Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

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Thursday, May 8, 2014

Is anyone tracking closely and rigorously job creation (and related tax revenue) from marijuana reform?

The question in the title of this post is prompted by this new article in the Los Angeles Times headlined "Marijuana boom spawns ancillary businesses."  Here are excerpts:

Container brands like Kush Bottles are among a slew of ancillary companies joining what many are calling the green rush. Where there's weed, there's also a growing need for everything from greenhouses and fertilizer to pipes and vaporizers.  "The annual revenue is easily in the hundreds of millions, and likely much more," said Chris Walsh, editor of website Marijuana Business Daily.

Demand for pot-related products and services is expected to grow sharply as more states loosen marijuana laws. Already, 21 states and Washington, D.C., allow the sale of some form of pot. Entrepreneurs are attracted by the industry's open field, with few established players and many untapped markets. Some say the marijuana boom reminds them of the Gold Rush a century and a half ago.

"We're selling shovels in a gold rush is all we're doing," said Rich Nagle, a former electrical engineer who now peddles an automated indoor marijuana growing system, designed to be managed remotely with a smartphone.

No one has been able to estimate the potential market for ancillary products and services. But legal cannabis sales are expected to grow to $2.57 billion this year, up from $1.53 billion a year ago, according to ArcView Group, a San Francisco investment network and market research firm focused on legal cannabis.

In addition to product suppliers, marijuana retailers and dispensaries are also increasingly seeking lawyers, accountants and security consultants, said Troy Dayton, CEO and co-founder of ArcView. But many of those professional firms still avoid the pot business. "The reason there's so much opportunity in ancillary businesses is because the industry is being underserved by traditional players," Dayton said. "In part, it's because they fear the reputational risk and they fear the market is too small. But it's growing fast."

Growers and dispensaries offer some of the quickest returns on investments and fattest profit margins. But they also are exposed to risks that don't affect supply chain companies. The federal government still classifies marijuana as a Schedule 1 drug, on par with heroin and ecstasy. That means any enterprise that handles pot faces the threat of closure or prosecution, no matter what state laws say. Because it's a cash-only business, companies that sell pot are also at higher risk of being robbed or burglarized: Most banks are prohibited from taking deposits from marijuana sellers.

"Any time you're literally touching marijuana, you're subject to a different set of laws," said Justin Hartfield, founder of Weedmaps, a review website that is similar to Yelp but for pot dispensaries. "We don't touch the product itself, and that's how we're able to get a bank account." Hartfield's site is one of the most recognized brands to emerge out of the recent rise of legalized pot. Founded in 2007, shortly after Hartfield received his first medical marijuana card, Weedmaps grossed about $25 million in revenue last year.

Dispensaries post their menu of marijuana plants and prices for a monthly fee of $420. Hartfield is building an empire around legalized marijuana. The Weedmaps site is one of a constellation of ventures, including the recently redesigned Marijuana.com, a news and forum site, and MMJ Menu, a point-of-sales software for tracking marijuana sales, inventory and patients.

Some prior related posts:

http://lawprofessors.typepad.com/marijuana_law/2014/05/is-anyone-tracking-closely-and-rigorously-job-creation-and-related-tax-revenue-from-marijuana-reform.html

Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink

Comments

Here's a link to a related story by Linton Weeks, an NPR correspondent: http://www.npr.org/blogs/theprotojournalist/2014/05/08/310707885/13-spliffy-jobs-in-the-marijuana-industry. The story in turn refers to a study conducted by the Humboldt Institute for Interdisciplinary Marijuana Research surveying college students' employment in marijuana related jobs.

Posted by: Rebecca Pressman | May 11, 2014 9:13:51 AM

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