A change has come
Under the Obama Administration, The Department of Justice announced in October that it would cease efforts to bring criminal charges against operators of medical marijuana clinics and no longer devote federal resources toward raiding dispensaries, provided they operate according to state law. This new policy stands in stark contrast to the Bush Administration’s handling of the issue. Under the Bush Administration, federal agents raided medical marijuana dispensaries and arrested operators on the basis of violating federal drug laws even if their own state law allowed them to distribute marijuana for non-profit medical purposes. The reason being, federal law bans marijuana use and possession under the Controlled Substances Act.
Medical cannabis is considered legal in 14 states. These include Rhode Island, Michigan, California, Vermont, Colorado, Washington, Maine, Oregon, Montana, Alaska, Nevada, New Mexico, and Hawaii. Many are predicting that the Obama Administration’s new policy toward pot is the catalyst entrepreneurs have been waiting for.
Hardly what was envisioned?
In Los Angeles alone, more than 800 dispensaries have registered with city hall since 2007. But only 540 are actually conducting business and of those, some are nothing more than simple “hole in the wall” operations. I personally found one "clinic" operating out of an apartment complex. Another was actually a computer repair shop moonlighting as a dispensary. The Wellness Collective and Herbal Institute operates across from the Boys & Girls Club and next to Canoga Park's Youth and Arts Center. Some of the clinics don't even have signs -- only addresses to mark their existence for potential customers.
Despite some of these shady outfits, some retail establishments appear to be operating according to the rules of the city's moratorium and are doing well. One such place is The Farmacy, located in West Hollywood, California. After first experiencing a neighborhood backlash, The Farmacy’s owner, JoAnna LaForce, in a savvy PR move, began contacting local school parent organizations to offer tours of her store. She hired security guards and banned smoking in the parking lot in an effort to win public trust. It worked. Local residents now view her medicinal clinic as part of the community instead of a risk.
The tide has turned fewer obstacles in the way
It appears the medical marijuana industry is truly emerging to the point where it’s now possible to invest in companies that profit legally from pot sales. Ticker symbol MJNA now trades on the pink sheets as a penny stock. The company, Medical Marijuana, Inc. has developed a debit card that will recognize a dispensaries tax ID number as well as state and local tax rates and then provide something called Automated Clearing which allows the transferring of that financial information to the proper financial institutions.
But while the cash crop for a medical pot market may exist, entrepreneurs must first overcome the murky legality between state and federal drug laws as well as the political sensitivities that—while changing rapidly—still present serious obstacles for those who see marijuana distribution as a way to start a new business.
For example, of the 14 states where medical marijuana is permitted, most only allow registered growers who are certified by the state to distribute the drug to patients. While patients can grow their own plants, most of the participating states have set a temporary moratorium on brick and mortar clinics. For the many exceptions where clinics are operating, the stipulation is they should function as a nonprofit entity rather than a for profit business.
California Attorney General, Jerry Brown set the guideline in 2008 when he proposed that marijuana clinics in California be nonprofit operations. The Attorney General was attempting to control the hundreds—if not thousands—of for-profit dispensaries that sprung up overnight. Many had doctors waiting in the wings to write prescriptions for anyone who walked through the door.
A huge tax money potential
Though the smoke has yet to clear about the issue, Oakland, California recently became the first U.S. city to vote on taxing proceeds from marijuana sales. The measure passed with a landslide 80 percent of residents choosing to impose a tax on Oakland's four licensed marijuana dispensaries. The proceeds of the tax, which is 1.8%, will go directly into the city general’s fund. The estimated sales and tax revenue medical cannabis will generate in California is between $70 to $120 million per year, with a total statewide customer base of some 150,000 to 350,000 patients, while the gross retail market is estimated to be around $800 million to $2 billion per year. Many law makers view the sale and taxation of marijuana as a partial answer to California’s $21 billion dollar budget deficit.
Some California proponents argue that medical marijuana dispensaries should be exempt from state and federal tax since California does not tax prescription medication. Marijuana must be prescribed by a doctor to be considered legal in Oakland; therefore, though technically considered a prescription medicine, at 1.8 % marijuana is being taxed the same way alcohol is.
Leading by example
One thing is clear; the recent developments concerning pot indicate the tide has turned for those who favor the legalization of the drug. Portland, Oregon became the first city in The United States to open a marijuana café, where for $25 dollars a month, certified medical patients (those who have a doctor’s prescription) can gather inside The Cannabis Café, and smoke marijuana together. The drug is not sold, but rather distributed to members for the price of admission.
Recently in the middle class skiing town of Breckenridge, Colorado, local residents overwhelmingly agreed on Ballot initiative 2F which passed with 73% of the 3,300 residents voting to allow adults 21 and over to poses up to 1 ounce of marijuana without being arrested. It should be noted however that marijuana is still considered illegal under state law in Colorado for those without medical clearance.
So yes the push to repel prohibition of marijuana has gained extraordinary momentum under the Obama Administration. Perhaps it’s because the president’s own mother, Ann Dunham, died from uterine cancer. Due partially to that experience, Mr. Obama feels compassion for those suffering from chronic diseases and he made it clear in November 2007 at a town hall meeting in Iowa that he views no distinction between marijuana and morphine -- not in terms of intensity -- but when it comes to relieving people of pain.
History repeating itself
Mr. Obama finds himself confronting circumstances Franklin Roosevelt encountered during his presidency. Reminiscent of the Great Depression, people are losing their jobs losing their homes and companies that once thrived are now bankrupt. What President Roosevelt saw were the opportunities that a legal liquor industry would generate; namely jobs and tax revenue. The tax revenue that medical marijuana sales could generate numbers into the millions if not billions of dollars. For a state like California that’s struggling with a budget deficit of some $21 billion, legalizing marijuana is an attractive option.
Of course there are some, especially parents, who say legalizing cannabis is a step in the wrong direction because it makes parenting responsible, drug free children all the more difficult. Breckenridge, Colorado Police Chief Rick Holman said his department will still have the ability to issue citations as some residents may feel the new law gives them the right to smoke openly in public while strolling along Main Street, and that’s not the case. Nevertheless counties within Colorado are paying attention to, and possibly following Breckenridge’s lead by considering similar measures.
The city of Durango, Colorado is preparing for the 2010 vote with a ballot question on whether to legalize up to an ounce of marijuana. About 1,200 residences must sign the petition to force a vote on whether to decriminalize its use by adults 21 or older. Many in the small town who plan on voting for the initiative say Durango is the next city to allow marijuana use for medicinal purposes.
