Sunday, November 11, 2018
The title of this post is the title of this new article authored by John G. Sprankling now available via SSRN. Here is its abstract:
Legal marijuana is the fastest-growing industry in the United States. Tens of thousands of new businesses have arisen to meet the demand created by over 34 million Americans who use marijuana. And the millions of pounds of marijuana grown, processed, and sold this year will generate more than $11 billion in revenue. This industry is premised on the assumption that marijuana ownership will be protected by law. But can marijuana be owned? This Article is the first scholarship to explore the issue.
Federal law classifies marijuana as contraband per se in which property rights cannot exist. Yet the Article demonstrates that marijuana can now be owned under the law of most states, even though no state statute or decision expressly addresses the issue. This conflict presents a fundamental question of federalism: Can property rights exist under state law if they are forbidden by federal law? The Article explains why federal law does not preempt state law on marijuana ownership.
This creates a paradox: state courts and other state authorities will protect property rights in marijuana, but their federal counterparts will not. The Article analyzes the challenges that this hybrid approach to marijuana ownership poses for businesses and individuals. It also examines the fragmented status of marijuana ownership in the interstate context, where business transactions involve states with conflicting approaches to the issue.
Friday, November 2, 2018
As reported in this local article, a "commission studying marijuana legalization in New Hampshire released its 264-page report with 54 recommendations that form a potential blueprint should state legislators pursue bills to legalize cannabis for adult, recreational use." Here is a partial summary of the massive report from the press piece:
Though it takes no position on legalization, the commission produced a framework for marijuana legalization, starting with recommending lawmakers refer to it as cannabis.
Recommendations mirror some practices in the eight states that have legalized recreational pot. They include limiting possession to 1 ounce for adults (21+) and up to 5 grams of concentrate, prohibiting public indoor or outdoor consumption, allowing towns and cities an "opt-in" provision, and banning marijuana smoking lounges or in a similar restaurant or business.
Marijuana legalization could generate up to $58 million for the state. But that is the high end, notes Rep. Patrick Abrami, the commission chairman. The report cites low end range being $15.2 million to $26.9 million, and the high range being $32.7 million to $57.7 million.
It recommends creation of a “pathway” for existing therapeautic cannabis centers, which are now non-profit by law, to become for-profit organizations -- with the intent that they may enter the “adult use” market. Any proposed home cultivation should limit six plants (three mature) per person, with that limit going to 12 plans (six mature) per household.
The full report is available at this link, and here is a portion of its extended executive summary:
Despite a number of states legalizing cannabis, many important issues remain unresolved as New Hampshire contemplates legalization. New Hampshire banks may still be reluctant to have banking relationships with marijuana businesses because of the federal position, potentially making any commercialization a cash-only industry. Many companies are working on a roadside marijuana sobriety test similar to the breathalyzer, but there is still no certified device to detect marijuana impairment. Workplace issues surrounding marijuana use and impairment are impacting businesses in states that have legalized and states that have not. Revenue is necessary to fund public education campaigns key to safe use and to fund substance misuse prevention and treatment. There is a need to fund and conduct research and data collection to monitor effects on health, driving while impaired, workplace safety, crime rates, usage rates, school performance, and impacts on quality of life and the NH state brand. Vaping marijuana products has become wide-spread among our middle school, high school, and college students and needs to be addressed. All of these facts are indisputable and viewed as such by all Commission members....
Finally, speakers from every legalized state warned that for every positive claim about marijuana, there is a negative claim that can be made. We found this to be true and decided to carefully select high quality peer reviewed studies to present in this report rather than draw conclusions. The studies are grouped into four categories; health, relationship to opioid misuse, youth and young adult use, and public safety. For each topic, multiple studies with abstracts are presented. The Commission thought it important that the executive and legislative branch of NH government as well as all the citizens of NH hear both sides of the marijuana legalization argument. Therefore, the studies are further classified as those in support of legalization and those opposed to legalization.
Thursday, September 27, 2018
Criminal conviction restrictions are justified as one way to ensure that the legal marijuana market will not be used to divert drugs out of state, to minors, or to fund criminal enterprises. But using past behavior as a predictor for future actions is an imperfect measure. It is impossible to determine how exactly these restrictions contribute to public safety since they are always coupled with other regulations. We do know, however, that there are other ways to facilitate a functioning legal market using regulations that are not subject to prediction error. Security requirements, marijuana tracking systems, and bookkeeping requirements deter criminal behavior without using an applicant’s past to make assumptions.
In addition to uncertainties that criminal conviction restrictions are the best way to ensure a functioning legal market, it is also important to consider the costs of these restrictions. Criminal conviction restrictions reduce entry into the legal marijuana industry. By excluding drug criminals, conviction restrictions may fundamentally undermine the goals of marijuana legalization by forcing some to stay in the black market. Having a safe legal market is useless if the black market is still the primary supplier of marijuana.
Given the hypocrisy of these criminal conviction regulations, it is not surprising that some states and localities have adopted policies to help those negatively impacted by previous drug policies enter the marijuana industry. Equity programs, however, will only help a chosen few priority applicants. Fundamentally opening up employment opportunities in the marijuana industry by reducing conviction restrictions has the potential to help many people who have been impacted by the drug war.
September 27, 2018 in Business laws and regulatory issues, Criminal justice developments and reforms, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)
Notable groups set forth notable set of principles for marijuana reform as New Jersey debates legalization
The on-going debate over potential marijuana reform in New Jersey is continuing to generate lots of interesting and thoughtful discussion concerning just how states ought to approach legalizing and regulating marijuana. In that vein, I was interested to see this recent press release from Americans for Prosperity – New Jersey titled "AFP-NJ Supports Principles for Safe and Responsible Marijuana Reform" in conjunction with this document titled "Seven Principles To Guide A Successful And Well-Regulated Marijuana Market." Here are parts of the press release:
Americans for Prosperity – New Jersey (AFP-NJ) ... announced that it has co-signed a set of principles with the Reason Foundation’s Drug Policy Project regarding the state’s effort to legalize marijuana. If passed, S- 2703, the New Jersey Marijuana Legalization Act would legalize possession and personal use of marijuana for New Jerseyans over the age of 21 and would create the Division of Marijuana Enforcement and licensing structure.
Erica Jedynak, State Director of Americans for Prosperity – New Jersey issued the following statement in support of components of S- 2703:
“For too long, New Jerseyans have had their lives upended due to non-violent offenses like the recreational use of marijuana. In partnership with the Reason Foundation’s Drug Policy Project, we encourage lawmakers to follow the policy principles outlined for a successful and well-regulated marijuana market. These principles will help our state exercise its constitutional right to create a safely regulated marijuana market that spares generations of New Jerseyans from getting trapped in an endless and senseless cycle of incarceration. While S-2703 is not perfect in its current form, it makes good strides toward reshaping our criminal justice system and bringing it into the 21st century. Eventually, AFP-NJ hopes that a fully-realized effort to legalize recreational marijuana enhances public safety, provides second chances, and is free of cronyism and overregulation.”
Dr. Adrian Moore of Reason issued the following statement in support of components of S- 2703:
“As states move to legalize medical and adult use marijuana, it is vital that sensibly regulated free and competitive legal markets emerge to entirely replace black markets and all their ills. We are focused on helping to learn and adopt best practices and informed understanding of how markets work to the legislative and regulatory process of legalizing marijuana.”
The articulation of "Seven Principles To Guide A Successful And Well-Regulated Marijuana Market" makes for an interesting short read, and here are the listed "principles" without the accompanying paragraph of explanation:
1. Recognize There Is A Limit To The Tax Burden The Industry Can Bear.
2. Do Not Place Unnecessary Limits On The Number Of Licenses.
3. Award Licenses Based On Competency And Business Acumen.
4. Allow Business Owners To Operate Within A Scale And Structure They Can Manage.
5. Establish Parameters For Local Governments.
6. Regulations Based On Evidence And Allowing Alternative Approaches.
7. Do Not Penalize People For Acts That Are No Longer Crimes.
September 27, 2018 in Business laws and regulatory issues, Political perspective on reforms, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Taxation information and issues | Permalink | Comments (0)
Friday, September 7, 2018
I could not resist spotlighting this new local article about the slow roll-out of Ohio's medical marijuana program due to its use of a great quote in its headline, "'Cannabis regulated like plutonium': Security measures causing delays in marijuana launch date." Here is some context for the quote:
Ohio's Medical Marijuana program was originally supposed to launch on Sept. 8. For months, it's been clear that delays with licensing and construction for the new facilities meant patients wouldn't be able to get medical products produced in Ohio until months after the initial start date, potentially as late as early 2019.
For an industry that's planning to be the business of the future, required security measures sound like they're from an old-fashioned action movie. Some of the basic procedures medical marijuana companies will have to follow include "unmarked cars, travel point A to point B, randomized routes, manifests before and after delivery," explained Frantz Ward LLP Attorney Tom Haren....
"I think that cannabis is basically regulated like plutonium," said Cleveland School of Cannabis Dean of Instruction and Student Success Jacob Wagner. He says plants are tracked "from seed to sale," making sure nothing gets diverted to the black market. When his school's students graduate and become medical marijuana industry employees, they'll wear state-required badges, and their facilities will be watched around the clock through redundant security systems, accessible to regulators in Columbus.
"It's designed to also make sure that every product is tested, every product is properly packaged and properly labeled before it reaches the end consumer, the patient," said Wagner.
"The worst thing for the program would be some type of criminal activity of some kind of adulterated product making its way into the market and into the hands of the patient," said Haren.
Wednesday, July 11, 2018
The title of this post is the title of this notable new article authored by Ira Robbins now available via SSRN. Here is its abstract:
Federalism is a vital tenet of our Republic. Although federal law is the supreme law of the land, our Constitution recognizes the integral role that state law plays in the national scheme. Like any pharmaceutical drug that withstands rounds of clinical testing, state law functions as a laboratory in which Congress can evaluate and potentially adopt novel policies on a nation-wide basis. Most of the time, federal and state law exist harmoniously, complementing one another; other times, however, the two systems clash, striking a dissonant chord.
In the United States, state marijuana laws are currently on a crash course with federal marijuana law, exemplifying the discordant consequences our dual-system of laws sometimes generates. Eight states and the District of Columbia have legalized recreational marijuana use, yet under the Controlled Substances Act (“CSA”) marijuana remains illegal in the eyes of federal law. Mere confusion concerning the legality of marijuana is not the only consequence, however. One notable casualty ensuing from the battle of the mutually exclusive federal and state marijuana laws is the deprivation of rights belonging to the unsuspecting, average citizen.
The CSA establishes a schedule of drugs, and various federal regimes — such as entitlement programs and welfare benefits — impose compliance with the CSA as a necessary antecedent for conferral of those benefits. For example, although possessing a firearm is a fundamental right under the Second Amendment, citizens who wish to lawfully smoke marijuana can no longer avail themselves of this fundamental right. Section 922(g)(3) of the Gun Control Act prevents users of Schedule I drugs pursuant to the CSA — irrespective of state law — from possessing or owning a firearm. Marijuana, despite its lack of potential for addiction, plethora of medical benefits, and disconnect from violence, has always been a Schedule I drug — essentially deemed more addictive and dangerous than methamphetamine, a Schedule II drug. Unknowing, ordinary citizens are consequently caught in this legal black hole, contemplating how conduct can be both lawful and unlawful.
This Article proposes a simple solution to a complex problem: deschedule marijuana. The Article first surveys the past, observing that the Nixon Administration’s placement of marijuana in Schedule I rang of racial undertones, and then examines the present, noting the majority of states that have legalized medicinal marijuana and the numerous anecdotal reports of its alleviating properties. Further, enforcing § 922(g)(3) against individuals who consume marijuana lawfully pursuant to state law simultaneously overreaches and under-reaches, failing to target the violent criminals that Congress initially sought to apprehend. Thus, the federal government’s insistence on maintaining marijuana in Schedule I undermines principles of federalism and prevents law-abiding citizens from fully exercising their constitutional right to own a firearm.
July 11, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Medical Marijuana Commentary and Debate, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)
Monday, July 9, 2018
I have long thought that the economic development potential of marijuana reform could be one big reason the movement has staying power. Against that backdrop, this new New York Times article about economic (over?)excitement in Canada really struck me because of the comparison to the dot-com boom. The piece is headlined, "Legal Marijuana Is Coming to Canada. Investors Catch the Buzz." Here is an excerpt:
A financial boom not seen since the dot-com mania of the late 1990s has overtaken Canada. The legalization of recreational marijuana, scheduled for this autumn, is not only a momentous social change and public health challenge, but also a rare opportunity for entrepreneurs like Mr. Asi to be in on the birth of what they hope will become a multibillion-dollar industry.
Early signs of a boom abound: Marijuana growers have plowed millions into investments that, without having recorded profits yet, have stock-market values measured in billions. Down-on-their-luck towns like Chesterville, Ontario, hope that marijuana will reverse economic decline. Former politicians and law-enforcement officials who once opposed legalizing recreational marijuana have now joined or formed companies to cash in on it.
Some provincial governments forecast that tax revenue from marijuana sales will help balance their budgets. And companies offering every kind of service or product — from real estate to packaging — are all out for a piece of the action....
Mr. Trudeau’s government portrayed the legalization of recreational marijuana — Canada has had a medical marijuana system since 2001 — as a way to wipe out the black market, not as a potential job creator or moneymaker for either the government or investors. In effect, he promised a system in which marijuana would be available, but not promoted.
As a result, the federal government will license growers in Canada, and provinces will decide how it is sold to consumers. In some provinces, notably Alberta, the government went with privately operated shops. Others, like Ontario and Quebec, will essentially adopt a variation of the system of government-owned stores that has been used for alcohol sales since Prohibition ended.
Under regulations recently released, marijuana will generally be treated more like cigarettes than alcohol. Advertising will be severely restricted — as will the ability of Canada’s marijuana makers to turn themselves into household brand names. Packages must be uniform and plain, aside from vivid, yellow health warnings and tiny logos. Even baseball caps, T-shirts and all other logo-laden giveaways promoting marijuana brands will not be permitted....
Cam Battley, who once worked in the pharmaceutical industry and who is now the chief corporate officer of Aurora Cannabis (market value: 5.6 billion Canadian dollars; losses in the first part of this year: 20 million dollars), acknowledged that the soaring values of marijuana companies may not be justified in every case. But he also rejected suggestions that the dreams surrounding the industry may, well, go up in smoke. “People should be cautious and do their homework on the cannabis sector,” Mr. Battley said. “We’ve become a mainstream industry in Canada. On this, we’re not seen as a wild and crazy country. I think the world trusts Canada to get cannabis right.”
Monday, July 2, 2018
The title of this post is the headline of this effective Rolling Stone article which does a nice job explaining the intricacies of the connections between hemp and CBD product and marijuana and why Senate Majority Leader Mitch McConnell may be greasing the path toward a CBD-friendly world. I recommend the piece in full, and here are some key excerpts:
CBD’s legality is complicated, to say the least. Without getting into the mind-numbing specifics, let’s just say that reasonable people disagree about whether it is possible for any CBD to be legal, and shops selling CBD products in states like Indiana and Tennessee have been raided by local law enforcement. So in order for mainstream retailers to feel comfortable carrying CBD products and Kentucky’s farmers to subsequently cash in on the CBD craze, McConnell put together legislation making it official. Though he’s focused his hemp legalization rhetoric on helping farmers and bland-sounding industrial products, his true intentions became abundantly clear about two weeks ago, when Sen. Chuck Grassley (R-IA) proposed an amendment that would exclude CBD and other major compounds (called cannabinoids) from the definition of legal hemp.
McConnell shot the proposal down, saying, “I’ve declined to include suggestions that would undercut the essential premise of the bill, namely that hemp and its derivatives should be a legal agricultural commodity.” At no point did he refer directly to the “derivative” that was up for discussion. But anyone paying close attention understood what he was talking about.
“McConnell’s omission of CBD is not a denial of it. It’s simply a tactical political move,” says Carl Cameron, a former Fox News commentator who now works for New Frontier Data, a D.C.-based firm that provides information on the cannabis industry to investors. “He’s trying to help potential supporters avoid criticism in places where opposition to marijuana might be misconstrued and then undermine support for hemp.”
Leslie Bocksor, who runs the cannabis consulting firm Electrum Partners, agrees that McConnell has downplayed the fact that CBD is a primary motivation for legalizing hemp so as to fly below the radar of anti-pot donors and voters. “This is just a way for McConnell to be able to move this forward without taking the political risk in talking about what’s going on, which is, yes, CBD is in so much demand that the supply can’t possibly equal the demand any time in the foreseeable future,” Bocksor says. “This is part of the Kabuki theater of the political environment we’re in today.”
Bocksor himself has embraced this kind of winking reference – hemp as a euphemism for CBD – as a business strategy. For the past few years, he’s been advising the companies he works with to avoid mentioning CBD directly or making any medical claims about what the product can do in order to avoid interference from law enforcement or warning letters from the federal government. Label everything as “hemp extract,” Bocksor says, and the consumer will know you mean CBD, as well as what kinds of health benefits can be expected.
Culturally, hemp has long been seen as a taller and more fibrous cannabis plant than marijuana, but the legal distinction is based only on THC content. Once CBD started to enter the mainstream consciousness about five years ago, pot farmers in states like Colorado and California began to breed strains of cannabis that were high in CBD but contained so little THC that they could be reclassified as “hemp.” Around the same time, the 2014 Farm Bill created a pilot program where state departments of agriculture and universities could register farmers to grow “hemp” — meaning, cannabis that was less than 0.3 percent THC. McConnell’s home state of Kentucky is the second biggest producer of hemp under this program – behind only Colorado. And while most people believe that the hemp pilot program in the 2014 Farm Bill was not created with the intention of causing a boom in CBD products, that is exactly what happened....
For now, the legal status of CBD is still murky. But with McConnell’s support, there is a good chance that the House’s version of the Farm Bill will include a provision to legalize hemp-derived CBD, and potentially open the door a world where you can find CBD soaps and CBD tinctures on the shelves at Target and CVS.
Monday, June 25, 2018
Formal FDA approval for Epidiolex means some part of the federal government finds some part of cannabis plant has "accepted medical use"
This new CNN piece, headlined "FDA approves first cannabis-based drug," reports on the big news from the federal government concerning a very specific form of medical marijuana. Here are the details:
The US Food and Drug Administration approved a cannabis-based drug for the first time, the agency said Monday. Epidiolex was recommended for approval by an advisory committee in April, and the agency had until this week to make a decision.
The twice-daily oral solution is approved for use in patients 2 and older to treat two types of epileptic syndromes: Dravet syndrome, a rare genetic dysfunction of the brain that begins in the first year of life, and Lennox-Gastaut syndrome, a form of epilepsy with multiple types of seizures that begin in early childhood, usually between 3 and 5.
"This is an important medical advance," FDA Commissioner Dr. Scott Gottlieb said in a statement Monday. "Because of the adequate and well-controlled clinical studies that supported this approval, prescribers can have confidence in the drug's uniform strength and consistent delivery."
The drug is the "first pharmaceutical formulation of highly-purified, plant-based cannabidiol (CBD), a cannabinoid lacking the high associated with marijuana, and the first in a new category of anti-epileptic drugs," according to a statement Monday from GW Pharmaceuticals, the UK-based biopharmaceutical company that makes Epidiolex....
The FDA has approved synthetic versions of some cannabinoid chemicals found in the marijuana plant for other purposes, including cancer pain relief. Justin Gover, chief executive officer of GW Pharmaceuticals, described the approval in the statement as "a historic milestone." He added that the drug offers families "the first and only FDA-approved cannabidiol medicine to treat two severe, childhood-onset epilepsies."
"These patients deserve and will soon have access to a cannabinoid medicine that has been thoroughly studied in clinical trials, manufactured to assure quality and consistency, and available by prescription under a physician's care," Gover said. Epidiolex will become available in the fall, Gover told CNN. He would not give any information on cost, saying only that it will be discussed with insurance companies and announced later....
It's an option for those patients who have not responded to other treatments to control seizures. According to the Epilepsy Foundation, up to one-third of Americans who have epilepsy have found no therapies that will control their seizures. Shauna Garris, a pharmacist, pharmacy clinical specialist and adjunct assistant professor at the University of North Carolina's Eshelman School of Pharmacy, said the drug is effective and works somewhere between "fairly" and "very well." She has not used Epidiolex in her own clinical practice and was not involved in the development of the drug but said she's not sure it will live up to "all of the hype" that has surrounded it....
As part of the FDA's review of the medication, the potential for abuse was assessed and found to be low to negative, according to Gover. Still, this approval comes as the White House is said to be reconsidering federal prohibition of marijuana and as more and more states approve it for recreational and medicinal use. Gover said the approval signals "validation of the science of cannabinoid medication."
As the title of this post highlights, this news serves as still further proof of the misguided placement of marijuana as a Schedule I drug under the Controlled Substances Act defined as having "no currently accepted medical use in treatment in the United States." But, it should also be realize that this news serves as proof that the federal government, even without any reform to the CSA, can and will approve a cannabis-based medicine which has been "thoroughly studied in clinical trials [and] manufactured to assure quality and consistency." Thus, the catch-22 comes from the fact that marijuana's placement on Schedule I precludes US-based companies from doing the types of clinical trials that the FDA demands. (If we had a well-functioning federal government, marijuana surely would have been at least re-scheduled to Schedule II or III under the CSA many years ago. But I digress....)
June 25, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Medical community perspectives, Medical Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)
"IRS cracks down with §280E": Reviewing the latest major US Tax Court court ruling highlighting burdens for marijuana businesses
Chris Nani, a student in my Marijuana Law & Policy seminar last year, has already had articles published at the Cannabis Law Report discussing federal tax treatment of cannabis businesses (see prior posts here and here). Thus I was not surprised to hear from Chris in the wake of a significant US Tax Court ruling earlier this month, and I imposed upon him to author a review of the decision for the blog. He titled his review ""IRS cracks down with §280E," and here is the account:
Altermeds, LLC, a medical marijuana dispensary near Boulder, Colorado, recently experienced the effects of § 280E after a tax audit found they had under-reported their taxes. The ruling from the US Tax Court in Alterman v. Commisioner, TC Memo 2018-83, is already being widely discussed in the marijuana industry.
In 2010 and 2011, Altermeds filed its taxes and applied normal tax deductions to its business. The IRS audited Altermeds and found a deficiency of $157,821 in 2010 and $233,421 in 2011 holding Altermeds was not eligible for business expense deductions. Additionally, the Internal Revenue Code (IRC) provides for a tax penalty of 20% the portion of the underpayment for under-reporting taxes.
280E states: "No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted."
Essentially, § 280E provides no cannabis business (because cannabis is a Schedule I drug) will receive deductions or credits for any of their business related activates. Normally, businesses can deduct their ordinary business expenses under § 162 of the IRC. However, § 280E limits § 162 and theoretically was meant to deter drug dealers from writing off their business expenses. (The opposite may have occurred by giving drug dealers even less incentive to report their income.)
The origins of § 280E are slightly comical. In 1982, Jeffrey Edmondson, a drug dealer, was able to write off his business expenses under § 162. Edmondson wrote off traveling, his scale he used to measure drugs, and his rent. When Congress found out Edmondson was writing off his drug dealing expenses, they enacted § 280E.
The majority of businesses know when entering into the state legalized cannabis market they will still pay federal taxes without being able to deduce business expenses. Non-cannabis related expenses such as the sale of t-shirts are eligible for § 162 tax deductions even while selling cannabis, cannabis-infused edibles, or pipes are not deductible because of their relation with cannabis. The tax court is more likely to permit deductions the clearer the line is between a cannabis and non-cannabis business.
When Altermeds was audited, they claimed they had multiple businesses. One of their businesses sold their non-cannabis merchandise, but the tax court did not find the business to be distinct enough from their cannabis dispensary. To prove a business is distinct, Altermeds would have to show there is a separate bank account and business. The tax court held that the non-cannabis products sold by Altermeds (pipes and other cannabis paraphernalia) were sold to complement selling cannabis and were not eligible for any deductions. Lastly, the court was willing to deduct the amount for the non-cannabis business as well, but Altermeds’ brief failed to follow the court rules and the court was precluded from even contemplating the deductions.
The tax court did allow for the cost-of-goods-sold allowances that the IRS had stipulated prior in the litigation, but Altermeds was still forced to pay its overdue taxes along with the 20% penalty. With this most recent tax decision taking a hard line approach to deductions associated with cannabis businesses, participants in the industry need to be careful about, and cognizant of the tax consequences that can result from, intermingling cannabis and non-cannabis products.
UPDATE: I just noticed that Bryan Camp over at TaxProf Blog has this long posting on the Altermeds decision under the heading "Lesson From The Tax Court: Into The Weeds on COGS." Here is his concluding "Lesson" concerning the case: "Get your accounting straight and be sure to hire tax counsel who have the specialized knowledge needed for the job of representing you before both the IRS and Tax Court."
Thursday, May 24, 2018
This new article by Joshua Horn and Jesse M. Harris in the Legal Intelligencer provides a useful reminder of how much law (and well as policy) is unpredictable in the modern marijuana universe. The piece is headlined " Cannabis and Banks: What Qualifies as Illegal Activity? Many legal issues arise out of financing cannabis activities, not the least of which is whether a target property for a cannabis venture is mortgaged by a bank." Here is how the piece starts and ends:
Many legal issues arise out of financing cannabis activities, not the least of which is whether a target property for a cannabis venture is mortgaged by a bank. The standard institutional mortgage contains language that allows the mortgagee to “call” the loan if the property is being used to conduct “illegal activity.” This language relates to federal lending guidelines and is usually nonnegotiable. The question thus becomes: what qualifies as “illegal activity”?
As a general matter, a contract for an illegal purpose is unenforceable. And while 29 states have passed some form of marijuana legislation, marijuana remains a controlled substance under federal law. The interplay between state and federal law has left the status of the marijuana industry — and the rights of involved lenders and borrowers — unclear. Several recent cases highlight this ambiguity....
At bottom, there are no black and white answers when it comes to the enforceability of marijuana-related agreements — only gray. For this reason, most lenders outright refuse to enter into such agreements. This is particularly true for mortgage loan originators who underwrite a new loan with the intention of immediately selling it to investors like FHA, Fannie Mae or Freddie Mac. As government entities, such investors will not accept marijuana-related contracts.
Other lenders, often called “portfolio lenders,” keep a certain number of loans in their portfolio instead of selling to investors. Portfolio lenders thus assume the risks associated with lending to marijuana-related business. And, because portfolio lenders assume the risk, they have greater discretion in deciding whether to extend credit to a cannabis-related entity. Depending on the jurisdiction, sophisticated borrowers may have better luck in persuading these lenders to do just that.
The title of this post is the headline of this local article providing a partial update on the roll-out of medical marijuana in the Buckeye State. I like the headline because it has a nice alliteration, "lackadaisical launch," which I am now inclined to steal when talking about what is afoot in Ohio. Here are just some of the reasons reasons why this label is so fitting:
Kim Rupp is anxiously awaiting the day she can buy and consume medical marijuana in Ohio. "You're hoping that when this opens that it will change your life," Rupp said, referring to dispensaries where legal cannabis will be sold in the Buckeye State. Rupp said she's battled a debilitating bone disease for years, consuming countless pharmaceutical drugs along the way.
A big proponent of medical marijuana, Rupp is pessimistic that Ohio's new pot program will be fully up and running by Sept. 8th, as required by law. "We would be fortunate if we see anything happening by spring," Rupp said. "I mean, anything where people have access." Instead, Rupp thinks only a few dispensaries will be open by fall.
Ohio's Board of Pharmacy delayed Wednesday's scheduled announcement of who will get to operate the stores. That means nobody's started building what have to be fortified sites, because buying cannabis is typically an all-cash transaction. "I don't think you'll see everybody open on the same day," said Greg May. May is with Ohio Releaf III, a company that hopes to build a dispensary in Forest Park.
Missing only a few stores will likely have a major impact. The pharmacy board can award up to 60 dispensary licenses statewide, with just three dispensaries for all of Hamilton County. "My advice is get your recommendation now or as soon as possible," said Rob Ryan, executive director of the Ohio Patient Network. Even though he anticipates a slow rollout, Ryan urges anyone with a qualifying medical condition to talk to their doctor about marijuana now.
UPDATE: The new AP article, headlined "Medical marijuana ramp-up in Ohio sees progress, questions," provides more details on Ohio's struggles to get is medical marijuana regime up and running. Here is how it gets started:
The medical marijuana program Ohio's set to launch later this year has been beset by questions.
Will growing operations be able to ramp up in time to meet initial demand? Will legal and administrative challenges tangle the rollout in red tape? Will enough doctors obtain certificates to serve needy patients?
Still, much progress has been made since Ohio became the 25th state to legalize medical marijuana in 2016 and set Sept. 8 of this year as the launch date.
Mark Hamlin, the Ohio Department of Commerce's policy adviser on medical marijuana, acknowledges the process has been "bumpy." But he said he hopes the public recognizes this is not just a short-term project.
ANOTHER UPDATE: This new Columbus Dispatch article provides yet another account of these stories under the headline "Ohio in danger of missing Sept. 8 deadline for medical marijuana," which includes these excerpts:
The program must be “fully operational” by early September, according to the state’s Medical Marijuana Control Program website. But state officials say that means only that a minimal amount of some form of medical marijuana must be available by then. “I don’t think there is a lot of confidence in that Sept. 8 date. If there is not a seed in the ground right now, you can speed up the permit process and build 24 hours a day, but the only thing you can’t speed up is Mother Nature,” said Bob Bridges, the patient advocate on the state’s Medical Marijuana Advisory Committee.
For cultivators, the only way to speed up the process is to plant a cutting from an existing cannabis plant rather than starting with a seed. That short-cuts the germination process, but it still takes eight to 12 weeks to mature.
Bridges is one of 14 members of the committee, tasked with advising the three state agencies involved with the program, appointed with approval by Gov. John Kasich. “Patients are very, very concerned product won’t be ready,” Bridges said. “Overwhelming, the concern has been: ‘Is medicine going to be available Sept. 8?’”
Tuesday, May 22, 2018
The title of this post is the (catchy?) subheadline of this new provocative Bloomberg commentary authored by economist Tyler Cowen under the main headline "Legalize Pot, But Don’t Normalize It." Here are excerpts:
I think it is the proper province of government to regulate the use of public spaces in ways that encourage order and utility. Private shopping malls won’t let you walk through the halls snorting heroin or smoking marijuana, and there is nothing outrageous about that decision. The property owners have decided that they want a particular kind of experience and image for their venue, and they regulate its use and access accordingly. Municipal governments should make and enforce comparable decisions.
Cities and towns already face these trade-offs when it comes to zoning. Even if you believe, as I do, that most zoning regulations are far too restrictive, it’s legitimate for a local government to decide that a waste dump, an auto junkyard or a strip club cannot simply set up shop anywhere in a city, hang out a sign and attract attention. We ought to treat marijuana the same way.
I propose that cities and suburbs restrict the sale and usage of marijuana to the same areas we use for garbage disposal and other “zoned out of sight” enterprises. We needn’t throw anyone in jail: If people or businesses violate these strictures, keep hitting them with the equivalent of parking tickets or injunctions, much as you would for an out-of-place repair shop. It should be possible to visit Colorado without knowing that marijuana is legal there. If someone is determined to ingest it, they can either drive to an industrial zone or order it online, and smoke it at home or up away in the mountains.
You might wonder why we should be so worried about public marijuana use. To put it bluntly, I see intelligence as one of the ultimate scarcities when it comes to making the world a better place, and smoking marijuana does not make people smarter. Even if you think there is no long-term damage, right after smoking a person is less able to perform most IQ-intensive tasks (with improvisational jazz as a possible exception). By having city streets filled with pot, pot stores and the odor of pot, we are sending a signal that our society isn’t so oriented toward the intellect or bourgeois values. Even if that signal is reflecting a good bit of truth, it would be better not to acknowledge it too openly, just as most advocates of legalized prostitution don’t want to allow brothels on Main Street....
Marijuana advocates commonly counter that the drug is no worse or more dangerous than alcohol. I agree, but you nonetheless might still believe that alcohol has acquired too prominent a place in the American public sphere, even if that state of affairs is no longer reversible. There is no reason we should compound that mistake with marijuana.
Thursday, May 17, 2018
"Planting the seed for marijuana use: Changes in exposure to medical marijuana advertising and subsequent adolescent marijuana use, cognitions, and consequences over seven years"
The title of this post is the title of this notable new research now appearing in the journal Drug and Alcohol Dependence. Here is its highlights and abstract:
• Many adolescents are exposed to medical marijuana (MM) advertising.
• MM advertising exposure may contribute to increased marijuana use and consequences.
• Regulations for marijuana advertising are needed, similar to tobacco and alcohol.
Marijuana use during adolescence is associated with neurocognitive deficits and poorer functioning across several domains. It is likely that more states will pass both medical and recreational marijuana legalization laws in the coming elections; therefore, we must begin to look more closely at the longitudinal effects of medical marijuana (MM) advertising on marijuana use among adolescents so that we can better understand effects that this advertising may have on their subsequent marijuana use and related outcomes.
We followed two cohorts of 7th and 8th graders (mean age 13) recruited from school districts in Southern California from 2010 until 2017 (mean age 19) to examine effects of MM advertising on adolescents’ marijuana use, cognitions, and consequences over seven years. Latent growth models examined trajectories of self-reported exposure to medical marijuana ads in the past three months and trajectories of use, cognitions, and consequences.
Higher average exposure to MM advertising was associated with higher average use, intentions to use, positive expectancies, and negative consequences. Similarly, higher rates of change in MM advertising exposure were associated with higher rates of change in use, intentions, expectancies, and consequences over seven years.
Results suggest that exposure to MM advertising may not only play a significant role in shaping attitudes about marijuana, but may also contribute to increased marijuana use and related negative consequences throughout adolescence. This highlights the importance of considering regulations for marijuana advertising, similar to regulations in place for the promotion of tobacco and alcohol in the U.S.
This RAND press release provides an account of the research behind this new article, and it begins this way:
Adolescents who view more advertising for medical marijuana are more likely to use marijuana, express intentions to use the drug and have more-positive expectations about the substance, according to a new RAND Corporation study.
The findings—from a study that tracked adolescents' viewing of medical marijuana ads over seven years—provides the best evidence to date that an increasing amount of advertising about marijuana may prompt young people to increase their use of the drug. The study was published by the journal Drug and Alcohol Dependence.
Tuesday, May 15, 2018
The title of this post is the title of this notable new article authored by John Campbell now available via SSRN, Here is its abstract:
The marijuana industry is booming. It is expanding into new states while it grows beyond the medical marijuana market into the recreational world. What was once illicit profit is quickly becoming on-the-books gains. As the industry matures, billions will be made, and companies once viewed suspiciously will become market giants. But this growth will not be without consequences.
As marijuana use grows, and those who profit from it become established companies, the marijuana industry will become a target for tort claims that other industries have faced for decades. These claims, ranging from product liability claims to vehicular injury to consumer class actions, will expose actors in the industry to potentially ruinous damages. This is particularly true if the industry remains, as it is now, only partially prepared. Particularly dangerous will be third-party claims (claims filed by people who did not purchase marijuana themselves). In those claims, the illegal status of marijuana in federal law could make establishing liability against manufacturers, wholesalers, and sellers easier than it is for other products. This Article chronicles the most likely claims to emerge en masse in courts and puts forth potential, viable industry responses.
Monday, May 7, 2018
The question in the title of this post is the headline of this recent Boston Globe article. (At the risk of getting redundant, I will again note ow this press piece is related in theme to my most recent article, "Leveraging Marijuana Reform to Enhance Expungement Practices.") Here are excerpts from the Globe piece:
Last month, Massachusetts rolled out the country’s first statewide marijuana industry “equity” program, giving preferential treatment to people who are typically marginalized by the business world.
One key to the effort: giving a head start in the rush for cannabis licenses to companies that are led by or employ minorities, to people with past marijuana convictions, or to residents of low-income neighborhoods with high arrest rates for drug crimes. All other companies that grow, process, or sell pot, meanwhile, are required to help those communities, and are limited in the size of their operations. The Massachusetts Cannabis Control Commission will also launch a training program for inexperienced pot entrepreneurs.
The provisions spring from a simple premise: People of color were disproportionately prosecuted and jailed amid the nation’s “war on drugs,” even though whites had similar rates for using or selling marijuana. It would be unfair, proponents argued, to allow the windfall of a now-legal cannabis industry to flow only to the already privileged, while those who suffered the most under pot prohibition remain frozen out. “We’re going to use this moment to try to rebalance the scales — or, at the very least, to stop creating new unbalanced scales,’’ said state Senator Sonia Chang-Diaz, who helped to write the so-called equity provisions into state law.
While it may seem radical to give previously incarcerated people the right to sell a product that was illegal until recently, the equity provisions so far haven’t been particularly controversial. Even Walpole Police Chief John Carmichael, a fierce critic of legal marijuana, is on board. “It’s going to open the door for people who just wouldn’t otherwise have the ability and financial background to break in,” Carmichael said. “We have to give them a chance.”
As the commission developed its regulations this year, county prosecutors asked the agency to bar people convicted of trafficking certain still-illegal drugs such as heroin or fentanyl from even working at a cannabis company. “This is not an area for permissiveness,” the Massachusetts District Attorneys Association warned in a letter. The cannabis commission partially acquiesced, restricting such people to administrative positions that don’t involving handling marijuana products.
For owners of cannabis businesses, the bar is higher than for their employees. People convicted of serious crimes, including nonmarijuana drug felonies, firearm violations, and sex offenses, cannot own licensed pot companies. However, businesses can hire people with records for possessing opioids, for example, and receive preferential treatment if they employ enough people with criminal records. People convicted of large-scale marijuana trafficking may qualify under the rules, though some might have related convictions that would automatically disqualify them anyway. The commission also has discretion to reject any applicant.
Marijuana equity programs elsewhere operate only on the local level, and have a limited track record. Oakland, Calif., for example, this year adopted a policy that reserves more than half of the city’s licenses for equity applicants, and most of the rest for large companies that agree to host and mentor them. The system has indeed helped people of color break into the business — but it’s also drawn sharp backlash from smaller companies that do not qualify.
Massachusetts has taken a less restrictive approach. The primary initiative underway provides expedited review to applications from companies that meet certain criteria — those owned by people from places with high rates of poverty and drug arrests, for example, or that employ mostly people with drug-related convictions. It’s an important benefit, as many Massachusetts communities limit the number and locations of pot businesses, giving a big advantage to the first stores.
Later this year, the commission will work with community groups to develop a crash course in business planning and fund-raising for entrepreneurs who were arrested or live in so-called communities of disproportionate impact. Those entrepreneurs will also be exempt from many state fees and will be allowed to open pot-delivery services and lounges ahead of other companies if the commission decides to issue those licenses....
Entrepreneurs who do not have drug convictions or arrests can still qualify if they show their business will benefit poorer communities with high arrest rates. For example, Dishon Laing dreams of opening an alternative health center in his native Dorchester that would offer yoga, vegan food, and cannabis. He, too, wants to hire people with criminal records, and also plans to run drug education programs for teenagers. “Everything we do is connected to giving back,” said Laing, a city public health worker. “I know my partners and I will face stigma based on being people of color and the industry we’re in, but we want to show that we’re actually improving our communities.”
Another requirement is intended to recruit marijuana companies that don’t qualify for the equity program to the cause: All applicants must show how their businesses will benefit communities hurt by the drug war. For example, Sira Naturals, a larger medical marijuana operator that’s seeking recreational licenses, plans to host an incubator for equity applicants at its growing facility in Milford. Licensed marijuana businesses must also write and adhere to a diversity plan that promotes gender equity and the employment of veterans, LGBT people, and people with disabilities.
The commission also offers incentives: Companies that provide money and mentoring to entrepreneurs from “areas of disproportionate impact” can get the cannabis equivalent of a Good Housekeeping seal of approval: a “social justice leader” label affixed to their product packaging. State officials also have moved to protect smaller equity businesses by banning larger companies from holding more than three licenses of any type and capping each company’s cultivation area at 100,000 square feet.
All these advantages, however, may not help applicants overcome the biggest hurdle: winning approval from local officials for the location and opening of their businesses. Somerville and other municipalities are considering local versions of the equity program, but none have been adopted yet. Advocates are worried established companies — such as existing medical dispensaries, which are nearly all white-owned — can outbid smaller players by offering communities generous financial packages.
“Cities and towns need to step up, or in a few years we’ll see we had this opportunity to put diversity into action and we failed,” said Ross Bradshaw, who hopes to open a pot business in a Worcester neighborhood designated as an area of disproportionate impact. “There are going to be municipalities that only allow three licenses, and two are going to medical marijuana companies. That’s less opportunity for people of color.”
Cannabis commissioner Shaleen Title, who championed the equity initiatives, acknowledged they are hardly a cure-all. But Title is heartened by the early numbers: 68 applicants have cleared a first hurdle in the process for licensing, and more than 100 more under review. Those people would have their applications reviewed ahead of others. “We’ll never be able to repair the damage caused by drug prohibition, but these programs at least begin to help provide a fair shot,” Title said. “Think about having a conviction that was based on unfair enforcement, and how that holds you back in so many different ways — we want to make that right.”
May 7, 2018 in Business laws and regulatory issues, Criminal justice developments and reforms, Employment and labor law issues, History of Marijuana Laws in the United States, Initiative reforms in states, Race, Gender and Class Issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana State Laws and Reforms, Who decides | Permalink | Comments (0)
Thursday, April 26, 2018
The title of this post is the title of this notable and timely new paper authored by Paul Larkin now available via SSRN. Here is its abstract:
Contemporary American society has decided that, whatever may be the benefits and harms of liberalizing marijuana use by adults, we should continue to outlaw the sale of recreational-use marijuana to children and adolescents. Even the states that permit recreational marijuana use under state law draw the line between adults and minors. Unfortunately, some companies pay only lip service to that line. The ability to develop products that closely resemble cookies, brownies, candies, and other substances that are attractive to children and adolescents — albeit, for different reasons — poses the risk that minors — some accidentally, some intentionally — will consume marijuana edibles found around the home or elsewhere. Any use of marijuana by children and long-term use of marijuana by adolescents poses health risks avoidable through federal prohibition or regulation of edibles.
To avoid the danger to their health and safety, the Justice Department and the FDA should take steps to prevent adulterated and mislabeled edibles from harming the public. Even if the Justice Department decides not to challenge the state medical or recreational use programs, the FDA should consider treating such edibles as adulterated foods under the FDCA — taking whatever steps are available to prevent the sale of any such products altogether — or to allow sales to go forward only under strictly regulated conditions. Doing so would help to reduce the danger that edibles pose to the health and safety of children and adolescents without materially interfering in state decisions on how to regulate the distribution of medical-use marijuana or the recreational use of that drug by adults.
April 26, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, Food and Drink, Recreational Marijuana Commentary and Debate, Who decides | Permalink | Comments (0)
Notable accounting of how hard it is to account for all the new marijuana data in legalization states
The AP has this interesting new article about data collection and analysis in the marijuana space. The piece is headlined "Oregon Marijuana: Lots of Data, Few to Analyze and Check It: Oregon is awash in data on its marijuana industry but has few workers to monitor and check what its legal businesses are doing." Here is an excerpt:
Oregon's experience is reflective of one of the significant challenges in the expanding legal U.S. marijuana industry: the ability of governments to keep track of their own markets.
Washington, which with Colorado became the first state to broadly legalize marijuana in 2012, recently switched tracking contractors after it outgrew the first system, and quickly ran into major technical problems. Colorado has reported no significant technical issues but has only five people on the data analysis staff to help with investigations and look for potential violators.
Last year, Nevada switched tracking companies after its first system crashed. California became the world's largest legal marijuana market on Jan. 1 without the promised vast computer system for tracking. It won't be available for months.
The Oregon tracking system was created by Franwell, a Florida-based technology company that has contracts in a handful of states, including California. Licensees log entries into the system as seeds sprout into plants, the plants are harvested, processed, sent to stores and then sold. The flood of data is checked by the single full-time marijuana data analyst, with occasional help. Five more will be hired soon, but they'll have their hands full as an estimated 2,000 medical marijuana growers start entering the tracking system on July 1. According to the Oregon Liquor Control Commission, a recent inventory of adult-use marijuana in the state stood at more than 1 million pounds (0.45 million kilograms). That's roughly 4 ounces (113 grams) for each of the state's 4.1 million residents.
Avitas general manager Joe Bergen said the pot businesses are inputting a "ridiculous" amount of information to the tracking system. He said 10 percent of Avitas' staff at the Salem facility is dedicated to rules compliance: tagging plants and finished products, tracking the inventory and filling out official shipping manifests. "It's important to do it, but it's burdensome for a small business," Bergen said.
The data has been useful in confirming wrongdoing in roughly 50 investigations, though less than half of them were triggered by the data, commission spokesman Rob Pettinger said.
On a recent morning, Cecilia Espinoza sat at a table inside Avitas' production facility, staring at a desktop computer. A small wheel spun on the screen for a couple of minutes as she waited for the web application to open so she could update information about the hundreds of plants growing in the 12,000-square-foot (1,115-square-meter) building. "We call it the 'spinning wheel of death,'" Espinoza said with a laugh. "It's tedious."...
Cannabis producers and regulators compare the tracking system to filing income taxes: They operate to a large extent on good faith, but when an auditor or inspector comes there better be evidence to back the numbers. However, the chances of a "compliance inspector" showing up at a site is low. The Oregon commission only employs 19, with four more to be added soon.
They don't have time to randomly check grow sites and compare amounts of marijuana they see with the data. Instead, inspectors are largely tied up investigating complaints, for example on someone carrying out a function beyond the scope of a license, or harvesters lacking the required permit, commission officials said.
Companies that have gone the legal route - paying for licenses, security and other systems to meet the requirements - say regulators should focus on those who remain outside the legal system. They note the illegal producers are unfair competition, without the large overhead. "Really, there is no incentive for us to do anything but stay in the recreational market," said Bergen, whose company invested millions in the Salem facility. "Why would we have gone to all this trouble, just to lose our license from doing something stupid like selling on the black market?"
April 26, 2018 in Business laws and regulatory issues, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms | Permalink | Comments (0)
Tuesday, April 24, 2018
"'High' Standards: The Wave of Marijuana Legalization Sweeping America Conveniently Ignores the Hidden Risks"
The title of this post is the title of this new article authored by Steve Calandrillo and Katelyn J. Fulton recently posted to SSRN. Here is its abstract:
As a tide of marijuana legalization sweeps across the United States, there is a surprising lack of scrutiny as to whether the benefits of recreational marijuana outweigh the risks. Notably, marijuana edibles present special risks to the population that are not present in smoked marijuana. States that have legalized recreational marijuana are seeing an increase in edible-related calls to poison control centers and visits to emergency rooms. These negative reactions are especially prevalent in vulnerable populations such as children, persons with underlying preexisting conditions, and out-of-state marijuana novices.
Unfortunately, research on edible marijuana is scant and state regulatory regimes are not adequately accounting for the special risks that edibles pose. Edibles are metabolized differently than smoked marijuana, resulting in late-onset, longer-lasting, and unpredictable intoxication. Novices are particularly vulnerable because of inaccurate dosing and delayed highs. Children are also at risk because edibles are often packaged as chocolate and other forms of candy to which unsuspecting kids are attracted. To minimize these risks and maximize the social utility received from marijuana edibles, further study of their effects is required and tighter regulations are necessary. Conducting research studies and enforcing new regulations takes time, and in the interim a state-implemented ban on marijuana edibles may be necessary to halt the increase of edible-related harms and hospitalizations.
Friday, April 20, 2018
Because of the date on the calendar, there is today waaaaaay too much mainstream press coverage of marijuana issues for me to cover in this space. But I cannot ignore it all, and the headline of this post is the headline of this new Atlantic piece by Reihan Salam that seemed worth spotlighting. Here is how it starts and its core proposal:
The marijuana wars are entering a new phase. The first phase, over whether or not to legalize the recreational use of cannabis, is over. The partisans of legalization have won the battle for public opinion. Soon, I suspect, marijuana legalization will be entrenched in federal law. At this point, to fight against legalization is to fight against the inevitable. The only question now is what form America’s legal marijuana markets will take. Will they be dominated by for-profit business enterprises with a vested interest in promoting binge consumption? Or will they be designed to minimize the very real harms caused by cannabis dependence, even if that means minting fewer marijuana millionaires? I fear that the burgeoning cannabis industry will win out—but their victory is not yet assured....
The fundamental challenge, as [Jonathan] Caulkins argues, is that cannabis is a dependence-inducing intoxicant, and a cheap one at that. In Washington state, a marijuana-legalization pioneer, he observes that the cost per hour of cannabis intoxication “has fallen below $1, cheaper than beer or going to the movies.” This is despite the fact that the state’s marijuana growers and distributors operate in a grey zone — legal at the state level, but not legal at the federal level — which leaves them ineligible for the federal tax deductions to which all more straightforwardly legal businesses are entitled.
If marijuana were largely consumed by adults who partake rarely and responsibly, this would not be much of a concern. According to Caulkins, though, only about one in three cannabis users fall into this fortunate category, and they account for no more than 2 percent of total consumption. Meanwhile, daily and near-daily users account for 80 percent of total consumption, and a far larger share of the profits of your friendly neighborhood marijuana business. Yes, there are cancer patients who use regularly marijuana to ease their pain, and there are traumatized veterans who do much the same. I am happy to concede that cannabis abuse is preferable to opioid abuse. But let’s not kid ourselves: Marijuana, Inc., thrives by catering to binge users, many of whom explicitly state that their dependence is getting in the way of their lives. By the time the cost of an hour of cannabis intoxication falls below $1 nationwide, the picture will start to change: The number of people who will turn to marijuana as a form of self-medication, or as a form of escape, will drastically increase. And most of them will be poor and vulnerable people, not the affluent bohemians so affectionately portrayed on HBO dramedies.
In a 2014 essay for Washington Monthly, Mark A.R. Kleiman, who along with Caulkins is one of the country’s leading experts on drug policy, anticipated the outsized role the marijuana industry would play in debates to come: “As more and more states begin to legalize marijuana over the next few years, the cannabis industry will begin to get richer—and that means it will start to wield considerably more political power, not only over the states but over national policy, too.” As a result, he warned, “we could get locked into a bad system in which the primary downside of legalizing pot — increased drug abuse, especially by minors — will be greater than it needs to be, and the benefits, including tax revenues, smaller than they could be.”
Is it possible to legalize marijuana without drastically increasing the number of Americans who find themselves dependent on it? I certainly hope so. In my ideal world, Congess would establish a federal monopoly on the sale and distribution of narcotics, including but not limited to cannabis, with an eye towards minimizing the size of the black market and avoiding the aggressive marketing and lobbying that would inevitably accompany the emergence of a large for-profit industry. But I recognize that this is, for now, a pipe dream.
April 20, 2018 in Business laws and regulatory issues, Federal Marijuana Laws, Policies and Practices, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate | Permalink | Comments (0)