9 Jan 2014

Marijuana Sales Exceed $5 Million In First Week

posted in: Cannabis News | 0

Colorado marijuana dispensaries made huge sales in the first week of legal recreational marijuana. Owners of the 37 new dispensaries around the state reported first week retail sales to The Huffington Post that, when added together, were roughly $5 million. That’s a lot of green for Colorado’s legal weed.

Colorado, the first state to allow retail recreational marijuana sales to adults age 21 and older, has projected nearly $600 million in combined wholesale and retail marijuana sales annually. The state, which expects to collect nearly $70 million in tax revenue from pot sales this year, won’t have its first official glimpse at sales figures until Feb. 20, when businesses are required to file January tax reports, according to Julie Postlethwait of the state Marijuana Enforcement Division.

Denver’s 9News was first to report statewide retail sales on New Year’s Day, the first day legal pot shops were allowed to operate, exceeded $1 million. Interest dropped in the days that followed, according to shop owners, but many reported customers still waiting in lines out the door.

“Every day that we’ve been in business since Jan. 1 has been better than my best day of business ever,” Andy Williams, owner of Denver’s Medicine Man dispensary, told The Huffington Post.

Owners of larger shops told HuffPost they sold from 50 pounds to 60 pounds of marijuana in the first week. Smaller shops sold 20 pounds to 30 pounds, proprietors said.

Under state law, Colorado residents may legally buy up to one ounce of marijuana in a transaction. Tourists can purchase up to one-fourth ounce.

But the initial rush to buy legal weed was so great that many shops imposed caps on the amount each customer could buy, or raised prices to curb demand and stave off a possible shortage. So far, none of the retailers reported supply problems.

Prices also were boosted by the state’s 25 percent tax on retail purchases, including a 15 percent excise tax and a 10 percent sales tax. Voters approved the levy in November. Local taxes can add more to what customers pay.

Shop owners said their sales were biggest the first day. Each day since, sales have been roughly half the New Year’s Day volume, the business owners said.

One-eighth of an ounce of marijuana was selling for an average of $65 around the first of the year, according to Marijuana.com.

Despite the surging sales, Joaquin Ortega, co-owner of Denver Kush Club dispensary, was quick to note to HuffPost that federal laws against marijuana sales and possession present obstacles to Colorado’s legal retailers. The Justice Department has said it won’t challenge legalization laws in Washington state and Colorado as long as the states prevent out-of-state distribution, sales to minors and drugged driving, among other conditions.

Still, the federal prohibition means banks won’t accept marijuana businesses for traditional bank accounts, and retailers said they can’t take advantage of traditional business tax writeoffs. 

“People think we all became millionaires,” Ortega said. “But as a business owner, I can’t write anything off for the last three years.”

Banks have said they fear they could be implicated as money launderers if they offer traditional banking services to the pot businesses.

Marijuana businesses often cannot accept credit cards, leaving them to conduct transactions in cash. They say that’s a burden for taxes and payroll, and a safety risk.

Monday night, Denver City Council urged banking regulators to grant Colorado marijuana businesses access to the federal banking system, so they can use the same banking services as other businesses.

Rep. Ed Perlmutter (D-Colo.) is seeking reformed access to banking for marijuana businesses with his Marijuana Business Access to Banking Act (H.R. 2652), which would create protections for banks that offer services to state-sanctioned marijuana-related businesses.

“The banking legislation sponsored by Congressman Ed Perlmutter is a common sense approach to bring financial legitimacy to the legal marijuana industry,” Denver City Councilman Albus Brooks told HuffPost. “It’s ludicrous and unsustainable to force large neighborhood businesses to operate entirely with cash. Congress needs to act, and act now.”

The Wall Street Journal reported Monday that the Department of Justice is also drafting legal guidance on how banks can work with marijuana businesses in states like Colorado and Washington, which both legalized recreational marijuana for adults 21 and over.

Dispensaries in Washington state are expected to open later in 2014.

Source: Huffington Post (NY)
Author: Matt Ferner
Published: January 8, 2014
Copyright: 2014 HuffingtonPost.com, LLC
Contact: [email protected]
Website: http://www.huffingtonpost.com/

31 Jul 2013

D.C. Records its First Legal Pot Deal in 75 Years

posted in: Cannabis News | 0

The 15-year struggle to legalize medical marijuana in the District ended like this: A 51-year-old Northwest resident entered a North Capitol Street rowhouse Monday evening and emerged 90 minutes later with slightly less than a half-ounce of street-legal, high-grade, D.C.-grown cannabis.

Shortly before 6 p.m., Alonzo walked into the high-security sales room of the Capital City Care dispensary with two store employees to consummate the city’s first legal marijuana deal in at least 75 years. He purchased about $250 worth of three strains of cannabis.

“It’s a beautiful natural product that is from rain, sun and soil,” Alonzo said, wearing a dark T-shirt with a green logo of a cannabis leaf over a medical cross. “Mother Nature doesn’t make mistakes.”

Alonzo agreed to share his experiences navigating the District’s medical marijuana system on the condition that he be identified only by his middle name, concerned that public knowledge of his medical marijuana use could prove sensitive at work.

Capital City Care’s sales Monday to two patients represent the culmination of a fight that dates to the mid-1990s, when HIV/AIDS activists first fought to put medical marijuana on the citywide ballot. Nearly 70 percent of voters approved a 1998 legalization initiative, but Congress intervened for more than a decade, preventing the implementation of a medical marijuana program.

After Congress lifted its restrictions in 2009, the District government started a slow process to set up a strict regulatory and licensing regime limited to city residents with specific chronic illnesses, with lawmakers and city officials saying they were moving deliberately to reduce the risk of future federal intervention.

Initial hopes that cannabis could be made available to patients in late 2010 gave way to early 2011 and then mid-2012 as the city moved through the painstaking and politically sensitive process of licensing marijuana growers and retailers, as well as certifying the doctors who would recommend the medicine and patients who would consume it.

Alonzo, who is HIV-positive, said he had been following the rollout of the medical marijuana program since the beginning of the year. The combination of antiviral drugs he takes to manage his infection, Alonzo said, causes him frequent insomnia and occasional difficulty in swallowing and digesting.

Marijuana, he said, was not initially his preferred therapy. “Like many people, I certainly had my fair share in college, but then I really left it alone for a long time,” he said. A mid-1990s trip to Amsterdam with his former partner, who had a more advanced HIV infection, demonstrated how cannabis could help address the virus’s symptoms and the side effects of the drugs used to treat them.

In March, Alonzo approached his doctor about seeking a marijuana recommendation.

“He asked why, and I outlined my challenges,” he said. “I really don’t want to have a prescription drug dependency, and they weren’t working for the insomnia. He was agreeable to it. And then the long wait.”

To secure his first dose, Alonzo had to visit his doctor, who had to request recommendation forms from the health department, which then processed the forms and issued him a patient card.

Although the city’s medical marijuana program has started, it remains a slow start.

D.C. Health Department spokeswoman Najma Roberts said that as of Monday, only nine patients have obtained a city-issued medical marijuana card. About 20 doctors, she said, have requested forms from the city allowing them to recommend cannabis to their patients.

Capital City Care, the first of three planned District dispensaries to secure an operating license, offers four strains of medical cannabis, priced from $380 to $440 an ounce, grown by Northeast-based Holistic Remedies. More varieties will be offered once two other cultivation centers — including Capital City Care’s own — produce their first salable harvest, said Scott Morgan, a spokesman for Capital City Care.

Morgan said he was not aware of any health insurers willing to cover medical marijuana purchases. The prices, he said, reflect the highly regulated nature of the District’s system and the firm’s investment in its dispensary and growing operations.

Senior citizens, veterans and low-income patients are eligible for discounts of 10 to 15 percent, he said.

“After a couple of years of hard work, it’s exciting to open our doors and serve the patients our facility is really for,” Morgan said. “This is a moment we’ve all been looking forward to for a long time.”

Alonzo opted for the Blue Dream, Jack Herer and Master Kush strains and, to consume it, a $120 Magic Flight vaporizer.

The StickyGuide, a Web site reviewing medical marijuana strains and dispensaries, said Blue Dream “is helpful for reducing pain and stress while maintaining energy levels” and offers a flavor “reminiscent of hash with a subtle hint of blueberry underneath.” Master Kush, the site says, is a “classic indica-dominant strain” whose characteristics include “helping [to] promote relaxation and assisting with sleep.”

Wayne Turner, one of the leaders of the 1998 initiative effort, called Monday’s sales “the end of the beginning.”

“It’s taken us 15 years to get to this point,” he said, adding that the program had much left to prove. “We can do this. We can do this right. The world isn’t going to come to an end. People are going to have access to something that really is going to help them, really help them ease their suffering.”

Source: Washington Post (DC)
Author: Mike DeBonis
Published: July 29, 2013
Copyright: 2013 Washington Post Company
Contact: [email protected]
Website: http://www.washingtonpost.com/

2 Jul 2013

Legalizing MJ is Hard Regulating Pot is Harder

posted in: Cannabis News | 0

It’s not every day that a former Microsoft executive holds a press conference to announce his new venture into the exciting and profitable world of drug dealing. But that’s exactly what happened earlier this month when Jamen Shively, a former Microsoft corporate strategy manager, announced that he wants to create the equivalent of Starbucks in the newly legalized pot industry in Washington state.

All this is happening at the same time that the Washington State Liquor Control Board is looking to finalize rules on the new, legal marijuana industry. And one of the major debates right now among board members is how much they ought to prevent or encourage the kind of market consolidation in which a few firms dominate the whole industry.

As Chris Marr of the Liquor Control Board argued, “How do you prevent a Microsoft millionaire from getting this idea and deciding that — playing by the rules — they’re going to dominate the market?” And if that is the concern, what can economics inform us about how this new market should be set up?

To provide some background, voters in Washington state passed Initiative 502 last fall in a general ballot, creating a statewide legal market in pot. Unlike Colorado, which has passed a bill to expand its medical marijuana industry and make pot legally available to everyone, Washington is folding pot under regulations for the liquor industry. As such, the Washington Liquor Board has regulatory control over the new marijuana industry.

As with alcohol, a marijuana firm is classified as a producer, processor or retailer. The first question, therefore, is how aggressively regulators should try to check the market power of front-line sellers. As of now, if there is excess demand for licenses, which cost $1,000 each, they will be subject to lottery. Licenses can’t be traded in a secondary market, and it is possible that the regulators will cap the number of licenses per holder.

The law also requires regulation for public safety and public health. As with the tobacco industry, voters don’t want firms marketing and selling pot to underage users. And public health officials are concerned about companies marketing to “problem users” who would like to quit or reduce their usage but find themselves unable to.

If that’s the case, then perhaps having pot dealers with large market power is a good idea. Economists usually consider monopolists a problem because they produce too little of a product and charge too much for it, earning substantial profits. But that could be a good thing for the pot industry. Safe profit margins mean that a firm might be less likely to compete on price for every potential consumer — and also much more likely to follow the law.

Yet people involved with the Washington law have two main responses to this. The first is that firms with market power could go outside the market and use their extensive profits and influence to exert political power.

“The idea is to prevent the retail industry from becoming so large that they have enough wealth and power to roll over anyone trying to enforce, expand or update the public-health-focused rules that are designed to protect the public’s health and safety,” says Roger Roffman, a University of Washington professor and author of the forthcoming book “Marijuana Nation.”

Second, consolidated firms may that they themselves pose threats to public health. “If a firm has market power, the profits they get from selling above market costs means that they can have a bigger marketing department,” says UCLA public policy professor Mark Kleiman. “In the real world, spending here will increase their market share by creating additional problem users. This, combined with lobbying efforts that will rival the alcohol industry in terms of avoiding taxes and adjusting the rules, is a major problem.”

A third argument comes from University of Chicago economics professor E. Glen Weyl. He argues that “long-term players who have market power have an incentive to get people addicted. A monopolist, in particular, has a big incentive to advertise to get people addicted over the long-term, as they are sure to reap all those rewards.” If a marijuana firm has a monopoly, then the financial gains of turning someone into a heavy, problem user of a product (rather than a specific brand) will all go to that firm. A market with smaller, fragmented firms with greater turnover would be a check on this dynamic.

Both Weyl and Kleiman argue that Washington should consider bolder ideas to regulate the industry. Weyl suggests some sort of mandatory turnover policy to discourage firms from turning people into problem users. Another possibility, which Kleiman considers, is to create a state-run nonprofit retail firm that has no interest in creating problem users or expanding the market. (Given that pot is still illegal at the federal level, this isn’t likely to happen).

Market consolidation is also an issue when it comes to a firm’s vertical structure. Under Washington state law, if a firm is a retailer, it can’t be a producer as well as a processor. This is meant to fragment the vertical chain of production, and it contrasts with Colorado’s system, in which dealers are required to grow 70 percent of what they sell (as that is how the medical marijuana system works).

Another related economic issue is the location of pot retailers. The law in Washington, as currently structured, requires pot retailers to be at least 1,000 feet away from a school, day-care facility, playground, teen arcade game center, recreation center, transit center or library. Though this may sound minor, in practice it means that it will be very difficult to put pot retailers in dense population spaces. Retailers might be limited to industrial or largely depopulated areas.

That could force what economists who study spatial models of economies call the agglomeration model — as when certain kinds of restaurants all cluster together to create an area people go to for certain goods. As Weyl notes, “often ethnic restaurants cluster into neighborhoods so that people can find the best places, creating ethnic neighborhoods. Do we want a ‘pot town’ to grow up in our cities? Perhaps not, but that is the logical consequence of forcing dealers away from a convenience model.”

Kleiman thinks the main issue with regard to pot retailers’ ultimate location has more to do with advertising and discretion than anything else. “An alcoholic trying to quit drinking will pass by alcohol in bars, billboards and grocery stores. That person uses up a lot of emotional energy always having to say no.” Instead of focusing on 1,000 feet within certain buildings, the bigger issue Kleiman emphasizes is whether storefronts and signs aggressively advertise their product.

It’s important to get these issues right because they interact with the three background constraints on this new market. The first is the black market, while the second is the legal medical marijuana market. For some reason, the medical marijuana market won’t be taxed, while the new legal market will be taxed around 25 percent. (The black market is, of course, not taxed at all.)

Note that if the price goes too high, or if the location restrictions prove too inconvenient, pot consumers might just stick with medical marijuana or the black market. State lawmakers are currently trying to get the medical marijuana market folded under the same regulations that the Liquor Board is creating for the legal pot market, and Mark Kleiman notes that police may need to escalate crackdowns on illegal distribution as they legalize the market.

A third constraint is the federal government, which enforces laws that still make pot illegal. If legalization is seen as a disaster, it is possible that the federal government will move to shut down the process by preempting state law. But even if it doesn’t, background laws will probably hurt the scale and efficiency of pot retailers.

As Jack Finlaw explains, since marijuana is banned at the federal level, new pot retailers “often cannot conduct their businesses through banks. They also cannot deduct business expenses from their federal taxes.” It is possible the normal interactions between businesses that allow them to thrive — things like having a legal bank account — won’t be immediately available.

Markets are constructed through laws and regulations, and the market for pot that is being created in Washington state is no exception. The regulators see how the consolidated alcohol industry is able to avoid taxation and accountability and are determined to avoid these problems in the new pot industry. Thus this market may help economists understand a crucial role of regulations that has lapsed in recent decades: the role of government in curbing the excess power of the private sector.

Mike Konczal is a fellow at the Roosevelt Institute, where he focuses on financial regulation, inequality and unemployment. He writes a weekly column for Wonkblog.

Source: Washington Post (DC)
Author: Mike Konczal
Published: June 29, 2013
Copyright: 2013 Washington Post Company
Contact: [email protected]
Website: http://www.washingtonpost.com/