Business
California cannabis company’s default highlights debt woes facing state’s MJ businesses
In what observers say is a sign that California’s struggling legal cannabis industry is slouching toward a long-predicted “extinction event,” a major Southern California brand in the middle of ambitious expansion plans was recently sued by its landlord after falling behind on millions of dollars in lease payments.
In July, privately held Kings Garden – headquartered in Palm Springs and a holder of cultivation, manufacturing and distribution licenses – defaulted on $2.3 million in rent and related fees owed to Innovative Industrial Properties (IIP), a San Diego-based real estate investment trust (REIT) that’s a major player in cannabis, regulatory filings first cited by a Twitter user reveal.
A subsequent lawsuit filed by IIP – which leases more than 8.5 million square feet of commercial real estate to some of the nation’s biggest cannabis companies – against Kings Garden was settled out of court on Sept. 11 “to the mutual satisfaction of both parties,” according to more recent filings.
Reached via phone on Sept. 21, both Kings Garden CEO Michael King and IIP CEO Paul Smithers declined to comment, citing the confidential nature of the settlement.
“For confidentiality reasons, I’m not permitted to comment further,” King said.
King also declined to say whether the company’s now-interrupted expansion plans would resume.
However, several observers said the situation reflects an overall negative trend in California marijuana that highlights the difficulties Kings Garden and other licensed companies are facing.
‘You Scaled Your Debt’
Many legal-market operators have claimed over the past year to be falling further and further into debt as costs rise, prices plummet and stalled federal and state reform keep taxes high and the illicit market competitive.
Last winter, coalitions of large producers and small craft growers declaring themselves to be on the brink of failure unsuccessfully lobbied California Gov. Gavin Newsom to cut the state’s 15% excise tax and relax licensing fees and other burdens.
Some even threatened to withhold taxes if their demands weren’t met.
The governor eventually agreed to cut the state’s regressive cultivation tax, but he also changed where on the supply chain the state collects excise tax – a move that advocates say merely moves the pain elsewhere down the line at a time of historically low wholesale prices.
“Applicants and our permit holders, they’re like, ‘I’m broker than I’ve ever been because of the economic situation in the market,’” said Kristin Nevedal, a former grower and consultant in California who now works as a regulator in Mendocino County, told MJBizDaily in July.
The situation is so bearish that Chicago-based Choice Consolidation Corp. – a special purpose acquisition company (SPAC) managed by former Cresco Labs executive Joe Caltabiano – decided to fold and return investors’ money rather than try to acquire a company.
The value of major California cultivator Glass House Brands has dropped nearly 80% since it went public via a SPAC transaction in July 2021.
Kings Garden is just another once-high-flying company to run into predicted trouble, observers said.
“The problem with cannabis is that if you scaled your business, you scaled your debt,” said Jerred Kiloh, the owner of Los Angeles-area marijuana retailer The Higher Path and president of the United Cannabis Business Association (UCBA).
Kiloh has repeatedly sounded the alarm over the past two years that the legal industry is in serious trouble, only to be greeted by what he says are the deaf ears of lawmakers and regulators.
“I wish ‘I told you so’ meant something to them. I really do,” he added. “But this is where we’re going. This is where the metrics are.”
“It sounds like Kings Garden had too many employees, too much overhead, and then the price of cannabis dropped 50% overnight, basically,” said Ken Seligson, a cannabis business attorney with clients in California and New York who is also a co-founder of Padre Mu, an Oakland-based delivery service and distributor.
“Is it a harbinger of other things? Probably,” he added. “All my clients are fighting extinction.”
Short seller’s prediction
It’s also the fulfillment of an April prophecy from a short seller that predicted rocky times ahead for IIP.
IIP was rated a short in April by Blue Orca Capital, short sellers that called the company “a marijuana bank masquerading as a landlord.”
Blue Orca went on to say IIP’s business model was one of purchasing properties at above-market rates “so as to loan tenants money to build their businesses.”
The company did not respond to a request for comment.
But since Blue Orca published its 24-page brief in April, other publicly traded cannabis companies – many of which are IIP tenants – have reported more than $550 million in combined losses over the first two quarters of 2022, according to Politico.
And shares in Innovative Industrial Properties, traded on the New York Stock Exchange as IIPR, have plummeted along with other cannabis stocks, falling 52% from $183.44 on April 13 to below $88.50 on Friday.
The decline is in line with an exchange-traded fund that tracks U.S. multistate operators – AdvisorShares Pure US Cannabis ETF.
Asked for comment, IIP’s Smithers directed MJBizDaily to a company news release from April that called the Blue Orca report so “flawed” that it “does not warrant a response.”
The short seller’s report “demonstrates a basic lack of understanding of commercial real estate generally, the regulated cannabis industry and IIP’s straightforward, simple business model,” the company said at the time.
Smithers did not respond to further MJBizDaily messages seeking comment on Blue Orca’s vision.
Legalization hopes fall short
For Kings Garden, the default represents what outwardly appears to be a remarkable comedown, at least partially a result of bad bets by both investors and entrepreneurs who believed Congress would have legalized a national marijuana market by now.
In February 2020, Kings Garden claimed to be a profitable company, “with no debt,” that already had “begun paying dividends to its investors,” CEO King told New Cannabis Ventures.
At the time, King claimed the company had raised $55 million “from friends and families” and was cultivating more than 20,000 pounds of cannabis a year across 215,000 square feet of licensed space that Kings Garden “owns and operates.”
King appeared to back away from that statement in his Sept. 21 interview with MJBizDaily, claiming instead that the company had never owned its real estate.
Since that time, California companies have steadily added more and more cultivation capacity.
Kings Garden was no exception.
In early 2021, the company announced ambitious plans to expand to an eye-popping 665,000 square feet of “indoor operations” that would produce 140,000 pounds of cannabis and generate “over $300 million in revenue” by 2023.
That kind of optimistic arithmetic was typical thinking at that time – after President Joe Biden’s inauguration – when investors opened their checkbooks and poured cash into ambitious expansion projects.
“A lot of this industry believed that federal legalization was around the corner,” said Anthony Coniglio, CEO of competing cannabis REIT NewLake Capital Partners.
Since the easiest way to expand in California – where many localities ban or heavily restrict retail marijuana sales – was to add more cultivation space, this sanguine capital only further fueled the overproduction that in turn crashed prices and put businesses in their current delicate positions, Coniglio said.
Instead, in California and in other legacy states, taxable sales in the legal marijuana market have actually declined from a mid-2021 peak, a rebuttal of the conventional wisdom that predicts only increased sales and revenue throughout the decade.
According to the UCBA’s Kiloh, sales among his members dropped 40% from February to August.
“I think you will continue to see operators struggle financially, and I think we’ll see failures occur in California to an increasing degree over the next six to 12 months,” Coniglio said.
“We’ve had cycles like this before, but there’s always been a bucket of capital” available to rescue struggling operators, he added.
“That’s not there this time.”
Business
EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices
A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.
Investigation Under Digital Markets Act Gains Momentum
The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.
Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.
Industry Groups Demand Swift Action
Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.
Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.
In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.
Google Denies Allegations
Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.
However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.
Potential Billion-Euro Penalties
If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.
Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.
Wider Implications for Big Tech
The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.
A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.
As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.
AI & Technology
Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations
Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).
The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.
Trial Push Despite Multi-Million Euro Settlement
The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.
Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.
A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.
Allegations of VAT Evasion Through Marketplace Sellers
At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.
Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.
Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.
Italian Government Named as Affected Party
In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.
Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.
Multiple Investigations Add to Pressure
The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.
Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.
In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.
Amazon Denies Allegations
Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.
Broader Impact on Europe’s Digital Economy
If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.
With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.
Aviation
IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?
Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.
Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.
Root Cause: IndiGo’s Market Monopoly
The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.
This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.
Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.
Government Intervention and Regulatory Weakness
The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.
Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.
The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.
If Telecom Giants Fail: A National Paralysis
The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?
If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.
In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.
E-commerce Monopoly: Another Fragile Ecosystem
The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.
Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.
A Wake-Up Call for Regulators
The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.
As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.
Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.
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