The United States of cannabis

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Washington, DC, October 24, 2008 -- Close up of the American Flag. FEMA/Bill Koplitz
Courtesy of FEMA

The recent election yielded massive marijuana reform across the country as four states voted to legalize recreational marijuana and four legalized medical marijuana. Alongside the concurrent election of Mr. Trump, this means a lot of change for marijuana reform movements and the industry, almost certainly changing the legal viability of cannabis as we know it.

Although the marijuana industry is used to uncertainty, President Obama and his administration did offer certain assurances to states with legalized medical and recreational markets — as long as they followed certain best practices, the federal government promised not to interfere.

While Trump has been vocal in endorsing the right of states to legalize marijuana, some of his rumored cabinet members, like Chris Christie and Newt Gingrich, are vocally opposed and vow to revoke federal tolerance of state legalizations.

Regardless of what might happen at the federal level, the marijuana result on election day is good news for national reform and consumers, but as local lobbyist Shawn Coleman reminded Boulder City Council in an email last week, broader change affects local politics.

“It is essential to view marijuana regulation in Boulder in the proper context as part of an established and expanding national industry,” Coleman wrote. 

Up until this point Colorado regulators have not been overly concerned with how the state ought to best position itself as part of a national market. Instead they favored tight controls justified as protections against unknown public health and safety risks.

But now that 28 states have legal marijuana markets, business owners worry that the regulations are antiquated and too slow to change, acting as a threat to Colorado’s industry rather than as a protection to unrealized fears.

“Colorado is established as an industry leader, we are known for that, it is just accepted,” Andy Williams, CEO of Medicine Man, said prior to the election. “But that leadership is going to whittle away rather quickly because of onerous regulatory restrictions in Colorado that are not really needed anymore. Investors and businesses will go to other states that don’t have those restrictions.”

He pointed to barriers like state rules that prohibit publicly owned companies in Colorado or city-level ordinances that limit the number of businesses an owner can have within a city’s limit. These, he said, pose artificial restrictions that will ultimately harm the industry and the state as revenue leaks to states with less restrictive regulations.

The most significant challenge to Colorado will undoubtedly come from California, the world’s eighth largest economy, which expects to bring in $6.46 billion in annual revenue by 2020 from cannabis alone.

In a June interview, Nancy Whiteman, Edibles Chair of the Cannabis Business Alliance, said, “[legalization in California] could have a big effect on Colorado. Many Colorado businesses cannot justify purchasing million dollar equipment when really you can only sell within your own state. Businesses in California will not have the same demand ceiling as us.”

“Think of this as a race, a race that is dependent on federal and state regulations, with everyone in the industry vying for position for, if and when the federal status of marijuana changes,” Williams said.

In economies more comparable to Colorado’s, like Massachusetts, Maine or Nevada, fledgling markets are not expected to pose direct competition, at least not in the foreseeable future. But it will likely take a bite out of the state’s marijuana tourism activity and revenue.

“We know that Boulder businesses rely on tourism business, and the success of California, Massachusetts and Nevada in particular pose a strong challenge to that business, as many tourists to Colorado have come from those states,” Coleman wrote to Boulder City Council.

The businesses that will struggle most will be the lesser talked about small businesses that hold the majority of ava

ilable licenses and make up only a small percentage of revenue.

In most other industries you can chalk this up to natural selection mechanisms built into capitalism that allow the strong to survive while the weak expire. But when it comes to Colorado’s cannabis market, the fate of businesses is often determined by state and local regulations.

“[Boulder] Council had a stated policy goal of a diverse marijuana industry in the city,” Coleman wrote. “While the success of no business can nor should be guaranteed or protected by municipal policy, now is the time to ensure that at minimum the barriers to success are removed, particularly for the smaller businesses whose entire investment is in Boulder.”