Cannabis Law Prof Blog

Editor: Franklin G. Snyder
Texas A&M University
School of Law

Wednesday, October 18, 2017

Does the Legalization of Marijuana Actually Increase Property Values?

Despite worries that an increase in dispensaries would decrease the value of the homes nearby, there seems
 to be an opposite effect.
Reporting on a recently released study by researchers at University of Wisconsin Madison and California State University Sacramento, Colorado Springs Independent revealed that the prices of homes in Denver increased in 2014 after Colorado’s Amendment 64 was passed, which legalized recreational marijuana: Home Prices

In particular, the report found that single-family residences within .1 mile[s] of [recreational dispensaries that were newly converted from medical dispensaries] increased in value by over 8 percent more relative to comparable properties farther away (between .1 and .25 mile away) over that year. That’s an average of almost $27,000 in added value, whereas homes more than .1 mile away from a [dispensary] weren’t impacted.

Although great news for Denver, and possibly an incentive for legalization in other states that are debating on whether to legalize the drug, researchers also caution that that the increase in property values could also be due to other factors such as “a surge in housing demand spurred by marijuana-related employment growth, lower crime rates, and additional amenities locat[ed] in close proximity to retail conversions.” Nonetheless, all of these changes were related, at least in part, to Colorado’s legalization of recreational marijuana.

These findings are in stark opposition to concerns voiced by opponents of legalizing marijuana, who have constantly cited increasing crime rates and decreasing property values as an anticipated result of legalization. And while the study was fairly small, another study in 2016 by researchers at the University of Mississippi found similar, positive results. The study found that in municipalities that passed ordinances to allow for the sale of marijuana in response to Colorado’s legalization of recreational marijuana in 2012, those municipalities experienced a 6% increase in housing values on average. Both studies even went as far as to consider retail dispensaries as amenities that could be included in the estimation of property values.

With the increase in the number of states legalizing both medical and recreational marijuana, we will soon be able to determine whether the effect of increasing property values is a trend among these states or only a stroke of luck for Colorado.

--Taylor Wood

October 18, 2017 in Finance, Medical Marijuana, Recreational Marijuana, Research | Permalink | Comments (0)

Saturday, September 16, 2017

Hawaii Dispensaries to Go Cashless

CanPay

Although Hawaii has struggled to legalize marijuana for adult use, it is ahead of the game when it comes to paying for medical marijuana. According to KATU, this week Hawaii announced that its dispensaries would start using the mobile debit app, CanPay, as a payment method for purchasing marijuana. 

In an effort to prevent robberies and other crimes targeting dispensaries, state leaders announced Tuesday that a cashless payment system will be implemented in October.

"This cash-free solution makes sense," said Hawaii Gov. David Ige. "It makes dispensaries' finances transparent."

The implementation of this method of payment will address a persistent concern coming from those opposed to marijuana legalization: safety. 

A cashless system would reduce, if not eliminate, the desirability of robbing marijuana dispensaries. The app is one method of payment, which can help to reduce the amount of cash on site at any given time. It should be noted, however, that although opponents of legalizing marijuana claim the presence of dispensaries increases crime, several other studies, like those reported in Civilized, The Cannifornian, and NY Daily News, have actually found the opposite.

While Hawaii has not gone completely cashless, it is unclear whether they will do so in the future. However, it may be preferable to use both payment methods in conjunction with one another. A mixed payment system could serve the needs of those who prefer to use cash due to information safety and privacy concerns, while also reducing the overall amount of cash kept in the retail shop throughout the day.

Furthermore, the CanPay payment app ensures that only legally compliant transactions are made using the app. According to CanPay, because it uses a Closed-Banking Feedback Loop, "only cannabis retailers working with financial institutions operating compliance programs built around the Cole Memo and FinCEN Guidance will be allowed to participate in the CanPay network." This compliance guarantee feature gives retailers a sense of financial security when deciding whether to accept the app as a payment method at their stores. 

CanPay is also currently available in Oregon, Washington, California, Colorado, Florida, and Maine.

 

--Taylor Wood

September 16, 2017 in Banking, Business, Finance | Permalink | Comments (0)

Saturday, September 9, 2017

Silicon Valley's Cash Crop

Marijuana Test Tube

Many industries have seen rapid changes in response to evolving marijuana laws. Next in line seems to be the technology sector. According to an article on the STAT medical site, venture firms and wealthy private investors in Silicon Valley are pumping money into the development of marijuana products--and not just for medicine.

VC firm Benchmark Capital recently invested $8 million in Hound Labs, a startup here in Oakland that’s developing a device for drivers — and law enforcement — to test whether they’re too buzzed to take the wheel.

 

And that’s just the start. Wealthy investors are pouring tens of millions into the cannabis industry in a bid to capitalize on the gold rush that’s expected when California legalizes recreational marijuana on Jan. 1. They’re backing development of new medicinal products, such as cannabis-infused skin patches; new methods for vaporizing and inhaling; and “budtender” apps like PotBot, which promises to scour 750 strains of cannabis and use lab research, including DNA analysis of each strain, to help customers find the perfect match.

Investors, in anticipation of a large increase in marijuana consumption due to the legalization of recreational marijuana on January 1st, have been rolling the dice and investing in products that incorporate the federally prohibited drug. But, as with all things, on the other end of the potentially lucrative rewards are great risks: civil and criminal liability under the Controlled Substances Act.

However, this risk is precisely what has given some of these investors the ability to step in. Because many public companies are prohibited from investing in marijuana, either contractually or by other federal law, private investors, though numerous, largely have first pick of which startups to invest in. Only time will tell if the decision to invest in the drug was a wise one.

-- Taylor Wood

September 9, 2017 in Business, Finance, Research | Permalink | Comments (0)

Sunday, March 1, 2015

Treasure Trove of Data Released by CO Department of Revenue

The Colorado Department of Revenue issued its first annual report on the performance of the regulated marijuana industry this past Friday — encompassing both the medical marijuana and adult retail markets.  Colorado was the first state in the US, and the first government in the world, to implement a regulatory system including both consumers and those who provide to them.

This report and those that follow will no doubt be the subject of a considerable amount of analysis (and spin) by both sides in the debate, particularly as more states consider similar laws.  

March 1, 2015 in Business, Drug Policy, Finance, Medical Marijuana, Recreational Marijuana, State Regulation | Permalink | Comments (0)

Wednesday, December 17, 2014

Silicon Valley VC Makes Big Bet on Marijuana

Big-time venture capital money may be headed to the fledgling marijuana industry.  Business Insider is reporting that Peter Thiel's $2 billion Founders Fund is set to take a stake in the $75 million offering by Seattle-based Privateer Holdings, parent of Leafly and the proposed Marley Natural brand marijuana:

    Thiel's Founders Fund is likely participating in a large round of financing in a cannabis startup, Privateer. The company is raising a $75 million Series B round at a $425 million pre-money valuation, according to documents obtained by Business Insider. If Founders Fund participates in the round however, it may invest at a lower valuation. The round hasn't closed yet, so those numbers are subject to change. 

    Privateer was founded in 2011 and is positioning itself to be the leader in the weed supply chain, which the company says in its current state is fragmented, poorly managed, and largely run underground, despite "proven demand."

    Privateer quietly bought up another startup in the space, Leafly, which is like Yelp for weed products. In 2013, Privateer launched Lafitte Ventures, which focuses on medical marijuana, and Tilray, which mails medical weed to users and generated nearly $200,000 in revenue last year. Privateer is also exploring a testing facility (Arbormain) in Washington state. The founders may launch their own weed-focused investment fund, too, so Privateer can pour money into external cannabis companies.

    Medical marijuana is available in at least 22 states as well as Washington, D.C. Privateer estimates the US weed market could be a $20 billion to $50 billion opportunity. Privateer hopes to be the leader across everything from growing and processing various strains of marijuana to supplying and shipping it. It also plans to get into the accessory business, selling devices like pipes and vaporizers to users.

    Privateer is already generating meaningful revenue, although the company is not profitable. In 2014 it expects to generate nearly $11 million in net revenue, up from $1.2 million in 2013. Most of that revenue (60% to 70%) is generated by Lafitte Ventures, and the rest is from Leafly. Privateer expects to reach profitability and generate $111 million in 2015 and $440 million in 2016. 

It's a natural fit, I think.  Unike alcohol and tobacco companies, with their heavy emphasis on production and marketing, Privateer looks to be following a Silicon Valley model.  It's founded and run by Yale MBAs with significant experience in the high-tech and financial sectors.

Thiel is something of a legend in the VC world.  He was the first outside investor in Facebook, and ranked number four on Forbes's 2014 "Midas List" of the world's top tech investors.

December 17, 2014 in Business, Finance | Permalink | Comments (0)