By Peter Jiang

Edited by Tashyana Davidson and Melanie Rose

Canada broke ground in October 2018 when it became the second country in the world to legalize non-medicinal cannabis use and sales. The Cannabis Act introduced cannabis as a legitimate recreational substance alongside alcohol and tobacco and the past five years have given credence to the many merits of cannabis legalization, including better quality control, economic growth, and new tax revenues.

Despite its successes, the Cannabis Act has fallen short in its promise to contribute to meaningful truth and reconciliation for Indigenous communities. The growing trend of unlicensed Indigenous cannabis businesses is a consequence of poorly designed legislative frameworks that isolate Indigenous businesses from the broader market and deny Indigenous nations the ability to self-govern. A coordinated effort from federal and provincial levels of government is needed to advance reconciliation efforts in Indigenous cannabis.

In terms of economic participation, many Indigenous businesses still struggle to meet stringent federal and provincial licensing requirements and access valuable start-up capital, bank loans, insurance, and auditors needed to start their business. As these resources become harder to access in general as cannabis conglomerates take over small businesses, accessibility becomes even more challenging for Indigenous businesses on reserve. Now that the market is saturated and opportunities have diminished, Indigenous businesses are turning away from the legal market dominated by big conglomerates and choosing to self-govern to avoid taxes and costs of licensing, packaging, and testing.

These Indigenous businesses operate without a recognized license in what is often referred to as a “grey market.” At best, these unregulated businesses look like Indigenous Bloom in the Semiahmoo First Nation, where they comply with provincially-unrecognized First Nation bylaws and regulations that meet or exceed federal health standards. At worst, illicit businesses target youth demographics with unsafe and unregulated products that pose significant public health and safety risks while funding organized crime. Indigenous businesses are stuck between two subpar options: save time and money by operating in the grey market under your own nation’s autonomy or operate legitimately as a licensed business off-reserve in an increasingly overcrowded and saturated market.

Indigenous leaders want to assert sovereignty over cannabis activities in terms of public health and safety and but face significant barriers to enforcing regulations. Because the federal Cannabis Act delegates the responsibility of setting rules for retail stores to provinces and territories, First Nations are not included within the enforcement and regulation framework. Among many other factors, a 2022 Senate Report points out that the lack of information sharing and funding for First Nations policing services makes it very difficult to regulate cannabis-related offenses.

The federal government only shares excise tax revenues with provinces, not First Nations, to assist with cannabis regulation and enforcement efforts. In provinces like BC, the amount shared has totalled to $227 million since legalization. Public health and safety issues in First Nations communities will likely worsen if there is no reliable funding mechanism to enforce cannabis regulations. The federal government needs to find a way to cut First Nations in on a portion of revenues exclusively shared to provincial governments.

Part of the solution to the problem of Indigenous sovereignty and economic participation lies in nation-to-nation agreements between provinces and Indigenous nations. Under Section 119 of its Cannabis Control and Licensing Act, British Columbia has entered several such agreements. Negotiated on a case-by-case basis, Section 119 agreements grant nations certain exemptions from provincial and federal regulations. For example, Williams Lake First Nation is permitted to sell cannabis products from a retail front located directly on their production facilities, also known as a farmgate model. Commonly compared to vineyards, the farmgate model offers businesses the ability to vertically integrate, reduce costs, and offer unique experiences for higher-end products.

In Ontario and Quebec, similar provisions allow each province to enter agreements with nations on cannabis regulation, but neither province has done so since legalization. The lack of a unified approach and consistency to these agreements across provinces is a major impediment to reconciliation efforts. The likelihood of being afforded an agreement should not hinge on which province Indigenous nations happen to be in.

Aside from these, provinces should explore other ways to incentivize Indigenous businesses to join the legal market. BC has an Indigenous Cannabis Product Program meant to bring visibility to products from licensed producers with at least 51 per cent Indigenous ownership. Other initiatives like the BC Indigenous Cannabis Business Fund help new businesses with crucial capital costs, licensing and permitting costs, and business advisory services that are typically difficult to access on reserve.

Indigenous cannabis regulation is a niche within an already underrepresented niche that is unlikely to garner significant public support in the near future. In the short-term, more nation-to-nation agreements need to be negotiated to ensure communities have a voice in how they govern, police, and promote cannabis businesses on their lands. In the long-term, federal legislation will need to coordinate provincial regulations to allow for Indigenous self-governance and economic participation in the licensed cannabis market. No firm actions or commitments can be expected until after the final report of the Cannabis Act legislative review in March 2024.

Peter Jiang is a Master of Public Policy candidate at the University of Toronto’s Munk School of Global Affairs and Public Policy. This article was inspired by his co-op experiences at the British Columbia Cannabis Secretariat where his research and data analysis focussed on legal market competitiveness. In his free time, you can find him reading biographies on Canadian prime ministers and playing Tetris. Peter holds a Bachelor of International Economics degree from the University of British Columbia. 

Photo by Budding on Unsplash.