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Marijuana shops in B.C. embrace fines to keep making a profit

Jamie Shaw, spokeswoman for the B.C. Compassion Club, displays two different varieties of medical marijuana available at the East Vancouver dispensary in East Vancouver, British Columbia, June 5, 2015. Vancouver city councillors on Wednesday voted in favor of new rules for licensing marijuana dispensaries, despite objections from the federal government, becoming the first Canada city to regulate retailers selling the drug. Picture taken June 5, 2015. REUTERS/Julie Gordon

Starting today, unlicensed Vancouver compassion clubs and cannabis dispensaries could be hit with $250 fines or even court injunctions forcing closures as a result of a new bylaw.

The city has promised “boots on the ground” visiting the cannabis dispensaries after 162 of the 176 applications for licenses failed due to being within 300 metres of each other, schools, community centres or youth facilities.

While some prospective pot peddlers have thrown their names in the hat – 230 applicants according to the city’s last count – other dispensaries, which can rake in $10,000 or more a day, say they plan to eat the city’s fines in the short term while they wait for the Federal government’s much-anticipated recreational marijuana legislation to come into play next April.

Zach Walsh, an associate professor at the University of British Columbia and cannabis researcher who worked with The Canadian Association of Medical Cannabis Dispensaries (CAMCD) to help establish guidelines for compassion clubs, calls the organic growth and proliferation a “unique test tube of market forces.”

“People seem to be concerned there’s too many of them but I don’t see why the market wouldn’t take care of that,“ he says.

Canada-wide there’s been a boom in dispensaries with the CAMCD estimating 350 storefronts cropping up, with Toronto in particular seeing a spike in dispensaries in the past few months.

Currently, only licensed producers authorized by Health Canada — which amounts to about 15 in Ontario and 27 across the country — are legally allowed to sell cannabis via mail to those with verified prescriptions.

Mike Moffatt, an assistant professor in the business, economics and public policy group at Western University’s Ivey Busienss School, says in the absence of regulatory framework, the market is predominantly speculation-driven with these dispensaries operating in a so-called grey area.

“I think the big issue is what is the regulatory regime going to be?” says Moffatt. “It sounds like in Ontario it very well might be some sort of LCBO-type model run by the government, in which case I don’t see these places being able to exist.”

For some, that regulatory uncertainty has spurred a “first mover” type response with some of these dispensary entrepreneurs hoping the regulations will allow for private sector scales.

“I think for a lot of them it’s just a short-term gamble but if the regulations work out a certain way they may end up being quite profitable by capitalizing on this first,” he says. “I’m very skeptical that that’s going to be the case – I’m not sure how much of a shelf life these places are going to have to be honest.”

But for $10,000 a day in profits, Moffatt says the speculative approach seems to be paying off for some entrepreneurial dispensers willing to risk the shut down and potential charges.

“It’s almost like an internet startup where the odds of success probably aren’t that great,” says Moffatt. “But if they do break the right way, these guys could end up making quite a bit of money.”

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