Economy of Scale - The cost advantage that arises with increased output of a product. Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs; i.e. the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are shared over a larger number of goods. Economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies. Economies of scale can be classified into two main types: Internal – arising from within the company; and External – arising from extraneous factors such as industry size. – “Investopedia”
I am constantly asked “how can I expand my cannabis business across state borders?” I am then forced to explain how the U.S. system of federalism works. Even though medical and/or recreational use of cannabis may be legal in your state, it is not legal on a federal level. Why? This boils down to the same issue concerning banking for the cannabis industry – the Schedule I Classification of cannabis makes its possession, use, cultivation and/or sale a federally illegal activity. Then logically following, from a federal perspective, the proceeds of activities involving Schedule I “drugs” are the proceeds of illegal activities.
Constitutional law then forces us to examine two important issues – (i) Preemption and (ii) Interstate Commerce. The “Supremacy Clause” states that state laws which conflict or contradict federal law, are null and void. Federal law is therefore the “law of the land”. So in essence, all state legalization of cannabis, in any category, will not be “legally” recognized by the federal government with respect to law enforcement. These real battles are being fought every day in states that have legalized cannabis use. For the moment, the federal government seems to content to allow the great cannabis experimentation to continue, while occasionally issuing “safe-harbor” guidance that is quickly disregarded.
