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Thai Cannabis Businesses Brace for Regulatory Shakeup

Marijuana businesses in Thailand are preparing for major regulatory and legal changes as the country works to keep recreational sales in check and make the industry primarily medicinal again. The latest draft marijuana law from the Thai government is focused on eliminating the vacuum that allowed the adult-use industry to flourish after the drug was declassified as a narcotic.

The new law could greatly impact the business prospects for thousands of growers and store owners, depending on how relevant authorities chose to enforce it.

Some of the proposed changes include the following:

  • Affording law enforcement more authority to enforce the law, with a focus on the ability to seize goods from businesses that don’t adhere to the rules
  • Adopting a license system for personal cultivation
  • Issuing prison sentences and fines for any individual who violates the law
  • Prohibiting the sale of smokable cannabis outside the medical market

Pongchaiwat Jirayustienjinda, a Tilleke & Gibbins associate, stated that the draft law prohibited the use of marijuana for recreational purposes, which included smoking. However, he continued, the draft was still being considered as the public hearing was concluded last month.

The draft maintains a ban on the majority of commercial imports of medical cannabis. It remains to be seen whether the new law might discourage or encourage foreign direct investment.

To analyze the possible future path for the country’s marijuana industry as well as its current situation, it is important to understand what went wrong. In 2022, Thailand decriminalized marijuana. Soon after, the Ministry of Public Health revealed that adult-use wasn’t part of the plan, with government officials noting that the goal behind the decriminalization was to help the economy and support medical wellness.

Despite this, sufficient regulatory and legal mechanisms weren’t implemented to prevent recreational marijuana businesses from launching; in addition, moves to conclude related regulations were stopped by political issues and never concluded. With the vacuum in place, thousands of cannabis retailers opened their doors to the public.

It is estimated that more than 6,500 cannabis stores operate in the country, and while they aren’t explicitly legal, they aren’t illegal either because most of them follow regulations in existence and operate in a gray area as marijuana isn’t classified as a narcotic.

Other flaws of the current regulatory and legal situation include the lack of traceability for cannabis product, the lack of testing requirements for cannabis products and the absence of marijuana-specific taxation to offset regulatory compliance costs

The likely regulatory U-turn in Thailand is a reminder to North American cannabis companies such as Aurora Cannabis Inc. (NASDAQ: ACB) (TSX: ACB) that some jurisdictions can easily change policy on a dime, and it pays to analyze any potential risks should the company consider entering any international marijuana market.

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