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'sThe Housethat they feel government regulation and taxation are in combination with a persistent illicit market putting the legal industry in jeopardy.

CBC News: The House17:02High hopes dashed?

Six years after the legislative journey toward legalization began, many cannabis entrepreneurs say their businesses are struggling due to excessive government regulations and the still-flourishing illicit market. CBCs Kenny Sharpe talks to the owners of BeeHigh Vital Elements Inc. in Corner Brook, N.L., about their fears for their multi-million dollar investment, then Catherine Cullen asks Health Minister Jean-Yves Duclos whether the government got legalization wrong.

"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 onthings likepackaging and advertisingand 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'reworried 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.

Tax regime an 'open question' under review: minister

Health MinisterJean-Yves Duclos told host Catherine Cullenthe tax regime is "an open question, an important one," and formspart of the federal government's ongoing review.

Duclos said that while there is more to do,the country hascome 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 reportedusing 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 producersreport 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 studyingthe cannabis sector, said Canada's cannabis regulations are a product of its trailblazing position in the industry.

"Why do we have so many regulations? Well, partly it's because the government really wasn't sure what was needed," he said.

Hall and German also saidthe persistence of a substantial illicit cannabis market remains a major challenge to legal producers.

"Don't kid yourself. The black market is still thriving and they can do things that we can't do ... Order [cannabis]from the black market, it's on your doorstep in an hour,Hall said.

"So, that's what we're competing against and it's very difficult."

Duclos said the illicit trade still makes up 30 to 50 per cent of Canada's cannabis market and things like easy online delivery are a source "of concern." Duclos said the federal government playsonly a supporting role inenforcing lawson cannabis, which are largely handled by theprovinces and territories.

Duclos said the legal industry has come a long way in helping to regulate cannabisin Canada and while there's more to do, he looksforward to the results of the legislative review. That review isn't set to be completed until next spring.

For Hall and German, though, changecan't come soon enough.

"We're not getting anywhere. We're just spinning our wheels," Hall said.