Legalizing Marijuana Creates Challenges and Opportunities for Colorado and Washington

Advocates for legal marijuana rejoiced earlier this year when Colorado became the first state to permit the drug’s sale for recreational use. However, as many are discovering, legal recreational pot brings with it a range of issues that affects everyone from marijuana smokers to big banks.

While 20 states have legalized marijuana’s medicinal use, only Colorado and Washington State have legalized its recreational use. Both have decriminalized the growth, distribution, sale, and use of the drug, which, historically, has been the most commonly used illicit drug in the United States.  These two states now allow residents over the age of 21 to purchase and use marijuana. Smoking the drug openly, however, is not permitted.  Colorado marijuana sales began on January 1, 2014, and sales in Washington State are expected to begin in the spring or summer of 2014.

Several other states are looking to follow suit at some point in the future.  Alaska is headed towards becoming the third state to embrace legalization of marijuana for recreational use. Recently, a state citizen’s group from “the last frontier” submitted enough signatures to place the issue on an August state ballot. The proposal would allow for the drug’s legal growth and sales, as well as legalize its use by those over age 21. If passed, it would also expand the legal use of medicinal marijuana.

Recreational marijuana legalization, however, is about more than simply allowing people to buy and smoke the drug without fear of prosecution.  It’s newly legal status is triggering changes that affect smokers, non-smokers, governments, and organizations.

Higher Prices for Buyers

Colorado adults who had previously purchased illegal marijuana, or those who had bought legal medical marijuana, may have experienced sticker shock when recreational sales began. For example, marijuana shops are reportedly charging anywhere from $45 to $55 for an eighth of an ounce, in contrast to $25 for the same amount sold for medicinal purposes. Part of the price jump comes from various taxes added onto the retail price, which include the regular state sales tax, a city tax, and a special state tax of 10%.  Some dispensaries are even tacking their hefty wholesale tax onto the final price.

In addition, some shops have raised prices in response to the high demand. Shop owners say the higher retail price also helps offset the costs of operating a legal marijuana business, which includes obtaining proper licensing and meeting compliance regulations.

Washington State also plans to institute a tax on legal marijuana sales. The tax will be around 25% on each market phase, from production to retail sales. This is expected to create prices that are higher than one would pay for marijuana from illegal street dealers.

Friction between Federal and State Government

Legalizing Marijuana Creates Challenges and Opportunities for Colorado and WashingtonAlthough Colorado and Washington State have legalized marijuana, the federal government still classifies it as an illegal substance. This has left some businesses, such as banks, unwilling to work with those in the legal marijuana business. Under federal law, it’s illegal for banks to open accounts or give loans to any business involved in the selling of a substance named in the Controlled Substances Act. However, the Departments of the Treasury and Justice recently issued statements saying that banks wouldn’t necessarily be prosecuted for doing business with legal marijuana-related entities. This could pave the way for marijuana shops to maintain and grow their businesses like any other.

Furthermore, the Supreme Court previously ruled that marijuana falls under interstate commerce law, giving the federal government the power to prosecute marijuana sellers and users. In the summer of 2013, the U.S. Drug Enforcement Administration (DEA) raided several medical marijuana dispensaries in Washington State.  This took place months after residents had passed the ballot initiative to legalize recreational sales. Federal government officials maintain the raids targeted dispensaries suspected of acting as fronts for illegal drug dealers. However, some legal marijuana advocates worry that this suggests the federal government will use its power to interfere with legal recreational sales.

Continued Bans by Employers

Although Colorado has already started legal sales, and Washington will soon be doing so, many organizations still consider the drug a banned substance. For example, National Football League (NFL) teams, including the Denver Broncos, prohibit players and employees from possessing or smoking marijuana. Additionally, Colorado state law still gives employers the right to fire workers who smoke it, either on or off the clock. Many employers are reportedly considering how the new laws will alter their own policies on marijuana use.

Continuation of Illegal Sales

It’s unlikely that legalization will completely stop the illicit sale of marijuana. Sales through street dealers won’t have any government taxes added to the price, allowing the drug to be sold for substantially less than licensed retailers. In addition, some users won’t buy the drug legally because they fear doing so will affect their schooling, employment, or business. For example, one graduate student told a news outlet that he continues to buy marijuana illegally from an acquaintance because he can get it at a significantly lower price than retail. A medical card would make legal purchases more affordable than retail, but he fears losing his federally funded loans if his name showed up on a medical registry.

Native American Jurisdiction

Not everyone is ready to accept the legalization of marijuana. Tribal officials for Washington State’s Yakama tribe are trying to stop marijuana from becoming legal on its reservation, which occupies one million acres, and on an additional 12 million acres of land to which the tribe holds perpetual hunting and fishing rights. While it’s believed tribal officials have the authority to prevent marijuana growth, sales, and use by its own people on reservation land, there’s some question as to whether they’re allowed to regulate conduct by non-tribe members on their land. No legal action has taken place yet; however, it’s a possibility.

Travel Boom

Non-Colorado residents are limited to purchasing just one-quarter of an ounce legally, but that hasn’t stopped people from considering travel to Denver. The Denver metropolitan area is home to approximately half of all shops in the state licensed to sell the drug. A recent study found that Internet searches for travel to Denver jumped in early 2014, just as the law went into effect.  While there’s no way to definitively connect the boost with legalization, experts say that many searches originated in states with strict marijuana laws. Legal sales of the popular drug could create a lucrative niche for the tourism industry in states like Colorado and Washington.

Legal recreational marijuana sales have an impact that reaches far beyond those who want to buy and smoke the drug more freely. While the new laws are creating opportunities, they are also creating issues that these states will need to contend with over the coming months and years.


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