With pot rules under the microscope, some entrepreneurs say Ottawa is stunting the industry's growth

For many of Canada's cannabis entrepreneurs, legalization has not been all they'd hoped it would be. And without changes to the legal regime governing pot, they say, the fragile industry could wither away.

Six years after the legislative journey toward legal recreational cannabis began, the rules surrounding the sector are being reviewed by the federal government. In the meantime, say two entrepreneurs, the mood of many in the business has turned from hope to gloom.

"There were a lot of highs, but they were quickly diminished with all the lows that happen afterwards," said Rita Hall, who along with Mark German founded the cannabis producer BeeHigh Vital Elements, Inc., which operates out of Corner Brook, N.L.

Hall and German told CBC Radio's The House that they feel government regulation and taxation are — in combination with a persistent illicit market — putting the legal industry in jeopardy.

"It feels like we were put into a boxing ring to to compete with other licence holders and with the black market, with both our hands tied behind our back," German said. The two entrepreneurs are calling on the federal government to reduce its tax bite, ease some regulations on things like packaging and advertising and help to crack down on the illicit trade.

BeeHigh's facility produces about 750 kilograms of cannabis a year, making it a medium-sized producer. Hall and German said they're worried about their financial position — in part, they said, because they pay about 50 cents of every dollar earned to taxes.

"I think the government is doing very well, making billions of dollars, but it's the licence holders ... working very hard for them to get that money," Hall said.

Health Minister Jean-Yves Duclos told host Catherine Cullen the tax regime is "an open question, an important one," and forms part of the federal government's ongoing review.

Duclos said that while there is more to do, the country has come a long way from the "free for all" of the pre-legalization era.

"We have a much stronger system now that protects the health and safety of people, but there is a lot more work to do and we know we have to do it with the legal industry," he said.

Cannabis use in Canada ticked up again last year, with just over a quarter of Canadians telling Statistics Canada they had used the drug in the past year. Fully half of respondents between the ages of 20-24 years old reported using cannabis. Around 22 per cent of Canadians reported cannabis use in 2017, before it was legal.

Duclos also said that the ongoing review would take a look at regulations on cannabis producers. Hall and German said rules requiring that producers report every month to Health Canada and the CRA on things like product weight and numbers of plants are onerous.

"There is probably red tape that can be cut," said Duclos.

Michael Armstrong, an associate professor at Brock University who is studying the cannabis sector, said Canada's cannabis regulations are a product of its trailblazing position in the industry.