WATCH | This is how Dixie Brands has been able to scale its cannabis company when you can’t technically cross state lines in the U.S.
Smoking weed is permitted in 30 states in America. But in the majority of those states, it's only allowed for medicinal purposes.
While adult use for those over 21 is allowed in eight states and the District of Columbia, weed is still a ways off from being fully legalized at the federal level. And that is giving way to a hazy regulatory environment.
"The only thing that is consistent in the cannabis industry is change," Dixie Brands CEO Tripp Keber told Circa.
A call for clearer rules
The market is so nascent it makes it tough for companies to scale and analysts to collect data.
Keber's company, Dixie Brands, makes marijuana-infused products like a THC-tinged soda (the Elixir), a taffy, gummies and a CBD (cannabidiol) topical balm. Dixie also produces Leafs by Snoop, Snoop Dogg's cannabis product line.
The growth of companies like Dixie Brands has made the pot sector a $6 billion market in 2017.
One hurdle, for example, is that any marijuana products produced in one state must remain and be consumed in that same state, Keber explained. Meaning he can't ship across state lines, even to jurisdictions where weed is legal.
While other business sectors in the U.S. are calling for less regulations, a growing number of pot-preneurs are asking for clear rules.
"In addition to the inefficiencies, meaning the lack of interstate commerce, each and every state has its own set of rules and regulations," Keber said. "The compliance framework is incredibly complicated, and so it requires a tremendous amount of intellectual horsepower."
Each state for itself
Since marijuana is not a federally legal market each state has had to craft its own rules. For Dixie, that means not only not being able to ship across state lines, but having to set up manufacturing in each state they want to distribute, which you can imagine isn't cheap.
"And so here you have an industry that wants to be regulated, that is willing to pay taxes," Keber said. Simply put, it's really hard to follow the rules when you don't know what they are.
"Last year alone, out of 500 or so companies that were put under the microscope in terms of the level of compliance, only one passed it," Giadha Aguirre DeCarcer, CEO of analytics firm New Frontier Data, told Circa.
The U.S. legal cannabis market is set to bring in over $24 billion by 2025, according to market research by New Frontier Data. And in 2020, $2.3 billion could be levied in taxes. That's not even counting states that may legalize weed in the future.
Ripe for job creation
New Frontier Data shows 300,000 new jobs could be added in three years time.
"People think that the only jobs that stem from this industry are going to be growing the plant, or touching the plant, processing the plant and selling the plant. Nothing could be further from the truth," Aguirre DeCarcer said. "The ABCs of any industries are still in need in this industry."
She and Keber also say a surge of fresh venture capital investments has flowed into the sector. They agree that could help raise the blooming industry's profile in Washington and Wall Street.
But lack of clear rules could stall the budding growth. "There absolutely needs to be greater standardization across all 30 markets that allows us some type of elevated transparency," Aguirre DeCarcer said.
Without clarity, it makes it "difficult to understand how revenue stream and tax revenue from one state would then compare to sales and transactions in another one," she said. As the market matures, it will be easier to read and make a case for, the data firm hopes.
Canada or bust?
In the meantime, it makes Canada look like a more business-friendly option for companies like Dixie Brands since the country is poised to fully legalize weed by 2018.
"Canada is allowing for the export and/or import of cannabis. Potentially you could set up a facility in Toronto, as an example, and distribute to countries like Colombia or Uruguay or even Germany," Keber said. "And so that becomes a much, much more efficient business model."
Pot-preneuers: Time to act is now
President Trump hasn't revealed his position on pot. But businesses believe marijuana could be a huge boost to U.S. economic growth, which is in line with the administration's priorities.
"The current administration is laser focused on creating jobs, generating tax opportunity; you can't find [anything] like the cannabis industry that is more specifically designed to deliver in these two categories," Keber said. "It's literally right there in front of us."