Intra-Industry Ballot Measure Fight Brewing In Several L.A. County Cities

Cannabis companies are supporting and opposing measures to legalize marijuana business in three Los Angeles County beach towns.

A political fight is building to a possible November crescendo in at least three beach towns in Los Angeles County, in which state-licensed marijuana companies are both supporting and opposing multiple ballot questions that are, on their face, pro-cannabis.

On one side are Catalyst Cannabis Co., Tradecraft Farms and their executive leadership: CEOs Elliot Lewis and Barry Walker, respectively, who have been crusading to reverse local bans on commercial cannabis.

The two – initially along with High Times, though that company has reportedly pulled out of the political venture – have funded and organized local ballot measures in Hermosa Beach, Manhattan Beach and Redondo Beach to force the cities to issue new cannabis business permits.

Standing in their way is Jonatan Cvetko, the executive director of the L.A.-based trade organization United Cannabis Business Association (UCBA), and a coalition of SoCal marijuana delivery companies he’s recruited to help fund an opposition campaign.

Cvetko and his allies take issue with the ballot measures not because they’ll expand the industry, but because they say the measures are structured to give unfair advantage to the companies paying for the campaigns.

The situation illustrates both how desperate legal marijuana companies have become in California to open new territories – roughly two-thirds of municipalities in the state maintain bans on cannabis companies – and the highly competitive industry landscape, which insiders say has become increasingly cutthroat since the legal market launched in 2018.

Finger-Pointing All Around

Cvetko said Catalyst and Tradecraft Farms potentially could gain complete control of the three beach town markets if the ballot measures succeed, in large part because the measures only authorize up to three retailers each in Manhattan Beach and Redondo Beach and only two in Hermosa Beach.

The measures would also prohibit cannabis deliveries from any company that isn’t specifically licensed by and operating from within those beach cities, Cvetko said, as opposed to out of neighboring Los Angeles, where many delivery companies are headquartered and store their inventory.

He said that could set a major precedent, possibly launching a wave of similar bans across the state, which would create enormous upheaval for already-struggling businesses.

“The industry’s soul is at stake here,” Cvetko wrote in an email to Green Market Report, adding that Proposition 64 in 2016 – which legalized adult-use marijuana in the state – was intended to be “a pathway to transition California’s existing operators into the legal market.”

“Instead we see businesses such as Catalyst and Tradecraft farms funding policies that eliminate those pathways to create a monopoly for themselves which provide no benefit to the communities,” Cvetko wrote.

“We’ve seen what the Amazons and Walmarts of the world have done to mom-and-pop entrepreneurs,” wrote Cvetko, who has been working with the Redondo Beach City Council for several years on a cannabis business permit system, which has yet to be fully approved.

Cvetko also said he’s enlisted the help of well-known marijuana delivery companies CanEx, Amuse, Emjay and Nugg Club to fight the ballot measures between now and when they go before voters.

He expects even more companies to sign on as well, including some big industry names.

Lewis laughed as he responded to Cvetko’s comments during an interview, and said it’s the “Big Tech” delivery companies who don’t like the ballot measures because they include strict new organized labor standards for companies to abide by.

“He’s got it way backwards. The little brick-and-mortar guys do shit for the communities. And last I checked, Walmart and Amazon aren’t unionized. We are,” Lewis said. “If anything, Big Tech is teeing off on the little brick and mortars and not paying city tax and not paying the special cannabis tax.”

Lewis didn’t deny that Catalyst and Tradecraft stand to benefit if the ballot measures succeed, but he insisted that the licenses provided by the measures would still have to go through a competitive bidding process with each city – which means he and his allies won’t automatically get a piece of each market pie, he said.

“We’re capitalists, and someone’s got to pay for the signatures, and if you pay for the signatures, you’d be stupid not to write in some advantages and not to map out your property advantageously,” Lewis said. “That doesn’t mean it’s not good policy and that it’s not good for the city.”

Adam Spiker, a lobbyist and partner at Spiker Rendon Consulting who said he tried for years to get all three cities to embrace the legal cannabis industry, also defended the ballot measures and said they’re a product of ongoing negotiations with city officials.

Spiker worked with Lewis and others initially on the ballot questions – with the hope that city councils would sign off without taking the measures to voters – but he is no longer affiliated with Catalyst or the campaigns.

Spiker rejected Cvetko’s assertions that the ballot questions were designed to benefit Catalyst or any other campaign contributor. He said the proposed city laws in the ballot questions were written first with a different campaign funder in mind, and Catalyst and Tradecraft stepped in as organizers when the first one fell through.

Rather, Spiker said, the ballot questions were authored to get local officials comfortable with legal cannabis, so that they would stand up a new regulatory system on their own instead of being forced to do so via ballot measure.

“Our goal was to get some of the rest of the council to jump on board and say, ‘This is reasonably proposed, it’s keeping it away from kids, it’s limited licenses, it’s not a big injection of cannabis into our community,'” Spiker said.

“What’s happened since is, the focus got off the policy and onto the characters involved,” Spiker said. “I’m sick to my stomach with where (this situation) is at… I was hoping to do a good thing.”

Spiker and Lewis both also suggested that Cvetko’s interests aren’t simply as a nonprofit advocate, but as a businessman himself with money at stake.

Lewis noted that Cvetko controls at least one state-issued delivery license in L.A. County, and that it’s the license under which CanEx operates.

Regardless, Cvetko and some of his allies are determined to defeat the trio of ballot questions, and a campaign is very much in the works, CanEx CEO Jim Damask said.

“The fact that myself and people I compete with every day are willing to be on phone calls and communicate and have reasonable, rational conversations and throw resources at this gives you the idea of how serious we are,” Damask said.

Ballot measure breakdown

On Oct. 19, Redondo Beach voters will get to have their say on both Measure E, the cannabis ballot measure supported by Catalyst and Tradecraft, and a recall campaign against City Councilman Zein Obagi, which was also paid for and organized by Lewis’s campaign. Both issues were put on a special election instead of being scheduled for November by the city council in an effort to defeat both questions because of typically lower voter turnout for special elections.

Then on Nov. 8, voters in Manhattan Beach will get to weigh in on the Cannabis Regulation and Safety Measure, and Hermosa Beach residents will decide the fate of Measure M, to legalize a cannabis industry, and Measure T, to establish a new marijuana tax (which would only go into effect if Measure M passes).

The provisions that have created the intra-industry rifts are:

  • All three measures limit the number of legal retailers. In Redondo Beach and Manhattan Beach, the maximum is three, and in Hermosa Beach it is two.
  • All three prohibit delivery from licensed businesses based outside of the city jurisdictions.
  • All three prohibit microbusinesses, which can also be smaller-scaled retailers.
  • Only Hermosa Beach has a proposed cannabis tax alongside legalization, which is common in most other California cities.

A fourth initiative was originally planned in El Segundo, but it was removed at the last minute for technical reasons, Lewis and others said.

A city council-sponsored marijuana industry ordinance, Measure W, is now on the ballot instead in El Segundo. That ballot question will go before voters on Nov. 8 and is very different from the other three. It contains no specific license caps, does not ban microbusinesses and is also accompanied by a separate marijuana industry tax ballot question, Measure Y.

John Schroyer

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