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« Can you be fired for doing a legal act outside of the workplace? | Main | Should beer/alcohol/beverage distributors enter the legal marijuana world? »

Marijuana - A prohibition market or a legal state-regulated market?

Legal marijuana is coming to this nation like a tidal wave.  And it is about time.  When one combines the pro-cannabis folks with the “prohibition doesn’t work” folks, a large majority is saying it is time to end the failed war on weed.

Remember the decision isn’t really about “for” or “against” marijuana.  Marijuana is everywhere.  There isn’t a high school kid in this country (or unfortunately many middle schoolers) who couldn’t get some in a matter of minutes.  The decision is whether the present state of prohibition is superior to an adult legal, state-regulated marketplace…  whether a flourishing, illegal, unregulated, “sell-to-anyone” market is better than a legal effective state-regulated market.

To me that decision is a no-brainer.  I would hope the folks in the beverage alcohol business would wholeheartedly agree.  We know it works.  The failed experiment called Prohibition and the 81 years since has proven the effectiveness of state regulation.  This country has the best regulated alcohol industry in the entire world (and at the same time also probably one of the most competitive and dynamic).  We can and should do the same with marijuana.

On the medical side, there is no question marijuana provides medical benefits.  The Washington Post reports on a 2013 survey in the New England Journal of Medicine that found nearly 8-in-10 doctors approved the use of medical marijuana.  You can find that here.  The same article notes that a recent wide-ranging survey in California found medical marijuana patients agree, with 92 percent saying medical marijuana alleviated symptoms of their serious medical conditions.

A recent letter to the editor in The Wall Street Journal from an experienced MD notes that cannabis is well known to provide pain relief for 3 – 7 level pain (on the 1 – 10 pain schedule).  For anyone who has witnessed the tragedy of the very common addition to opiate-based pain pills, cannabis is far superior. 

This explains the pharmaceutical industry’s cynical financial support of anti-legalization efforts around the country… they are THE MAIN financial supporters fighting to keep marijuana illicit and mired in the black market.  As they say, always follow the money.

But on the medical front, the antidotal evidence is overwhelming.  Is this the magic elixir that some claim can solve every malady known to man?  ;-)  Probably not, but the health benefits for many is indisputable.

On the flip side some are concerned about marijuana’s possible neurological effects on young brains.  They completely miss the point.  Whether these effects exist or not are open to serious debate… but the main point is… is prohibition a better means to restrict young folks from consuming or is a legal, state-regulated environment? 

In the 10 months of full legalization in Colorado, the dispensaries have never been cited for selling to an underage individual.  NEVER.  It’s kind of hard to improve on 100%!  ;-)

Again the beverage alcohol industry shows the truth… it is MUCH more difficult for underage people to get beer, wine, or spirits than the so-called “prohibition” of marijuana.  Go ask any high schooler anywhere in the country… what’s easier to get?  Beer or weed?  You’ll get close to 100% saying weed.  So how is this better protecting young minds from marijuana’s supposed neurological effects?  It isn’t.  It works in just the opposite direction.

Milton Friedman, renowned economist and philosopher captured this perfectly in this quote “One of the great mistakes is to judge policies and programs by their intentions rather than their results”

And of course this striking observation… “See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That's literally true.” 

Prohibition or a legal, state-regulated market… the choice is pretty straightforward… whether one likes this fact or not is irrelevant.

Some anti-cannabis folks will say, “yeah, but a lot of these folks just want to get high”… to which I respond… so what?!  Based on 2013 dollar figures, this country consumes about 42 CASES of beer for every 3.3 BOTTLES of non-alcoholic beer.  While there is non-alcoholic wine, its sales are basically meaningless.  Unless one is the designated driver (or has an alcohol issue), no one goes to bars and orders mock-tails.   And I don’t think this industry or consumers have to apologize for this. 

People consume alcoholic beverages because of the alcohol.  A beer or two (or more!) with friends… a glass of wine while making dinner… a martini to relax with after work… and we don’t have to apologize to anyone. 

The VAST majority of adult alcohol consumers don’t consume to get hammered.  Guess what… although the effect of marijuana is different than alcohol, most present day adult marijuana consumers (whether smoking or edibles) also don’t consume to get wasted. 

Whether it is your personal cup-of-tea is up to you, but I don’t think the fledgling legal state-regulated marijuana industry has to apologize either… whether consumed for medical benefits or simply others.  At least that’s my take.

And it is the take of a lot of folks.  The New York Times, Seattle Times, Providence Journal, The Economist, National Review, Denver Post, The Nation, Las Vegas Review Journal, Star-Ledger, The Indianapolis Star, The Orange County Register, The Baltimore Sun, and numerous other editorial boards have all recently endorsed full legalization. 

Five Nobel Prize-winning economists recently released a UN report recommending that countries end their war on drugs.  Travel guru Rick Steves sits on the board of the National Organization for the Reform of Marijuana Laws (NORML) and is a vocal supporter of legal weed.  Right now he’s traveling the state of Oregon trying to ensure passage of their legalization efforts.  The late scientist Carl Sagan and good ol’ Rodney Dangerfield were consumers and supporters. 

As noted above… whether “pro-cannabis” or simply “anti-prohibition”, it sure seems like the time has come for a state-regulated marketplace for legal adult consumption… kind of like the 21st amendment 81 years ago.

 

So what is the state of the burgeoning legal marijuana world?

 

Right now 23 states and DC allow some form of legal marijuana.

Colorado and Washington are presently the only 2 states that have fully legalized adult marijuana consumption.  2014 ballot initiatives in both Alaska and Oregon may make these the next states to implement full legalization.  DC has just approved a 2014 ballot measure which will legalize.  Arizona, California, Maine, Massachusetts, Montana, and Nevada are all on track for 2016 efforts for full legalization. 

Florida, Ohio, and Pennsylvania have pending legislation and/or ballot measures.  One would guess that by the end of 2014, over half of the states will have some form of legal marijuana.  By the time the next administration takes office, we could see 5 – 10 states with full legal adult consumption and well over half with some form of legal consumption.

The Marijuana Policy Institute, an organization which drives legalization efforts, has produced a 48 second video which you can find by clicking on, a new short video where they show the 17 states plus DC that they believe will have full legalization by 2019. 

One expert estimates legalization in California alone will create a $31B market, including all ancillary products and services.  Actually this should be better stated not as “creating” a market, since the market already exists and is in operation now.  These sales are happening now. 

It should be stated that legalization in California (and everywhere) will bring to the surface, and allow effective regulation of the present market… just like the end of prohibition and legal, state regulation did to alcohol 81 years ago.  One hasn’t seen bootleggers hawking illicit alcohol for over 81 years… hopefully soon the days of street-corner dealers hawking marijuana to kids and anyone with the money will be just as ancient history.

Assuming Texas at the same to slightly smaller size, these 17 states alone could represent close to a $100B market; all within 5 years!  To put that in perspective, that’s the size of the total US beer market.  Just California or Florida alone could easily match the dollar sales of the ENTIRE craft beer segment.

 

What has been the Colorado experience?

As of January 1, 2014 Colorado became the first state to fully legalize adult “recreational” marijuana.  In fact, Colorado is the first place in the world to allow full adult consumption via a state-regulated market.  After the first 10 months, one would have to declare this effort an astounding success. 

In fact The Brookings Institute just released a report entitled 'Colorado's Rollout of Legal Marijuana is Succeeding', analyzing the first six months of Colorado's legalized cannabis commerce and taxation policies.  The author calls the implementation of the new Colorado law "a resounding success." He continues, "My research shows that regardless of the merits of the policy itself, Colorado has created a smart regulatory system that balances safety and security with access to legal marijuana."

  • Teen marijuana use has not soared as some feared, in fact it has declined.  This has occurred in other places that have made marijuana more legally available too.
  • Crime is down across the board (although it may be a stretch to attribute this all to legal marijuana)
  • Although the media continues to discuss the dangers of stoned drivers, accidents and fatalities are also down.  A recent report in the Washington Post notes that since legalization, Colorado auto fatalities have reached “near-historic lows”.
  • Marijuana sales in Colorado saw a 10 percent bump in August. The sales of recreational and medical marijuana in Colorado each jumped more than 10 percent from July to August 2014, according to numbers released by the Colorado Department of Revenue.  In August, customers purchased more than $33 million in recreational cannabis — up from $29.7 million in July and $24.7 million in June. Consumers bought more than $32.2 million in medical marijuana in August — up from $28.9 million in July and $28.6 million in June.
  • Thus total sales for August were $65.2 million!  Assuming flat growth (which is very conservative since sales were up 25% last month and 10% in August), this straight lines to an annual projection of $782,000,000.  Not a bad first year for a relatively low population state!  And remember, most of these sales were occurring anyhow; just in the illegal, unregulated, sell-to-anyone market.  This legal, state regulated effort is far superior.
  • The marijuana tax numbers are also adding up. Since Jan. 1, Colorado has brought in more than $45.2 million in taxes, licenses and fees for recreational and medical marijuana.
  • A recent study estimates Colorado market demand to be in excess of 10 tons per month.
  • Edible products have been extremely in demand.  In Colorado it was just reported that edibles make up 45% of all marijuana sales! Some experts predict that in 20 years no one will smoke marijuana, it will all be edibles.  I don’t know about that, but the market for edibles is truly astounding.
  • Pot tourism is larger than most predicted.  This of course will decline as more and more states provide some means of legalization but it does give an indication that demand for legal marijuana is most likely higher than many predicted and crosses a much broader demographic than just “young stoners”.  It also seems many of these new and present recreational and medical users are drawn to edibles over smoking. 

I believe other states will experience much the same as Colorado, further fueling the drive towards legalization in all states and the Feds, i.e “the sky hasn’t fallen” and the benefits are proven by the facts on the ground.  The reality is this product(s) is being sold in the black, “sell-to-anyone” market today; some sort of legalization via a state-regulated market is clearly becoming a better solution than the failed policies of prohibition.

Should you jump into this new world?  That depends.  It’s not for the faint of heart and everything regarding marijuana is more difficult… and will probably continue to be so at least until the federal and state laws get in sync.  But of course this is also the reason there is such an incredible opportunity in this burgeoning industry. 

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