The cannabis industry has long had to contend with various laws and outdated thinking. These roadblocks have hampered operators’ ability to survive, let alone be competitive. Even as we move — inch by inch — into a seemingly more enlightened era, relying on science and public support over propaganda to determine consumer access to cannabis, the industry still faces major obstacles.
Part of the problem is that policy is often shaped by people with little to no direct experience in the field. As we’ve previously written, putting someone at the helm who’s never steered a similar business can be disastrous.
In this article, we’ll explore how the lack of insider input has harmed the industry — and highlight examples where involving operators has proven to be more productive for everyone.
When Policy Ignores Practice: How Rules Can Unintentionally Sabotage Day-to-Day Operations
Regulations can create compliance difficulties and drive up costs, making it harder for businesses to operate efficiently or keep up with required protocols. For example, according to an audit of the Cannabis Control Commission (CCC) covering July 1, 2022, through June 30, 2024, failures in management and a lack of transparent processes created compliance challenges and operational risks. These issues were especially tough on smaller operators, who lack the resources available to larger companies.
The audit also revealed that the CCC’s top-down regulatory approach failed to solicit input from industry operators. This lack of input produced ambiguous and poorly enforced procedures, which in turn fostered inconsistency and the potential for favoritism.
For instance, there were cases where some licensees paid fees while others did not — a clear sign of uneven enforcement. Had operators been consulted in drafting the rules, ambiguity could have been reduced and perceptions of favoritism minimized.
Attorney Aaron Hall, who represents business owners and their companies, has noted that cannabis regulations often undermine businesses in multiple ways. These challenges range from Byzantine regulatory frameworks — excessively complex that don’t square with real-world operations (e.g., shifting legislation that disrupts established licensing procedures) — to outdated rules that make operations more vulnerable.
Hall also points to the “cash-only” business model as particularly damaging, since it increases risks of theft, financial mismanagement, and labor hours for cash handling. He emphasizes this is not a rule the industry would ever have chosen, but one imposed from above, and has only served to make operators’ lives more difficult.
He also lays blame at the feet of one of our oft-mentioned foes, IRC 280E, the tax code, which severely limits allowable deductions. This gouges potential profitability and makes financial management unnecessarily complex. This rule is, of course, not one that anyone in the cannabis industry would ever have suggested.
Balancing the Books and the Bud: Why Financial and Agricultural Realities Matter in Drafting Laws
Cannabis policy often overlooks key taxation and agricultural realities — namely, how debates and research tend to ignore supply-side effects. As the study The Supply-Side Effects of Cannabis Legalization demonstrates, taxation and regulatory fees sap growers’ profits and likely push both producers and consumers toward the illicit market.
The study illustrates this clearly: after an initial profit spike, grower earnings can drop by more than 50% unless technological innovations or cost-reduction strategies are implemented.
Furthermore, the study discusses how growers have to contend with residency, annual licensing, and detailed reporting. While such regulations can benefit public health and generate tax revenue, they can be detrimental to the profitability of the farmers and can cause market instability.
If cannabis policy considered real-world agricultural and financial data — rather than relying mainly on theoretical or tax-driven models when setting tax rates and licensing requirements — the less we would see growers and consumers heading to the illicit market.
State Models to Learn From
Okay, we’ve described at some length how operators would benefit if they had more input into the laws. Let’s now discuss how input from certain states was beneficial to the operators.
According to the news site CT Mirror, Connecticut has seen policy shifts such as the creation of a specialized regulatory office designed to address the industry’s unique needs. The office’s formation was shaped in part by operator input. It will be led by Lila McKinley, an attorney with extensive experience in cannabis regulation and strong ties to the industry. Her hiring has been warmly received by industry members and legislators alike.
Adam Wood, founder of the Connecticut Cannabis Chamber of Commerce, said, “Lila is extremely well qualified and very knowledgeable here in Connecticut and beyond our borders.”
Another state just north of Connecticut has also shown it can influence legislation. According to Bloomberg Law, Massachusetts cannabis policies have been directly shaped by industry insiders collaborating with lawmakers and regulators. Together, they’ve worked on licensing, equity initiatives, and host community agreements.
Thanks to these collaborations, draft regulations for social consumption licenses have been approved by the Massachusetts Cannabis Control Commission (CCC). The commission has also spearheaded license tiers and oversees Host Community Agreements (HCAs) to help guarantee equitable economic participation.
Other collaborative efforts have yielded compliance adjustments, such as developments in “agent badging,” which allows employees to use a single badge instead of one for every license — increasing efficiency. Bills have also been developed to help double possession limits.
These examples show how collaboration between lawmakers and industry insiders can produce policies that balance public health concerns with practical considerations like economic equity and market stability.
Conclusion
If you were going to design the next Burj Khalifa, you wouldn’t ask for help from someone whose only building experience was limited to chicken coops. Yet in the cannabis industry, everyone from dispensary owners to growers has suffered under complicated regulations that fail to account for day-to-day realities. Worse, exorbitant taxation and fees have sometimes driven both operators and consumers back to the illicit market.
Yet, when we look at states that have allowed industry input in shaping cannabis laws, the benefits are immediately clear. We can only hope more states start listening to the people who actually know what they’re talking about.
At BTA Cannabis CPA Tax, we’ll help you understand your state’s relevant laws, ensure you remain compliant to the best of our abilities, and make sure you deduct every penny you can. Reach out today — we’d love to hear from you.
