One Year of Legal Recreational Cannabis: Where the Cannabis Industry Stands

One Year of Legal Recreational Cannabis: Where the Cannabis Industry Stands

Posted by Celia Daly on December 30, 2014 12:00 am
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In Colorado this week, the first year of legally sanctioned cannabis sales since Prohibition began comes to a close. Of course, cannabis remains illegal at the federal level, but there is a vibrant market here in Colorado—and, in many ways, what makes this past year so notable is its lack of notoriety. For Coloradans who don’t participate in the cannabis market, life is not significantly different now than it was one or even five years ago. For those who do sell or consume, life tends to be a little bit better.

Even with a large majority of the state’s counties and cities choosing to prohibit recreational sales and cultivation entirely, the recreational market comprises nearly three-fourths of the state’s cannabis tax revenue. In the first ten months of 2014, the total cannabis tax revenue collected by the state came to over $60 million. While this number is small change compared to the state’s overall budget, it’s clearly not trivial. And for municipalities that choose to allow facilities to operate, there is tax revenue to realize as well. Denver, for example, brought in $7.6 million in the first three quarters of 2014. Nearby Boulder (Surna’s home!) anticipates more modest 2014 tax revenues of about $1.5 million dollars—but it also hasn’t had to spend as much of that money as it originally anticipated.

For those still toeing the line and wondering what cannabis could do for their state look no further than Colorado. The cannabis industry is having a profoundly positive effect on Colorado’s overall economy. Colorado’s unemployment rate fell 2.2% between November 2013 and November 2014, giving Colorado the eighth lowest unemployment rate in the country. And Denver’s industrial vacancy rate is a mere 3.1% thanks to the booming demand for cannabis.

Early in the year, there was concern that the legal supply would not be sufficient to meet demand and that prices would skyrocket. While this fear foreshadowed problems faced this past summer in Washington, prices in Colorado’s markets have been fairly consistent even as legal production sources continue to come online. Much of the stability likely derives from the well-established medical marijuana regime, which likely continues to capture some of the recreational market because of its tax advantages.

Out-of-state visitors are not permitted to purchase as much cannabis as in-state residents, but those restrictions do not seem to be scaring off cannabis tourists from visiting Colorado. What then of Oklahoma’s and Nebraska’s suit against Colorado? It’s well settled that the federal government cannot require states to enforce federal law, so the Supreme Court is unlikely to reverse Amendment 64’s legalization. It’s conceivable that the Supreme Court might view the State’s tax revenue and regulatory regime more disfavorably in light of federal prohibition, but it seems unlikely that the remedy Nebraska and Oklahoma would prefer is even less regulation of cannabis in Colorado. Clearly, the suit is little more than political theater. Nevertheless, it is a prime example of the obstacles in the road ahead for cannabis legalization.

Although we personally believe those attorneys general are on the wrong side of history, they are increasingly on the wrong side of public opinion and common sense as well. Polling reveals that Americans increasingly support outright legalization. And with good reason: the data from Colorado’s experiment suggests that the harmful consequences of licit cannabis markets have been vastly overstated—if anything, legalization seems to be having a positive effect on key measures in the state. For example, overall crime rates in the city and counties of Denver fell 7.9% (comparing the first 11 months of 2013 to the same period in 2014). Vehicular fatalities also appear to be down this year, though only nominally—and while prohibitionists tend to cite increasing “drugged driving” citations and incidents, much of the increase is likely due to better training, enforcement, and testing by authorities as education about the effects of cannabis has improved.

Still, none of this is to argue that such improvements are caused by ending prohibition (or even that the metrics might not be even more improved if cannabis were still illegal). It will be a while before we have sufficient data to make many concrete conclusions about the effects of ending prohibition. Similarly, nothing should undermine those few incidents in which cannabis played a harmful role; whether it’s a few hours of highly publicized discomfort or something far more confusing and tragic, ingesting psychoactive cannabis comes with real risks. Colorado has some work to do—particularly finding an efficient and effective way to distinguish food products containing THC and educating consumers about ingesting them safely (as foolish as Maureen Dowd’s behavior may have been, it likely served to help prevent it from happening more frequently). But the negative incidents were rare and tended to be over-reported by the media (did any child actually receive THC-laced candy on halloween? Nope.).

Colorado’s experience thus far should continue to bolster drug policy reform efforts throughout the world. Promisingly, Alaska, Oregon, and D.C. followed Colorado’s lead in November, and a number of states are poised to join us in 2016 (if not sooner). President Tabare Vazquez’s victory in Uruguay’s presidential elections indicate that support for reform continues to build outside of the US, as well. And, despite years of one-sided research, efforts to explore possible therapeutic effects of cannabis are finally getting public support.

It’s been a momentous year for cannabis, and the future is bright for the nascent cannabis industry as well as the continuing efforts towards broad drug policy reform. But, for those of us in the industry, 2014 became the year of “business-as-usual.” And that suits us just fine.


Graham Gerritsen is Surna’s Associate General Counsel. He is a member of the Colorado and Denver Bar Associations and is a founding member of the first Cannabis Law Committee within any U.S. Bar Association. He earned his law degree from the University of Texas School of Law in 2013 and his bachelors degree with honors in Economics from the University of Colorado at Boulder. A long-time ally in the fight to end the war on drugs, he became an avid supporter of the movement in 2008 when he studied and wrote his undergraduate honors thesis on the effects of drug prohibition.

Tae Darnell is the VP and General Counsel for Surna. Tae Darnell’s career in the cannabis industry includes being a co-founder of the Cannabis Law Center where he played a pivotal role in Colorado’s rise from operating under a Constitutional Amendment to outright regulated legalization. Tae’s clients represent the definitive leaders in the Cannabis industry.


Topics: featured, legalization, Our Perspective, year in review

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