Canada Legalizes Cannabis

Canada is the second country in the world to legalize cannabis, after Uruguay, which legalized in 2013.

Cannabis had been illegal in Canada since 1923 under the Controlled Drugs and Substances Act until federal legalization when Bill C-45, The Cannabis Act, passed in the House of Commons and came into effect on October 17, 2018. The Act claims to accomplish three goals: keeping cannabis out of the hands of youth, keeping profits out of the pockets of criminals, and protecting public health and safety by allowing adults access to legal cannabis.

Cannabis was federally legalized for use by individuals 18 years of age and older to a limit of possession of 30 grams in public and cultivation of up to four plants within a household. Edibles and concentrates for personal use will become legal later.

Prime Minister Justin Trudeau, of the Liberal Party, promised to legalize cannabis during his federal election campaign in 2015, arguing it would prevent cannabis use by minors and reduce profits directed into the illegal cannabis industry. A 2016 report by Canada’s Parliamentary Budget Officer projected cannabis legalization would initially result in $618 million in revenue through taxation, eventually reaching billions of dollars, whereas the illegal cannabis industry was estimated to be worth $7 billion each year.

The Liberal Party of Canada, which currently holds a majority government, favours cannabis legalization and regulation of recreational use. The Conservative Party of Canada, currently the Official Opposition, favours decriminalization of cannabis. The New Democratic Party supports legalization, regulation, and decriminalization of cannabis.

 

How Much Will It Cost?

The price is nationally standardized at $10 per gram, including tax and production costs. The federal government will apply an excise tax of 10% percent on the product price or $1 per gram, whichever is higher. Provinces will receive 75% of the excise tax revenue for the first two years, with the remaining 25% going to the federal government. The federal share is capped at $100 million annually with revenue above that returned to the provinces. Provinces have the option to also add on a sales tax.

 

What Is Legal?

Medical cannabis continues to be regulated under the Access to Cannabis for Medical Purposes Regulations.

All cannabis products are purchased from Canadian Licensed Producers regulated by the federal government.

The federal government states adults aged 18 years of age and older are legally able to:

  • Possess up to 30 grams of legal cannabis, dried or equivalent in non-dried form in public;

  • Share up to 30 grams of legal cannabis with other adults;

  • Buy dried or fresh cannabis and cannabis oil from a provincially-licensed retailer;

  • In provinces and territories without a regulated retail framework, individuals are able to purchase cannabis online from federally-licensed producers;

  • Grow, from licensed seed or seedlings, up to 4 cannabis plants per residence for personal use;

  • Make cannabis products, such as food and drinks, at home as long as organic solvents are not used to create concentrated products.

Beyond this, the provinces and territories are responsible for drafting their own rules regarding possession, sale, and use.

Cannabis edible products and concentrates will be legal for sale approximately one year after the Cannabis Act came into force on October 17th, 2018.

New regulations authorize police to test drivers’ saliva to determine if they are drug-impaired.

 

What’s Not Legal?

It is illegal to produce, distribute, or sell cannabis products to and for minors.

Cannabis will not be sold in the same location as alcohol or tobacco.

The importation into Canada of any product containing CBD, even when derived from hemp, remains illegal.

 

Market Investment

The cannabis industry is now worth approximately $80 billion, with the stock value of Canadian companies such as Canopy Growth Corp., Aphria Inc., and Aurora Cannabis Inc. increasingly rapidly, along with the application of hundreds more to receive licensing from Health Canada to produce. There are currently 132 licensed producers.

 

What’s Not Being Mentioned?

Most Canadians, estimated around 80%, have cited their interest in cannabis legalization in terms of adult medical or preventative health, not for recreational use. For example, there is increased use of CBD in beauty and skincare products.

The licensing process is onerous and can take up to a year. First, a company must receive a cultivation license, then produce two full crops, send them for testing, have their sales software audited, and finally submit a completed application for the sales licence. Legal retailers may not be profitable for at least two years due to prohibitive start-up costs and tight profit margins, which could quickly close many retailers and benefit the black market.

Additionally, banks are still very conservative when it comes to cannabis companies, despite legalization, though Lift, a marijuana media platform in Vancouver, estimates Canada’s cannabis industry has enough funding to boost production to between 400,000 and 500,000 kilograms a year.

According to Statistics Canada, 5.4 million Canadians will buy cannabis from legal dispensaries in 2018, which is about 15% of the population. On day one, and weeks in, shelves remain sold out in dispensaries across the country.