How marijuana legalization will change the pot industry


In one episode of HBO’s hit show The Wire, Stringer Bell, the brutal head of a Baltimore heroin cartel, demands that his meetings about the day-to-day operations of the “game” be run in strict compliance with Robert’s Rules of Order: the street-corner pushers have to be recognized by the chair before speaking. Though the scene seemed outlandish, perhaps it was ahead of its time.

Recently, the federal government announced at the United Nations that it would be tabling legislation in spring 2017 to legalize the recreational use of marijuana. Legalization will drastically change the landscape. Smaller dealers will be put out of business by dispensaries both big (Shoppers Drug Mart and the LCBO may one day sell marijuana) and small (farmers’ markets could offer “artisanal” pot).

With legalization, the focus on marijuana will shift from the criminal courtroom to the boardroom. The reason for this change is obvious: legalization will create a cash cow. 

It’s estimated that the industry will be worth more than $1 billion by 2020. Here are some of the legal issues that should be on your radar.

The lowdown on reefer regs

While the specifics of legalized marijuana are unknown, the current regulatory requirements for medical marijuana provide some insight.

Marijuana can now be grown for sale only if the grower meets the requirements set out in the Marihuana For Medical Purposes Regulations. The MMPR requires that “licensed producers” (i.e., the only legal growers at the moment) pass criminal records checks, ensure that sufficient security measures are in place at their premises and comply with various manufacturing protocols, among other things. The process is highly technical and demanding. Only 30 of the 1,284 applications received had been approved as licensed producers, with over 320 still in process.

Allard v Canada

In February 2016, a federal court judge struck down the MMPR as unconstitutional. 

While the decision focused on the right of patients to grow marijuana for personal use, it’s important more generally: the court explained that the regulations were unconstitutional in part because their effect was to limit supply, which in turn increased the cost and decreased access to marijuana. 

In addition, the court in Allard noted that, unlike other drugs, marijuana poses no risk of a lethal dose. The safety concerns about other drugs are thus less valid when it comes to marijuana. It doesn’t carry the same risk of overdose as cocaine or even Aspirin. 

The court stated that other risks controlled by the MMPR may also be overstated. For example, public safety concerns allegedly associated with growing operations (e.g., mould, fire and criminal activity) were found to be largely unproven in the case.

Location, location, location

The MMPR prohibits growing in residential dwellings. Many municipalities have gone further and classified medical marijuana growing as an agricultural (or even an industrial) activity and have put zoning barriers in place.

It’s unlikely that this approach will vanish with legalization, because NIMBYism will be in full force. While the Joneses might be in favour of legalized and commercially available marijuana, they could fight to prevent that new grow op from setting up shop around the corner from their home or little Johnny’s school.

Location is not just a concern for growers. The number of cafés and dispensaries that have already popped up show how this billion-dollar industry will blossom. These businesses will also face nuisance and zoning issues.

Several court cases in Canada and other jurisdictions have dealt with nuisance complaints related to marijuana. Similar issues will undoubtedly plague any commercial operation that allows smoking on premises. 

For prospective marijuana businesses, the most important person to have on speed-dial will not be a criminal defence attorney it will be a municipal lawyer.

Quality control, man

Legalization will also put a greater focus on maintaining consistency of production. Instead of having product with varying degrees of potency (“This stuff is quality, man”), the focus will be on ensuring stable potency and good manufacturing processes (“This stuff is quality-controlled, man”).

For instance, processes will need to be implemented to ensure that potency levels remain stable production, storage and packaging occur in proper conditions and recalls can be made when necessary. 

Marijuana will have to meet all the same requirements as any other mass-produced consumable product, and potential producers should organize their businesses from the outset with this in mind. 

They should plan to consult with experts on manufacturing processes that comply with the Food And Drugs Act and other quality-assurance procedures.


Legislators will probably take their cues from the regulation of other legal “vices” like alcohol and tobacco once marijuana is legalized. 

Under the Tobacco Act, tobacco companies and their retailers are prohibited from promoting cigarettes to young persons or associating cigarettes with a “way of life… that includes glamour, recreation, excitement, vitality, risk or daring.” This has obviously inspired a host of interpretations. Any business advertising marijuana-related products will face similar challenges.

In terms of packaging, anything aimed at minors will likely be banned. In Colorado, regulators have prohibited the use of cartoon characters on packaging or products that look like candies.

Additional issues will arise when edible products are legalized. There will likely be limits on the potency of baked goods, and regulations will undoubtedly outline what information consumers must be given for their protection. Currently, Colorado requires that all edible products have clear potency information about the amount of THC in each serving.

The times they are a-changin’

Although it’s unlikely that heroin will be legalized any time soon, Stringer Bell was prescient about marijuana: the business will be regulated like many other billion-dollar industries.

Timothy Morgan is a lawyer with Speigel Nichols Fox LLP. | @nowtoronto



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