A "not-for-profit" regulatory model for legal recreational cannabis: Insights from the regulation of gaming machine gambling in New Zealand (2018)

A dozen or more regulatory frameworks have been proposed for legal cannabis but many of the "not-for-profit" options have yet to be developed in any detail, reducing the likelihood they will be seriously considered by policy makers. New Zealand's innovative "not-for-profit" regulatory regime for gaming machine gambling (i.e. "slot machines") has reversed the previous increase in gambling expenditure, empowered local councils to cap the number of gambling venues, and is unique in requiring the societies operating gaming machines to distribution 40% of the gross expenditure from machines (i.e. $NZ 262 million in 2015) to community purposes (e.g. sports). However, the regime has been criticised for not addressing the concentration of gaming outlets in poorer communities, and not requiring grants to be allocated in the disadvantaged communities where outlets are located. There have also been cases of gaming societies providing community grants in exchange for direct or indirect benefits. In this paper we adapt this regulatory approach to a legal cannabis market. Under the proposed regime, licensed "not-for-profit" cannabis societies will be required to distribute 20% of cannabis sales to drug treatment and 20% to community purposes, including drug prevention. Grants must be allocated in the regions where cannabis sales are made and grant committees must be independent from cannabis societies. A 20% levy will be used to cover the wider health costs of cannabis use. A further 10% levy will be used to fund the regulator and evaluate the new regime. Local councils will have the power to decide how many, and where, cannabis retail outlets are located. Other important elements include a minimum price for cannabis, effective taxation of cannabis products, regulating CBD in cannabis products, higher taxation of traditional smoking products, advertising restricted to place-of-sale, no internet sales, and restrictions on industry involvement in regulation making and research.