Legal pot in the west

A couple of weeks ago, the Washington Liquor and Cannabis Board announced they had worked off the 7000 pending cannabis applications that were submitted six years ago. WA has a limit on the number of retail stores, around 550, but about 450 are actually generating revenue. There is a limit on the farmers as well, but that limit was not well thought out and the result is there isn’t a limit.

Stores that haven’t opened for business are mostly in counties or cities that have bans or moratoriums on cannabis licenses. WA did not allow the localities to opt out of the state law, so licenses were issued to people who would then be prevented from opening by some creative local ordinances. That issue hasn’t been resolved legally yet, so the state has implemented a “title” system: In lieu of a retail license to operate in those locales, folk have been issued a title to get a license should their locality allow the businesses someday.

There is too much marijuana being grown in WA, dragging down wholesale prices quite dramatically. Some legal farmers are then tempted to cheat a bit and send product out to the illegal states to get 3 or 4 times the price. Because of the long backlog, several growers had opted to go ahead without any licensing, “spoofing” their farms to look like they are licensed so as not to attract attention.

Retail prices in WA are lower than Colorado, Alaska, Nevada, and California despite having the highest taxes. Oregon generally has the lowest prices because the stores can legally offer deep discounts at the point of sale, something that is severely curtailed in WA. It’s almost universal that an Oregon store will offer a sales price discount of 20% (Special Sale! Today Only!) which is what the state and local taxes are.

It’s obvious to any visitor that Oregon has more stores than WA because they don’t limit the number of licenses, relying on an open and business-friendly philosophy for their regulated market. Oregon has many more unlicensed growing operations because of their history supplying the rest of the nation. Wholesale prices are the lowest in Oregon, and the bulk of the product is exported to the illegal states.

California is issuing state licenses, although they are temporary until the regulations can be finished. Because the regs haven’t been finalized, licensees are free to invent the way things are done. More importantly, locales must approve the businesses before they can apply for a state license, which has really slowed the process down. There isn’t a logjam at the state level. A visitor will have to exert some effort in finding a retail store since they are not at all common. Retail prices are very high to compensate for the high start-up costs, and legal growers for the state market are few (relatively speaking). Hopefully the state system will be nailed down this summer and it will begin to operate as it was intended.

Colorado keeps it’s legacy medical system, though the other states have basically eliminated it. It’s not politically tenable to outright ban the legacy medical programs in any state, though they can make it irrelevant and costly. One of these days Colorado taxpayers will tire of supporting two systems when one doesn’t generate the revenue that the legal system does.

Arizonans were convinced not to vote for legalization, leaving them only with their existing medical program. All medical programs are weakly written and not at all comprehensive enough to offer any real control by the state, so the Arizona medical market is booming as the loopholes are discovered. Their market will very soon resemble the other states but without the high taxes, the regulations, and the enforcement efforts. Should Arizona reconsider this approach, it wouldn’t surprise me to see the opposition for doing so will come from the existing operators who won’t want the burdens of state regulation.

New Mexico has been seriously stymied in their legalization efforts by some elected officials who are adamantly opposed to it. But they do have a rudimentary medical system that is full of loopholes and operators have figured out how to take advantage of that. So lately, the market has been growing quickly.

Alaska is doing fine, but they have some big obstacles (like geography) in bringing up their market. As always, Alaskans will do what they want, just a bit slower.

All legal states are growing far more than they can legally sell, so the supply exported to the illegal states is plentiful and expensive. Watch this year’s election results to see what a large number of states are doing to this situation.

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