Yes, recreational cannabis is legal. No, cannabis festivals aren’t thriving

More than 10,000 people are expected to pack a small high desert baseball stadium next month for what might be the first state-sanctioned cannabis festival in Southern California.

Dope Cup High Desert, put on through a new partnership between High Times and Dope magazines, is taking advantage of a change in state law that allows marijuana festivals at any venue where local leaders have approved that use. The Adelanto City Council voted earlier this month to designate its Adelanto Stadium as a cannabis event space, paving the way for Dope Cup and other festivals that let adults buy and smoke marijuana.

The move offers a glimmer of hope for cannabis festival organizers, who recently were forced to consolidate after a brutal 2018 and are still struggling to find footing in California’s newly regulated marijuana industry.

Navigating the emerging legal cannabis scene has proven particularly challenging for festival organizers — and the vendors, venues and hospitality businesses who benefit from them — in Southern California.

As the state began to implement the legalization of recreational cannabis in 2018, not a single licensed event happened in the region.

Given that festivals previously had been a key revenue producer, the new rules have resulted in financial pain.

Cannabis industry giant High Times saw its revenue dip 12 percent in the first half of the year after the company failed to get the local permits for its once-massive SoCal Cannabis Cup event in San Bernardino. And Chalice, a Los Angeles-based company known for hosting marijuana festivals, went out of business after permitting problems forced them to cancel their annual event days before it started.

Even the San Bernardino County Fairgrounds in Victorville suffered, laying off staff and delaying improvement projects after losing $1 million in expected revenue when the city declined to allow the venue to host marijuana festivals.

“It’s an important part of what we did,” said Geoff Hinds, CEO of the Victorville fairgrounds, which are seven miles from Adelanto Stadium. “We do consider these types of events to be safe, viable and financially important. So we will continue to try to come up with solutions that are acceptable and workable for all parties.”

In the meantime, plans are in the works for High Times to celebrate marijuana’s biggest holiday, April 20, with another Cannabis Cup. Only this time, the massive festival plans to leave San Bernardino for a more welcoming community — Sacramento.

Rough first year

Here’s the irony: When recreational cannabis was illegal in California, huge cannabis festivals — often with thousands of participants openly flouting the law — thrived.

For example, tens of thousands of people would visit the National Orange Show Events Center in San Bernardino each spring for High Times SoCal Cannabis Cup, with big-name music acts, a competitive cannabis competition and hundreds of vendors selling marijuana products.

The events were always dubiously legal, though, with organizers finding protection in medical marijuana laws by forcing attendees to get doctor’s recommendations for cannabis before entering the gates.

After California on Jan. 1, 2018 launched a regulated recreational market that allowed for recreational marijuana sales and consumption to all adults 21 and over at licensed events, organizers hoped to find the same kind of public acceptance and legitimacy given to festivals for wine or craft beer. But a state policy last year limited cannabis festivals to several dozen county fairgrounds, and required organizers to first get approval from the local city council or county board of supervisors.

Under those rules, state regulators sanctioned just six cannabis festivals in 2018. All of them were in Northern California, at the only two fair venues, statewide, that permitted marijuana events.

In May, Sacramento’s Cal Expo welcomed the first legal event of the year, with High Times hosting the Cannabis Cup Central Valley. The festival was the first in the nation at which attendees could buy and consume recreational cannabis on site.

All of the other legal festivals in 2018 were at Santa Rosa’s Sonoma County Fairgrounds, including High Times Cannabis Cup NorCal and December’s large Emerald Cup festival.

San Bernardino didn’t give High Times a permit for Cannabis Cup SoCal in April 2018. The event still took place, but without legal cannabis consumption and sales. Financial reports filed with the Securities and Exchange Commission say High Times — which gets nearly 80 percent of its $14 million in annual revenue from events — lost $1.2 million after attendees bailed and vendors pulled out.

Chalice festival was planned for the fairgrounds in Victorville from July 13-15, with shows by Ludacris and Bone Thugs-N-Harmony on the ticket. But the city said an ordinance banned cannabis sales at the event, which meant organizers couldn’t get a state license. So organizers canceled Chalice and sued the city and the state’s cannabis bureau director, Lori Ajax.

An attorney for Chalice didn’t respond to requests to discuss the case. But Sacramento Superior Court records show nothing has happened with the case since July, when Ajax’s team filed a response.

In September, a creditor foreclosed on Chalice, seeking nearly $600,000. High Times swooped in the following month and bought Chalice’s assets with a $560,000 promissory note, which is backed by High Times stock. The note is due on March 29.

Last fall, High Times also bought Dope magazine and all of its assets, including the Dope Cup festival circuit.

The San Bernardino County Fairgrounds in Victorville lost roughly $250,000 with the cancellation of the Chalice event, Hinds said. And by the time the year was over, he said they’d lost about $1 million in anticipated revenue from marijuana events.

That meant that the Fairgrounds didn’t hire the dozens of temporary workers who typically are paid to help provide security and other services for large events. The venue also didn’t replace a senior maintenance worker, who retired, and pushed back plans for improvements.

New year, new options?

Festival organizers are once again hopeful for a brighter year after legislation kicked in Jan. 1 that allows cannabis events at any venue in the state that has both local and state approval.

But, so far, state regulators haven’t sanctioned any festivals for 2019, according to Alex Traverso, spokesman for the Bureau of Cannabis Control. They’ve received some applications, though Traverso didn’t provide details.

High Times didn’t respond to requests to discuss Dope Cup High Desert, which is slated for March. But local approval is locked down, meaning it’s likely the state will issue a permit.

Sacramento has received applications from organizers of four cannabis festivals, all of which are being reviewed according to Joe Devlin, who oversees marijuana business activity for the city. Those applications include one from High Times, for a Cannabis Cup Central Valley Event on April 20-21, and the Tree Harvest Festival, which was canceled in 2018 after city officials in Woodland denied them a permit for Yolo County Fairgrounds.

The general manager for San Bernardino’s National Orange Show Events Center didn’t respond to a request to discuss how the loss of those events has affected operations.

No cannabis festivals are listed on the venue’s calendar, and the city of San Bernardino isn’t reviewing any applications for cannabis festivals this year, according to Stephanie Sanchez with the city’s economic development department.

As the 8-acre Adelanto Stadium starts booking cannabis events for 2019, there’s still no path for the 84-acre San Bernardino County Fairgrounds in Victorville to host marijuana festivals.

Hinds, with the Victorville fairgrounds, said his venue cut its annual budget from $3 million to $2.4 million. Unless they can recruit new events to replace the lost cannabis festival revenue, Hinds said this year’s revenues are only expected to clear expenses by $4. And that’s without any unexpected expenses popping up.

“It just seems counterintuitive that legalization would actually make (festivals) more restrictive,” Hinds said. “Regulation in some ways is good and in some ways is harmful.”