Pop Rocket, January 2013
Readers who vaguely recall that two years ago Arizonans voted to legalize medical cannabis (for the third time) may be wondering why so little has so far come of it. It's true that foot-dragging by obstructionists in our state government is partly to blame (again), but you may be surprised to learn that a lot of it is more structural.
Credit where credit is due must first go to Governor Jan Brewer, Attorney General Tom Horne and Maricopa County Attorney Bill Montgomery, who have nearly exhausted their legal avenues for digging up excuses to avoid doing their duty and ushering in positive change. The courts have ruled pretty uniformly that no, state employees will not be subject to federal prosecution for issuing patient ID cards and fulfilling other related licensing functions, demolishing the state's argument time and time again.
It's kind of touching to watch the contortions that these proud defenders of "state's rights" have to put themselves through to argue that we really should be obediently following federal law in this one area. That it also puts the lie to their "we the people" posturings is just cake.
We should also note that it appears most county health departments have turned in their homework and set up the local infrastructure for regulating patients, dispensaries and suppliers. Kudos to them for doing their jobs.
Cards are being issued, but only one dispensary is officially operating as of this writing, in Glendale, with another in Tucson about ready to go. Most entrepreneurs are waiting for what will likely have to be an Arizona Supreme Court decision finally declaring that the people have spoken (doh!) before they will even slightly expose themselves to the tender mercies of the likes of Maricopa Sheriff Joe Arpaio. At the federal level, answering the question of when Congress will finally get off the dime and move cannabis from Schedule 1 (Evil Things) to Schedule 2 (Very Profitable Things) under the Controlled Substances Act is anyone's guess, making truly secure business planning essentially impossible for the foreseeable future. But as we've seen in California and Colorado, a lot of people will be willing to accept that risk. The "user base," as we say in the biz-journo trade, is huge.
The legal obstructions will eventually pass, at least at the state level, and in not too long. For people who are serious about this as a business, however, there are other, even more daunting obstacles.
The official delays on the dispensary network are pushing suppliers through a loophole in the law for any patient who doesn't live within 25 miles of a dispensary. They are legally allowed to grow their own, and many are forming wildcat co-ops for that purpose, operations that they may not want to give up once the dispensaries start opening. You may have noticed a few shops around town last year supplying equipment for home growing. All in our area have closed again or gone back underground for the time being. (Update: I've since discovered that there's at least one smokeshop recently opened.)
It seems that all the legal posturing in Arizona and the official ambiguity of the President and his Justice Department is turning off most landlords from leasing space for dispensaries and supply-chain businesses. And who can blame them? When the people who know most about this business have been operating as criminals for in some cases generations, they've already got big hurdles to clear to prove they'll be acceptable tenants. And they'd better not have a dog, either.
Further, once past the warm glow of clearing the many legal hurdles and getting a business open, every entrepreneur discovers the need for a solid credit line, for capital improvements, payrolls, insurance, supplies, equipment, even startup advertising. But Arizona banks and credit unions are uniformly refusing to bank these businesses, blocking even just regular business checking accounts, fearing that if the Justice Department happens to feel like blowing hot one day, they'll be left holding stacks of unrecoverable loans, making their shareholders very unhappy. This is forcing these first dispensaries to operate on a cash-only basis, inevitably causing daily liquidity concerns and exposing the entire class of businesses to all sorts of financial abuse.
So where does that leave the industry for 2013? We've had popular votes in 20 states and DC saying that cannabis can be good for you, including two that want to make it as legal as alcohol. More will surely come to that conclusion, and expectations are expanding that the weed will be imminently decriminalized and available, creating new unfulfilled demand right now. We have established a legal structure for distributing cannabis as medicine in our state, but structural discrimination against the industry is preventing all but the very well-heeled from getting involved legally.
I'm thinking that if we can't get it together soon, our effort to end this campaign of the War On (Some) Drugs could ironically lead to unilateral disarmament and an unhappy scenario in which well funded, experienced and highly motivated criminal organizations could launder themselves into nonprofit respectability and take over the ground floor of what will eventually become a fully open and legal profitmaking industry. This is essentially what happened in the wheezing demise of Prohibition (without the nonprofit whistle stop), leading to the hegemony of Seagram's et al., and would prove to pot-haters that the whole idea was bad from the start. Then you're in backlash territory. Anybody remember 1980? Would we be happy to see our seniors forced to buy medical cannabis from some infernal partnership between the Zetas and Philip Morris? Or would we prefer a more grass-roots (ahem) industry open to local entrepreneurs and employing Arizonans in what will surely become a significant labor force?
To readers identifying themselves as conservatives especially, I'd like you to try to get beyond your entrenched feelings about cannabis and focus on the practical aspects of dealing with it as it comes out of the shadows and into common social acceptance. This is happening. Right now we have the opportunity to make positive choices about the future of this new industry, and I hope we won't blow it.
Update, Friday: Today I'm hearing that legislative Republicans will try to refer the law back to the ballot for a third do-over in November, hoping we voters will finally change our mind and repeal the entire system. This is of course why they've been doing all they could to stall implementation. Again, they only respect the will of the people when it agrees with them.
Thursday, January 3, 2013
Pop Rocket, January 2013