BY RAMSEY CHAMIE, GREEN LIGHT LAW GROUP—
Washington limits it, Florida requires it (sort of), and Oregon doesn’t give a darn. What sounds like a reboot of the ol’ Abbot and Costello knee-slapper is actually the varied state-by-state approach to vertically integrated cannabis businesses.
Vertical integration occurs when a company is involved in more than one stage of production of a specific industry. In Oregon, for example, cannabis licenses are tethered to a phase in the production chain: producer, processor, wholesaler, laboratory, retailer, or researcher. A fully vertically integrated cannabis company in Oregon would control the entire process internally, from seed to sale. Oregon does not limit vertical integration. In other words, one business can hold licenses a different points in the production chain.
Vertically integrated companies improve efficiencies, increase profitability, control the product pipeline, and, ultimately, reduce costs for consumers. (For these reasons, many popular non-cannabis companies—think Netflix, Tesla, and Peloton—have aggressively pursued vertical integration strategies.)
From a health and safety perspective, mandating vertically integrated cannabis markets helps ensure the quality of products. That’s why we have seen vertical integration mandates in state medical marijuana laws. Colorado’s now-ended 70/30 rule required retailers to grow 70% of what they sold. Florida and Hawaii still require some level of vertical integration of medical marijuana operations. (Florida’s law is subject to an ongoing legal challenge and may be overturned this year.)