TU Global: Marijuana regulation
The common mode of thought among those opposed to legislation that advanced the status of recreational marijuana use was that yes there are enough people to vote for the new propositions, but the likelihood of state agencies working with the burgeoning marijuana industry to create a regulatory structure in a timely fashion was as likely as Congress agreeing on a budget.
But the former has been accomplished. Washington state and Colorado have recently finished hammering out the guidelines regarding taxes, age limits, safety testing, etc. which will now become the law of the green land. And the beautiful thing about that development is that when other states are ready to make way for the completely harmless and remarkably profitable cash crop of cannabis, they now have two separate regulatory models to pick and choose from. This development will provide legitimacy to the industry.
Both Washington and Colorado are requiring that all products be submitted to third-party laboratory testing, that the legal age to purchase/consume is 21, and that the amount which an adult can legally be in possession of be limited to a certain weight in grams.
Taxing between the two states however differs slightly. There is a 25 percent tax levied in Washington on, as Time magazine puts it: “producer to processor, processor to retailer, and retailer to customer,” whereas in Colorado officials have decided on a 15 percent excise tax and a 10 percent sales tax. These numbers were tricky to come by. The effect that these taxes would have on the price of a gram have to be subtle as to keep the legal industry competitive against the black market. And there’s not much wiggle room in between the two fronts’ pricing.
The Liquor Control Board of Washington state did however make one unpopular move by capping production levels at 80 metric tons. The rationale behind this is that if a surplus is produced then it will encourage spillover into illegal and foreign markets. Others believe the caps need be in place to discourage retailers from having to fight to keep their prices down and thus cut their costs by degrading quality of the product and safety measures.
The methods of licensing marijuana businesses between the two states are complete opposites. Colorado requires vertical integration meaning that businesses can’t just sell the pot; they also have to be responsible for growing and processing it. The rationale is understandable but this will only stifle the industry by requiring businesses to have a lot of startup capital to be able to run three separate operations in one and limit revenues from licensing, permits and taxes.
In Washington, by contrast, businesses are only permitted to be licensed in one part of the “seed to sale” process. This may seem strict, but I think the more diversified the industry is, the better. Again, the state will pull in more tax revenue and businesses will be less likely to falter in their operations.
Few issues remain blocking the progress and development of the marijuana industry, the most important and restrictive being the apprehension of banks to do business with the marijuana industry. Bank of America has agreed to let Washington businesses deposit marijuana related profits but they’re one in a few. Without financial help from lenders, those wanting to get into the industry are stuck with a big tab to pick up. Now that not only marijuana is completely legal in these two states but that there is an existing legal and regulatory structure ordained by the state, banks should have no issue with taking their money.
With a pathway to full legality cleared and somehow unanimously agreed upon, the only issue—aside from the laws and banknotes—is to rid marijuana of its century old stigma through whatever means possible. Time will tell.