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Ep. 406: Lori Ajax, CA Bureau of Cannabis Control

Cannabis Economy Podcast
Ep. 406: Lori Ajax, CA Bureau of Cannabis Control

Ep. 406: Lori Ajax, CA Bureau of Cannabis Control

Lori Ajax is back to talk about the last year that flew by and the next year looming on the horizon. Lessons learned from the last year are carried forward into expectations for year two by looking at the transition of the industry into the regulated market, and the struggles that the transition continues to entail. Tax structures, competition from illicit markets, and the complications of licensing all mean there is a need for better messaging going forward.

Transcript:

Seth Adler: California Bureau of Cannabis Control commissioner Lori Ajax returns. Welcome to Cannabis Economy, I'm your host Seth Adler. Download episodes on caneconnomy.com, that's two N's on the word economy. First a word from Med Men and then Lori Ajax.

Speaker 2: Med Men continues to expand it's footprint on the cannabis landscape, opening new stores in Los Angeles, Las Vegas, and the iconic 5th Avenue in Manhattan. They've also opened a 45,000 foot high tech cannabis cultivation and manufacturing facility in Nevada. The company has reached a $1 billion valuation, making it the countries first cannabis unicorn, and it's just the beginning. Learn how Med Men is building the future of cannabis today at medmen.com.

Seth Adler: Lori Ajax, I'm not in California and you are not in New York it's safe to say.

Lori Ajax: That's safe to say, yes.

Seth Adler: Which is why we're on the phone with each other is my point.

Lori Ajax: Right.

Seth Adler: You just told me, before we started recording, that it doesn't feel like it's been six months. Well, do you mean that it feels like it's been seven years? You know, cannabis years are dog years, maybe even half years now, or-

Lori Ajax: It just feels like time has been moving so quickly the last six months. If you would have asked me last time we spoke I probably would have told you it was a couple months ago. It's just moving so quickly.

Seth Adler: Yeah. All right, so just to kind of set the stage here. It was the lead up to January first, and then the lead up to July first, and then here we are. It's January, well it's January. Podcast land knows no time, but now that we've got a full year under our belts so to speak, I guess the key question to ask is what were the lessons learned from this first year. Then, maybe we'll get into what you're expecting for year two.

Lori Ajax: Yeah, lessons learned. Well, I think there's been a lot of them. We've had an industry that's transitioned into the regulated market, with all of our regulations, and a lot of changes for them, for us, for everybody, the public. I think the lesson for us going forward is, is we're going to have more consistency now with our regulations. Not this constant change. All of our phase-in periods are pretty much over, and I think everybody's looking at putting last year behind us and moving forward. Our focus is going to still be getting as many people licensed as we can this next year. Also, stepping up our enforcement of the illegal market.

Seth Adler: Yeah. Getting folks kind of ramped up, ready to go, and then working with them through the transition was really a lot of the focus. If I'm kind of another state, or maybe even another country, you know everyday it seems there's another country that's announcing that they would like to regulate cannabis. I wonder, besides the fact that you just have to figure it out, so there is always going to be a little bit of oh we need to add that, oh we need to remove that. To any regulation roll-out. What would you share with another state, what would you share with another country that's about to do what you just did for the first year?

Lori Ajax: Well, I would say get ready to roll, because it's not easy. Like I said, not just for the regulator or for the state, but also for the industry that you're trying to regulate. The biggest advice I'm going to say, what's helped us along the way, as difficult as things have been for the industry, always making sure we're including the industry in our conversations. Being open to feedback. The worst thing we could do is not to listen to what people say. Not listening at what's effecting their businesses.
I think that's the advice I'd give any state or country looking to regulate, is that you can't do it on your own. You need to work with the industry. Although we may not always agree on things, I think there's always that compromise, but you really have to understand their business and what your regulation is going to do to that business.

Seth Adler: California Bureau of Cannabis Control commissioner Lori Ajax returns. Welcome to Cannabis Economy, I'm your host Seth Adler. Download episodes on caneconnomy.com, that's two N's on the word economy. First a word from Med Men and then Lori Ajax.

Speaker 2: Med Men continues to expand it's footprint on the cannabis landscape, opening new stores in Los Angeles, Las Vegas, and the iconic 5th Avenue in Manhattan. They've also opened a 45,000 foot high tech cannabis cultivation and manufacturing facility in Nevada. The company has reached a $1 billion valuation, making it the countries first cannabis unicorn, and it's just the beginning. Learn how Med Men is building the future of cannabis today at medmen.com.

Seth Adler: Lori Ajax, I'm not in California and you are not in New York it's safe to say.

Lori Ajax: That's safe to say, yes.

Seth Adler: Which is why we're on the phone with each other is my point.

Lori Ajax: Right.

Seth Adler: You just told me, before we started recording, that it doesn't feel like it's been six months. Well, do you mean that it feels like it's been seven years? You know, cannabis years are dog years, maybe even half years now, or-

Lori Ajax: It just feels like time has been moving so quickly the last six months. If you would have asked me last time we spoke I probably would have told you it was a couple months ago. It's just moving so quickly.

Seth Adler: Yeah. All right, so just to kind of set the stage here. It was the lead up to January first, and then the lead up to July first, and then here we are. It's January, well it's January. Podcast land knows no time, but now that we've got a full year under our belts so to speak, I guess the key question to ask is what were the lessons learned from this first year. Then, maybe we'll get into what you're expecting for year two.

Lori Ajax: Yeah, lessons learned. Well, I think there's been a lot of them. We've had an industry that's transitioned into the regulated market, with all of our regulations, and a lot of changes for them, for us, for everybody, the public. I think the lesson for us going forward is, is we're going to have more consistency now with our regulations. Not this constant change. All of our phase-in periods are pretty much over, and I think everybody's looking at putting last year behind us and moving forward. Our focus is going to still be getting as many people licensed as we can this next year. Also, stepping up our enforcement of the illegal market.

Seth Adler: Yeah. Getting folks kind of ramped up, ready to go, and then working with them through the transition was really a lot of the focus. If I'm kind of another state, or maybe even another country, you know everyday it seems there's another country that's announcing that they would like to regulate cannabis. I wonder, besides the fact that you just have to figure it out, so there is always going to be a little bit of oh we need to add that, oh we need to remove that. To any regulation roll-out. What would you share with another state, what would you share with another country that's about to do what you just did for the first year?

Lori Ajax: Well, I would say get ready to roll, because it's not easy. Like I said, not just for the regulator or for the state, but also for the industry that you're trying to regulate. The biggest advice I'm going to say, what's helped us along the way, as difficult as things have been for the industry, always making sure we're including the industry in our conversations. Being open to feedback. The worst thing we could do is not to listen to what people say. Not listening at what's effecting their businesses.
I think that's the advice I'd give any state or country looking to regulate, is that you can't do it on your own. You need to work with the industry. Although we may not always agree on things, I think there's always that compromise, but you really have to understand their business and what your regulation is going to do to that business.

Seth Adler: Yeah. For folks that wanted to take regulations as seriously as possible I do know from their side of the equation, from the business side of the equation, that really you were true partners through this. Of course, I can hear that from your side as well. Then, if we're both partners the only people that are not invited is the illicit market. You mentioned year two was about kind of making sure that we kind of take care of that. Now, some of it has to do with simple business. Meaning, if I'm a consumer and you are not competing with the illicit market in price, on price, and I'm not necessarily so concerned with truly tested cannabis, what are you doing in the way of taxation or what are you hearing in the way of taxation or what are you saying the way of taxation before we get into actual enforcement. If that makes sense.

Lori Ajax: Right. Well, and you know we're not the agency that does, collects taxes, but I am hearing that first of all it can be a very difficult tax structure, in trying to pay your taxes in the cannabis industry. Not only are they dealing with state taxes, but the industry is also dealing with local taxes. I think it's as simple as we've got to ... understandably we have to have some taxes on cannabis, but how do we make it so it's simple for people to understand. It's simple for people to pay their taxes. I think you're going to see going forward, you know, not only probably in California but elsewhere, is how can we make the tax structure more effective.

Seth Adler: Sure. I appreciate you answering that question that way, and I was not clear, because what you did was share with us that there is an extreme burden, especially with 2:80 on cannabis businesses. I was actually, I meant to ask you from the consumers perspective. If I go into, exactly, if I go into a retail establishment and we've got the whole supply chain and tax on tax on tax. What conversations are you hearing, and I know again it's not your department, but this is kind of the number one tool in competing with the illicit market is the tax structure for the consumer. What thoughts do you have or what have you been hearing?

Lori Ajax: I want to make sure I understand your question. Like, you know, one of the problems we're seeing right now is how do we make sure the public understands the value of going to a licensee, right.

Seth Adler: Sure.

Lori Ajax: As you said, if they can go to the illegal market and get it cheaper, and if they're not really worried about whether it's tested or not, how do you draw them to that licensed market? I think from our point of view we need a better job of messaging why it's important for California, why it's important you go not only for getting safe cannabis but what those taxes, how that's going to benefit the state. Making sure we're valuing our licensee's and saying, "Hey, these are the places you should get your cannabis from."
I mean it's like any, especially our smaller guys that have like a, you know, they're craft cannabis that they take a lot of time and care to make sure they have a quality product. We should be showcasing that more. I think from the bureaus standpoint one of the things you're going to see this next year is our launching our public awareness campaign, which is really focused on driving the consumer to the licensed market, and doing a better job of messaging that. Along with also making sure the illegal market knows that they have to get licensed if they're going to be, continue to operate in California.

Seth Adler: Sure. There's the education, there's the communication, and then I think in that last sentence you put your prosecutor hat back on, if I heard a change in tone, but-

Lori Ajax: I didn't realize I had a change in tone, but yeah, exactly.

Seth Adler: For folks that can, and there are foreign entities that really are responsible for a lot of the illicit market, but for folks that are unwittingly, unknowingly, or knowingly but not meaningfully in the illicit market. What is the message to them now that we do have the regulations in place to kind of welcome them if you will with open arms, if not a little bit of a stern finger wag.

Lori Ajax: Yeah. I do think there's still, we do still have a lot of applicants that are out there waiting for the local cities or counties to review their application or get through their processes. I think there are some folks that are still waiting for that local jurisdiction.

Seth Adler: Sure.

Lori Ajax: The message now is we're, you know, in the last, I'm going to tell you in the last four weeks we've just, I mean our, because temporary licenses we can no longer issue them after December 31 of last year.

Seth Adler: Right.

Lori Ajax: We issued almost 1400 licenses in just the last month, just for the bureau, which is an incredible number. But, I mean, we're already starting to see more people come into the regulated market. More [inaudible 00:10:12] county starting to approve. I think we are getting that message out. I think as we see our collective and cooperative model, that sunsets on January ninth, we're seeing some of those businesses transition. I do think educations always important. We're going to look at every, when we deal with the unlicensed market, we're going to look at the facts and circumstances of why they're operating illegal. Then, we're going to take the appropriate action.
I do think if we expect this regulated market to be successful this next year, we have to have, really start to tackle this unlicensed, illegal market in California.

Seth Adler: Oh my god, yeah. Yeah, no, absolutely. For folks that are waiting on local licenses that's not who we're talking about. That's the gray, but we are trying, there's effort there. But, for foreign entities or folks that are meaning to be illicit in their practices, can you share what they might expect? If love doesn't work, maybe fear will help here?

Lori Ajax: Well, I think it's just a reality that last year we talked about it, the year of transition. Getting our final regs in place. We're going to be, our final regs will be in place probably in the next two weeks. The time is up. You just can't continue to blatantly be competing with our regulated market if you're not intending to get licensed. I think as we get staffed up, as our resources continue to increase, we get better at what we're doing, too. We're honing our processes. I think the regulated market, they have expectations that we're going to increase our enforcement effort, and that is what's going to happen this year.

Seth Adler: Okay. Fantastic. Again, there was that just touch of a change in tone which I very much appreciate Lori, having met you in person. Because you're so kind, but also I am fearful of you. I don't want to be on your bad side. One of the things, one of the clear things that you've been saying all along is that the community, the economy, the cannabis economy, is your partner if you are a regulator. What else is on that list of things. Do this, don't do that. Make sure that this is in place six months before you even consider a next thing. What are maybe additional lessons learned above and beyond the fact that it does take a year and you do tweak things as they go, but certainly the industry itself is your partner. What else is on that list?

Lori Ajax: For us, I mean as I said earlier, I think we need to continue to look at our process. How it is you apply for an application. How we communicate with our applicants. Because, although we're, you know, between the three licensing authorities we have over 10,000 temporary licenses. We have to transition all those people into either provisional or annual licenses. What it really becomes, when we talk about communication it's been important over the last couple years, it's equally important this next year that we continue to communicate.
That we, again, get better at what we do. Maybe there's ways to streamline things we're doing. I'm always, I always feel like sometimes I look at things and I'm like why, why are we doing this way, that makes it harder for people to apply or to comply with our regulations. I think on our side, I think we need to know what is effecting the industry. Too many times they're on social media complaining about us, but we want to hear those complaints. I think people don't want to come to us with their complaints, but I think it is important that they do tell us, because that's the only way we can step it up and make the necessary changes.
I always encourage people. Like, I think they think we know what's going on, but we encourage them to come to us. Even if it's to be critical of us. It's okay, because that's how we learn, that's how we grow, and that's how we move forward to make improvement.

Seth Adler: That's fantastic. You have always requested that dialogue. As far as why are we doing things this way. We could discuss and debate the structures and what the downsides are. I would rather learn from you what the upsides are. When you went into this, there were a number of different, and there still are, a number of different as you've been intoning players involved from the regulatory standpoint. What is the advantage of that, of having a number of different players involved?

Lori Ajax: I think it's too easy as a state regulator to be in a bubble and not really listen to other people or get feedback. I don't think you're, as a bureau we don't operate like that. We feel like we want everybody's opinion. We want it whether it's the public, whether it's the industry, whether it's our stakeholder group, the legislator. I think that's where the value is. I think what's sometimes frustrating for the industry is there's, you know, we have to look at it as a whole. What's best for the industry. We can't just look at hey what's best for a dispensary, or what's best for a distributor. We have to look at it as a whole.
I think the industry is evolving. They understand that. I think when you have more voices you just come up with better policy. I mean, that's my experience. I think you're going to see from us, we already have people asking us, "Hey, what changes are you going to make to the regulations?" I think what we say is, "Well, let's see what changes we need to make." I think again, having that information, knowing how their business is working, that just arms to, better understanding of the industry.
Sometimes, you know, change is going to continue to come. It's just not going to be on the same scale as it's been in the last year, which I think is good for the industry, too.

Seth Adler: What remains though is the fact that there is the state license, there's the local license. We kind of spoke about that at least in passing, here we've spoken about it in the past. Again, we could talk about what we don't love about it. What do you like about it. Why is that helpful for other regulators, either state or federal in other countries listening. How is that helpful?

Lori Ajax: How is meaning dealing with the local jurisdiction?

Seth Adler: Meaning, yeah, meaning I've got to get my LA license and then also deal with you and kind of, it's a two step process. That's frustrating, but what's the advantage?

Lori Ajax: The advantage of is that I think there's some checks and balances for us. We know that they have met all the requirements at the local before we can even issue a license. I think that doesn't put all the pressure on the state to make sure you're getting it right, you have your local partner that you're working with. I came from alcohol industry where we really didn't, you didn't have to have a local license perse. I think from my point of view now, dealing with each individual state and county it gives us a better idea of what the differences are throughout the state. Because you know, geographically we're so large, so what a city is dealing with up in Humboldt County is certainly different than what they're dealing with in the city of LA.
I don't know without having that local control we would have that same vantage point of understanding that. I think that's important for us as we do the state regulations because that's the base for every licensee. I think that's the advantage.

Seth Adler: Yeah. You mentioned your experience in alcohol. I wonder as you go into year two, do you see more similarities, do you see any changes that more closely align to that industry, or is that just an example that you can draw, you know, what, experience from and apply here?

Lori Ajax: Yeah, that's one of the examples. There's similarities between alcohol regulation but, gosh, I mean nothing ... you know, you don't have a lot of bootleg alcohol.

Seth Adler: That's it.

Lori Ajax: People making alcohol in California, you know, it's different that way. You don't have an unlicensed market in alcohol at the scale you have in cannabis. As much as there's similarity, there equally or greater number of differences between the products. I've always said this, cannabis is a more complicated product to understand, but it's more of an organic product in a sense. There's so much to learn about this product. Almost three years into this job I still have a lot to learn about this product.

Seth Adler: Of course, we all do. There isn't enough science. The academic scientists and even now the corporate scientists are trying as hard as they can to get something done, but we need more studies, we need more clinical trials, we need more of everything there. Do you keep yourself abreast of what's going on in the labs? I mean, I know that you regulate the labs, but what are your thoughts on the science of cannabis and the fact that you just said it yourself, you need to learn more, but so does everybody.

Lori Ajax: Oh, I think we're going to constantly be learning more about the product. You're going to see, we are also have 10 million in research grants that we are going to be giving out to our public universities this next year. I think we see the importance of doing more research on this product. I look forward to seeing how that works. Then, I think people are looking at our testing regulations, too, and how that is effecting the supply chain. We do a lot of work with our current licensed laboratories to make sure they're testing the product appropriately, but I think there's also a lot of folks that are saying hey, do we need to keep this, is this how much we want to test this product, do we need to test for different things.
I think you're going to see that over the next year, how that's working for California, because we probably have one of the strictest testing laboratories regulations in the nation. I think people are looking to California to see how that works. A lot of science. A lot more science than I ever thought I would be involved with by the way, because I am no scientist, or I never usually put myself out there. It's absolutely fascinating, though.

Seth Adler: Yeah, it absolutely is. There's work to be done there, I can't wait to talk to you about what you're going to do with those 10 million dollars in grants, that's extremely exciting for me because that's obviously, that's the work that needs to be done. As we get into this next year then, you're thinking about science, you're thinking about enforcement, you're thinking about just doing what you're doing better. All right, so there's the science. You're in Sacramento, which is pretty far north, and I think you might know where I'm going with this.
October 17 they legalized cannabis in every way in that G7 nation Canada. I wonder how much that changed anything that you were doing. I would imagine it didn't change the specifics of your tactics, but structurally, but strategically, or conversationally, what changed when Canada went legal if anything for you.

Lori Ajax: Yeah, I don't think so much changed for us when Canada legalized. I mean, we're obviously we're watching, seeing what they're doing, but of course it's for them it's legalized all over. I think you look at, but I think some of the players that have been investing money up there that's probably been of some interest to us. Who's investing in Canada, because I think at some point when this product becomes federally legal I think those are some of the things we're going to see in California, so I think that's been the interesting part. What new products they're developing, and what research they're doing.
We're excited for them. I think it's pretty, it all seems like a brave new world as more and more states and countries come online. It's pretty incredible how quickly this industry has evolved. I mean, I know a lot of people think it's been a long time, but just in a very short period of time I think we've seen so much happen.

Seth Adler: Yeah, oh yeah. No, no, it's been a very long time as far advocates and as far as activists are concerned, of course, it's been, you know, decades and decades and decades. If we want to bring in prohibition it's been 100 years, 80 years, whatever it is. But, the last five years have gone from zero to 1000 miles an hour without question.

Lori Ajax: It seems like it.

Seth Adler: Yeah. Speaking of change, you had one more change a couple of weeks after Canada went legal, you guys decided to what, give a promotion to your lieutenant governor, to governor.

Lori Ajax: Yeah.

Seth Adler: I mean, obviously you would have some experience with lieutenant governor, now Governor Newsom, or Government Elect Newsom at least at this moment in time. Do you expect any change, any kind of difference, any kind of nuance coming from him as opposed to governor brown?

Lori Ajax: I'm really looking forward to working with Governor Elect Newsom. I think we're excited, and I'm certain there's going to be, I'm sure we're going to get some, maybe some direction, some new ideas. We're looking forward to it. I'm very excited. But, I think cannabis policy is going to continue to move forward in California, I mean I really think that's the takeaway. Hey, can I tell you one other thing that just happened probably just minutes before I got on the phone with you?

Seth Adler: Oh, wow.

Lori Ajax: We just set up a new license search system, so if you have people that were tired of going through our old license search, where they had to go through these excel sheets to figure out if someone was licensed or not. Now they can just go to the bureau's website and enter in somebody's license number or their name, or their county or city, and get that information automatically, so there you go.

Seth Adler: Look at that. She's gone digital folks, I appreciate-

Lori Ajax: We have. Hopefully it works fine, right.

Seth Adler: Exactly.

Lori Ajax: See, now that I've announced it, though.

Seth Adler: No, that's fantastic. I know that that was kind of a thorn in your side, so that's great news. The only other thing that I really have to ask you right now is I'm sure you know what's coming, it's on the soundtrack of your life. One track, one song that's got to be on there.

Lori Ajax: Oh my god.

Seth Adler: It happens every time Lori.

Lori Ajax: Are you going to ask me what song is for next year?

Seth Adler: Yeah.

Lori Ajax: Oh god.

Seth Adler: it's got to be.

Lori Ajax: Oh my god.

Seth Adler: Well, should we do Auld Lang Syne, which is for the new years song, you know?

Lori Ajax: Maybe, or you know, you know what, I ... see, you've got me speechless, that doesn't happen too often. I've got to come up with a good song for next year, because I think last year it was under pressure and honestly-

Seth Adler: Under pressure, yes.

Lori Ajax: ... we still feel we're under pressure just about every day.

Seth Adler: I think I offered you celebrate after the July first one, but yeah.

Lori Ajax: That's true, and that was a good one. That was a good one. Now, it's, we've got to come up with one.

Seth Adler: I feel like Auld Lang Syne works, you know, and when we speak in six months we'll do something else. But Lori Ajax, in all seriousness, thank you so much. Yeah, go ahead?

Lori Ajax: Hey, my communications guy just gave me a good one. I'm still standing my Elton John, and I absolutely love that.

Seth Adler: That's of course perfect. That's of course perfect. Alex comes through, that is fantastic.

Lori Ajax: Alex came through.

Seth Adler: Lori, thanks so much for your time as always.

Lori Ajax: All right.

Seth Adler: There you have Lori Ajax, very much appreciate her time. Very much appreciate your time, stay tuned.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.