Canada: America's Next Marijuana Capital

Chris Swanepoel

In a number of states, the legal use of marijuana for recreational purposes is well on its way, but it remains illegal on a federal level. This is causing major problems for the industry’s emerging dealers.

According to The Guardian, people like Andy Williams of Colorado are faced with numerous financial complications as a result of the situation. The First Bank of Colorado has closed his accounts and those of all his family members involved in the business. This effectively prevents him from attaining any financial help from the institution, forcing him to fund expansion through personal loans from friends and family.

All his transactions have to be in cash, and his employees are faced with difficulties when applying for loans and mortgages as they have no proof of income. In addition to this, Williams estimates that he gives the IRS an additional $600,000 per annum regarding expenses which, due to section 280E of the U.S. tax code (which prohibits the deduction of expenses related to controlled substances), cannot be written off.

While Williams and his U.S. peers face these obstacles, their Canadian counterparts are set to enjoy more freedom to expand their business as Canadian prime minister Justin Tredeau has promised to legalize the use of recreational Marijuana on a federal level, allowing business owners access to investment, less restrictive tax policies, and banks that can regard the marijuana industry as any other.

Although Tredeau has yet to follow through on his promise, when he does, the American marijuana industry will be seriously disadvantaged.

A map showing the states where customers have come from is displayed inside a hallway at a medical marijuana dispensary in Denver, Colorado. [Getty Images/Photographer: Matthew Staver/Bloomberg]

Williams believes that Canadian companies will use the growth and development that’s occurred in the U.S. since legalization began as a stepping stone to propel them past their American opposition.

 “The real setback will be longer term in their jump in developing that intellectual property, whether that’s in producing marijuana or developing brands or discovering new uses for cannabis in the medical field,” he said. “It’s the long-term effect of being behind the eight ball that I’m concerned about.”

Although recreational marijuana is still illegal in Canada, its medical marijuana system is rated as one of the best in the world. Its federal health authority, Health Canada, already has over one million square feet of approved marijuana production space under its control, with recent reports indicating a growing stash that has already reached the seven ton mark.

“We currently have the most industrialized process for marijuana production in the world,” said Alan Gertner, the co-founder and CEO of Toronto-based high-end cannabis lifestyle brand, Tokyo Smoke.

“That puts us in a position where, with the repeal of marijuana prohibition at a national level, we can build significant infrastructure and build brands and build intellectual property at a pace that’s [unrivaled.]”

A a state-of-the-art fully automated medical marijuana production facility in Scarborough. [Getty Images/Richard Lautens/Toronto Star]

Gertner added that due to the growth of the industry being stunted by federal law in the US, the door is open for the better funded Canadian suppliers to step in and take control of the market once it is legalized.

 “It doesn’t at all feel like you’re experiencing modern retail in the design of the store, in the layout of the store, in the staff of the store, in any part of the experience, and it’s possible that almost overnight Canada could bring modern retail to the marijuana space [in the U.S.],” he said.

“The same is true with growing in the U.S. None of the growing facilities in the U.S. feel like modern, industrial scale growing operations, whereas if you look at the medical marijuana program in Canada it’s a modern program built for industrial scale.”