PORTLAND, Ore. (KOIN) – Cannabis is nearly a $1 billion industry in Oregon, but after years of upward trajectory, the industry has hit a wall.

Last year marked the first time that annual sales of cannabis products declined from over $1 billion in 2021 to $994 million in 2022.

This comes as Oregon’s third-largest dispensary chain, Chalice Farms, recently asked Multnomah County to place five of its subsidiaries in receivership.

Hunter Neubauer, the president of the Oregon Cannabis Association, says he had a feeling that the company’s financial troubles would happen — adding that the business has been going through financial issues for some time.

“It’s really difficult to run a business when we’re fighting things such as archaic policy, such as 280E, and over-regulation and over-taxation,” Neubauer said. “It’s also really difficult when you don’t have an eye or an ear on the marketplace. If leadership isn’t involved on a daily basis, you can lose sight of what’s happening.”

Now, Neubauer says Oregon’s cannabis industry is “the most fragile it’s ever been” as demand is not keeping pace with supply.

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“We’re in our second cycle of supply-and-demand issues. We had one back in [2018 and 2019] where oversupply forced the market to drop significantly, prices fell to the floor. And in [2021] we started another session of market supply issues,” Neubauer said. “This round is worse, actually, than last time.”

“We started out with a really great framework for the industry. We had no limits on the number of licenses, we had no limit on money. And the idea was, whoever wants to come be part of the cannabis industry should have that opportunity and that was a great place to start,” Neubauer explained.

However, the federal government has stalled progress for the industry by not allowing interstate commerce, banking, along with fair regulation and taxes, according to Neubauer. He said because of these regulations, some cannabis business from mom-and-pop shops to larger businesses are facing the prospect of shutting down.

Neubauer explained this has forced some of the cannabis businesses that are still in Oregon to innovate, create more high-quality products and be able to compete — leading Oregon to become “the most competitive marketplace in the country, I believe,” Neubauer said.

According to Neubauer, until fair regulations are implemented, there is going to be a cycle of cannabis shops shutting down and recovering.

“We’re going to see a lot of people shut down, we’re going to see less retailers, less production and we’ll see the market recover, most likely get too big again and then go through a wave of consolidation over the next five years,” Neubauer said.

He also says it would be ideal for interstate commerce laws in the cannabis industry to pass.

“For folks like us that are vertically integrated, we’d love to have a store in Illinois, in New York, in California, in Colorado, in Nevada, in Arizona, but we could ship our products that we create here from phenomenal growing practices and a great team of people to our stores and other states,” Neubauer said. “Unfortunately, there’s outdated policy that doesn’t allow us to do so.”

Additionally, Neubauer says that the banking system fails to recognize cannabis as a legal business across the country, making it a cash business.

“We could look at a scenario where we have a state bank. It’s a significant public safety issue,” Neubauer said. “There’s a lot of break-ins, there’s a lot of theft and we’re a target. We’ve got a big target on our back because we end up having to go pay our state sales tax in Salem in a duffel bag full of cash. The unfortunate part is it goes into that machine and into a U.S. bank bag — or whatever bank bag the state decides to use — and so we’re at a significant disadvantage from just traditional banking resources, but also, being able to raise money. We have to deal with private individuals or small family offices where our rate to borrow or invest money is far above what the standard is.”

In addition to Chalice Farms, La Mota is also facing economic and legal trouble for not paying taxes and for donating to Oregon Democrat campaigns — including former Secretary of State Shemia Fagan who stepped down from office after working as a contractor for La Mota while her office conducted an audit of the cannabis industry for the Oregon Liquor and Cannabis Commission.

“I think it really points to the system that we have to operate in. Government and politics is a place where you have to pay to play and if you don’t have lobbyists fighting for the changes that you need, you really can’t get anything done,” Neubauer said.

“I think if you look at the history of cannabis in the United States, Oregon and parts of Northern California have supplied the country for a very long time. The culture that’s here, the knowledge, the experience, the education surrounding cannabis and the growing, the processing, distribution and retail now of the plant is far beyond because of the competitive nature of our marketplace. It forces you to get better. It forces you to create high-quality products whether they’re grown organically or with other methodologies,” Neubauer explained.

“Eventually, when we have some sort of shift in federal policy, it kind of goes back to where it was where Oregon can provide significant volumes of cannabis for the rest of the country and other states where it’s legal and provide more jobs,” he added.

“The thing that we don’t get to really talk about is the hundreds of millions of dollars that we’ve contributed to the state, the tens of thousands of jobs that we’ve created and the culture that’s surrounding it. It’s a lot of really, really good people that continue to have to fight an uphill battle that is just unfair. We’re still treated as though we are an illegal business, yet we are legal.”