, and therefore we do not want to encourage in any way people to engage in that behavior until the law is changed,” Trudeau told reporters at a press conference in January.

Globe and Mail columnist Andre Picard echos activist Jodie Emery’s sentiments, “Canada is taking a much more convoluted and outdated approach [than some American states].”

Picard points out that the current Controlled Drugs and Substances act only lists eight cannabis-related offenses, while C-45 will have 45, “and many penalties will be far stiffer.” But he warns most importantly about the new “illicit cannabis” classification.

The new law will also create something called ‘illicit cannabis’ – covering all products that are not purchased in a provincially-regulated store, or grown legally. If you distribute "illicit cannabis" to a minor, i.e. share a joint with a teenager or sell them a bit of pot, you could face a $15,000 fine and 18 months in prison for a summary offence and up to 14 years in prison for an indictable offence. By comparison, selling liquor to a minor will land you a maximum fine of $10,000 in most provinces,” Picard writes.

He says it is especially problematic in the provinces of Ontario and Quebec, where “they are creating a state-run monopoly.” And therein lies the rub. Canada isn’t decriminalizing and de-scheduling cannabis, it is regulating a commercial market while retaining the right to arrest people. It’s the same model as adult use legalization in the United States, and while possessing legally produced cannabis will be legal, this isn’t the legalization advocates have fought for.