By Marguerite Arnold
Since recreational marijuana sales began Jan. 1, 2014 in Colorado, it has become clear that without federal reform, the development of the industry will be increasingly stamped by regional politics, rather than rational business regulations.
This year in particular, it is easy to see the impact of state legislatures that are “refining” the will of the voters to better suit their own short-term goals. In some cases, these goals have nothing to do with cannabis or even bottom-line logic. The possibility that some of these decisions are made for no other reason than political whim is a huge problem that the cannabis industry is still struggling to confront.
New York and Nevada are two states where different tendencies and political currents have already created vastly disparate business climates — even in the very early days of legal and state-sanctioned dispensaries opening. Silver State Relief became Nevada’s first legal dispensary July 31, nearly 15 years after the state first legalized medical marijuana; New York City expects to see its first medical dispensary in January 2016 (Columbia Care, which also has licenses in Arizona, Illinois, Massachusetts and Washington, D.C., was awarded one of the state’s five licenses and plans to open The Big Apple’s first dispensary near Union Square).
“The New York and Nevada medical marijuana programs represent two radically different approaches to the market,” said Kris Krane, managing partner of Arizona-based 4Front Advisors, which helps raise funds for entrepreneurs. “New York went with a model that is highly restrictive with a limited list of qualifying conditions, difficult barriers to obtain patient cards, a ban on smokable products and state-controlled price fixing.”
In Krane’s view, Nevada “has a program that makes it relatively easy for patients to qualify, has approved hundreds of cannabis businesses and allows patients from out of state to access the dispensary system.”
Leslie Bocskor, who has a great deal of experience shaping the state regulations and helping cannabis businesses find financing as the managing partner of Electrum Partners in Nevada, concurs.
“Nevada has a long history of establishing transparent, fair and effective regulations for activities that are taboo, or even illegal in other jurisdictions,” he said. “Some big differences in the two states are that Nevada allows for reciprocity, meaning if a patient has a doctor’s recommendation for medical marijuana from another state, foreign or domestic, they will be allowed access to dispensaries in Nevada as well. Without reciprocity we are telling the millions of legal medical marijuana patients from other states to either not travel to New York or to break the law to have their medication in the state.”
As Krane also pointed out, beyond its impact on patients, the restricted market in New York will create an unbelievably tough business environment.
“The result of this will likely be that New York businesses will struggle, while very few patients will be able to take advantage of the system. The barriers to obtaining a patient card, the lack of access to dispensaries, and the limited range in product will ensure that New York has one of the most restrictive programs in the country,” he said.
While politicians in New York (and elsewhere) like to brag about “restrictive” programs, this often allows the proliferation of the black market.
Politicians and business people alike profess the elimination of the black market as one of the goals of marijuana legalization; however, consumer choices and reasonable access are frequently the first targets of regulatory policies.
As a result, the industry is looking far more at Nevada and those states that are moving in a similar direction (like Hawaii and Oregon) to move the agenda forward based on real market development, rather than the politically-controlled environment in New York.
“In Nevada, the large number of cultivation centers and production facilities will ensure a robust variety of products on the market, likely at competitive prices, and the inclusion of out-of-state patients should lead to a large and robust market that works well for businesses and patients,” Krane said.
“Nevada has a real market, 60-plus dispensaries for a state with a fraction of the population, and less tourism than New York, and over a hundred cultivation and processing facilities approved to begin doing business,” he said. “They are free to trade with each other, creating a market. This all works to effectively spell the end of the black market in a real way. No black market means keeping it out of the hands of children; it means more tax revenue for education, for law enforcement and for substance abuse counseling.”
From his point of view, just locally, the legalization movement is doing what it is supposed to because it appears to be moving in all the right directions based on voter intent and business focus, rather than other agendas. As a result, the political impact is also significant.
“This also results in less stress on our jails and courts, and a lower burden for taxpayers,” he said. “We will also see jobs being created, likely in the thousands soon. It means keeping the treasure of the state and country here, rather than going to murderous criminal organizations outside of the U.S.”
Marguerite Arnold is a freelance journalist and the author of “Green: The First 12 Months of Modern American Marijuana Reform.”