Category Archives: national

Some Oregon Marijuana Dispensaries Devastated by Recreational Sales Deadline

chrismathewsstashcannabis800x445-min 01/06/2017

By Keith Mansur     Oregon Cannabis Connection

There is definitely no wait at Stash Cannabis Company in Beaverton, Oregon, the past couple of days. Since the deadline for Oregon’s medical marijuana dispensaries passed on December 31, stores that have been waiting for their licenses from Oregon Liquor Control Commission (OLCC) are seeing a lot fewer customers.

It’s so bad that they had only two sales on January 4, for $125.00, and barely over $100 the previous day. The typical sales at Stash Cannabis Company, before they were forced to go back to medical-only sales, was about $4000 a day.

The problem has been devastating for dispensaries that are stuck in limbo between receiving their OLCC licenses and the deadline to end early sales that passed on December 31. These dispensaries, which had been allowed to sell to the recreational market since October 2015, are now out in the cold.“At that pace we will be at $3000 for the whole month,” explained Chris Mathews, owner of Stash Cannabis Company. “We’re turning away 75 or 80 people a day, at least.”

Mathews paid for his application on December 13, after waiting since August on a letter from his landlord showing he had legal occupancy of the building—an application requirement even though he had an operating medical dispensary under the Oregon Health Authority (OHA) system licensed by the city of Beaverton as a medical marijuana dispensary. He has still not gotten an appointment for an inspection walk-through, the last step before licensing. In fact, he may have fallen further back in line, according to his most recent conversation with OLCC.

Mathews emailed OLCC for the status of his application on December 21. They responded, telling him he was 10th in line. Anxious about the looming deadline, he emailed again December 27, and found he was still 10thin line. Finally, he checked on January 4 and found he was now further back in line,  suspiciously moved to 15th!

“It’s frustrating,” Mathews told Oregon Cannabis Connection (OCC). “I have met all the requirements, I took the Metrc training, and I’m just waiting for an inspection.”

He has been given no timeline, either. “They told me to call back next week and they will tell me where I am at then.

Washington and black market benefit

Martin Nickerson simply closed his McMinnville, Oregon, dispensary doors at Ocean Grown Cannabis Company. He knew it was a pointless endeavor to try and operate when the vast majority of his customer base was forced to shop elsewhere—which he knows means Washington state. Originally from Washington, Nickerson understands the market there and has even been told by his customers that’s where they are willing to go.

“We’ve shut down until we get our OLCC license,” Nickerson told OCC.
The county was holding up his Land Use Statement, or LUCS, which is a required part of the application. They received the LUCS January 4, the day we spoke with him. The OLCC now has a completed application and he is awaiting inspection.“The dispensary was being hit so hard on loss of product. We were watching customers go right to the black market or they are going right across the border to Washington,” Nickerson explained. “If you go across the border to Washington … they’ve got 50 different kinds of concentrates from $18.00 to $24.00 a gram. I have had customers tell me if it’s that much cheaper and there’s that much selection and accessibility to product, it’s worth the drive.”

“I want to see them helping us and not hurting us. If we could just work together and talk,” Nickerson said. “I appreciate the work they put in and all the time and effort that has gone into legalizing marijuana in Oregon, but they should be asking the cannabis community ‘what should we do here?’, you know?”

“We are trying to beat the black market and I am right here with the state to help them every step of the way but, boy, I hope they start to listen a little bit,” explained Nickerson.

Tax losses are huge already

The 420 Club in the City of Roseburg, Oregon, was the first licensed marijuana dispensary located in Douglas County, a county that still bans cannabis businesses due to a commission-imposed ban ordinance. The attempted repeal attempt failed in November 2016. Roseburg, however, has allowed dispensaries since 420 Club opened on November 6, 2014, and recreational sales eventually were allowed, too. One of the selling points for recreational cannabis to the city of Roseburg and an main argument for lifting the ban in the county was the tax benefits.

Four dispensaries were operating in Roseburg and 420 Club alone was contributing $18,000 in tax to the Oregon Department of Revenue every month, but that changed in October with the shortage of concentrates and edibles, and in some cases flower, for a few weeks.

“For the last two months we have collected $10,000 per month in taxes, but in the previous year we were collecting about $18,000 a month,” explained Hoyt. “As soon as the state started messing with the testing [on October 1, 2016], our sales dropped 40%.”

“However, now we aren’t collecting any taxes because of not being issued our license yet,” he told us. “We’re obviously not collecting anything for the state in taxes.”

They started their application process at the beginning of December and have faced delays similar to what other dispensaries have encountered. They submitted their application somewhat late because they had very low inventory and nothing available due to the testing backlog and timing of that with harvest. The same timing happened all across the state as dispensaries struggled to stock their shelves before the switch to OLCC retail sales.

“They did all the testing changes at harvest time, and that’s something you just don’t do because everybody and their brother has herb to be tested,” Hoyt pointed out. “That was just the wrong time to do what they did.”

It’s a widespread problem

“This was a completely avoidable disaster,” explained Casey Houlihan of the Oregon Retailers of Cannabis Association. “Several agencies dropped the ball and are now pointing fingers at one another, while our industry grinds to a halt. Scores of shops are scaling back employee hours, forced to turn away would-be customers because they are stuck waiting for a rubber stamp.”

The association has been working to help  cannabis businesses in Oregon negotiate policy issues. Their membership includes about 120 businesses and 65 dispensaries. They have provided guidance and input to legislators and administrators over the past few years in an attempt to prevent onerous rules and stifling regulations from being placed on the industry. They continue to address problems and suggest solutions to rulemakers and legislators.

“This was not the legislature’s intent when they passed ‘early sales’ [SB 460] in 2015,” Houlihan said. “The Oregon Retailers of Cannabis Association is doing everything we can to develop and organize for a solution to the current crisis, and we are working with policymakers to help make that happen.”

The number of licensed cannabis OLCC retailers (dispensaries) in Oregon as of December 30, 2016, was 216, according to the OLCC website information atwww.oregon.gov/olcc/marijuana. Of those only 178 have active licenses. 314 medical marijuana dispensaries remain on the OHA list, which is can be found athttp://public.health.oregon.gov/DiseasesConditions/. on their website. Rob Patridge, OLCC Chairman, told OCC that as of January 4, 257 applications have been approved.

Is there a solution?

The deadline was put in place by statute, so  legislative action would be required to change it. But the problem is immediate and serious, so waiting for the legislature to take care of this is no solution at all. Unfortunately, it appears that is a major roadblock.
“OLCC remains committed to expediting late filing applications and has been taking steps throughout the year to facilitate a quick transition, including working directly with applicants to complete their applications. Applicants can speed up the process by inventorying their products and completing their Inventory Transfer Requests. The December 31 deadline cannot be changed without legislative action since it is in statute. The deadline has been in place for 17 months, starting on July 27, 2015, when SB 450 became effective. The OLCC has been accepting applications for a year and retailers that applied and were ready have been approved through the OLCC’s expedited process. As of yesterday, 257 retail licenses have been approved and staff expects more to be approved shortly as applications are completed.”Patridge explained:

We also reached out to Rep. Ann Lininger, who co-chairs the Joint Committee on Marijuana, but received no response.

The reasons for delays are numerous and many have been forced by local regulations, inattentive landlords, rules changes and myriad reasons other than procrastination. If they have already paid the application fee and are already a licensed dispensary under the OHA, is there no way to allow them to continue to operate?

Let’s hope a solution can be revealed sooner rather than later.

© 2016 Oregon Cannabis Connection.

Buyer Beware: Oregon’s First Marijuana Investor Fraud Scandal

Aug 1, 2016 at 4:20 PM

I can’t count the number of times I’ve warned potential investors that the cannabis industry is rife with fraud and bad behavior. With legalized cannabis still a relatively new industry and with states constantly changing their cannabis regulations, fraudsters can have a field day.


Cue the bizarre (though unsurprising) case of Portland-based dispensary,
Cannacea, and allegations of cannabis investor fraud swirling around it.I can’t count the number of times I’vewarned potential investors that the cannabis industry is rife with fraud and bad behavior. With legalized cannabis still a relatively new industry and with states constantly changing their cannabis regulations, fraudsters can have a field day.

Last week, as reported by The Oregonian, “[t]he Oregon Department of Consumer and Business Services [“Department”] ordered Tisha Siler, CEO of a Northeast Portland pot dispensary called Cannacea, to pay $40,000 in fines for multiple violations of state securities law, including selling securities without a license.” You can read the Department’s order against Cannacea and Siler here.

According to the order, in November 2014, Green Rush Consulting, a California cannabis consulting company which “worked with a felon previously convicted in a financial scam,” helped Cannacea and Siler come up with a private placement memorandum for potential investors of Cannacea. The Department found this PPM contained multiple misrepresentations, probably the most egregious of which was that “Oregon regulators contacted and specifically invited Siler to ‘open cannabis dispensaries in Oregon,’ and that ‘Oregon regulators stated they would ‘pre-approve’ or ‘green light’ up to six of Respondents’ medical cannabis dispensary applications, ‘ensuring [Siler] would sail smoothly through the application process.’ This ‘pre-approval’ or ‘green light’ was emphasized repeatedly throughout the PPM. In truth and in fact, no such statements were made by any Oregon regulator.” Out of all of the suspect PPMs the cannabis business lawyers in my firm have seen (which are many), this takes the cake as the most outrageous since no regulatory authority would ever make such a promise to anyone.

The facts get even more interesting:  In connection with the creation of the PPM, Siler provided Green Rush with a letter, dated October 16, 2014, that was purportedly from the Oregon Health Authority Medical Marijuana Dispensary Program (the “MMDP Letter”). The MMDP Letter represented that Cannacea had received a ‘green light’ from MMDP for six dispensary locations. In truth and in fact, the MMDP Letter was a fraudulent document. Specifically, the MMDP Letter: was created on letterhead that is not used by MMDP; contained fabricated statements, and; contained a forged signature of a regulator that did not even work in the MMDP. Upon information and belief, the MMDP Letter was created by Siler, or by another at her direction.

The result from all of this is that Cannacea and Siler cannot do any business in Oregon, and both Cannacea and Siler are jointly and severally responsible for $40,000 worth of civil penalties assessed against them by the Department. And while Green Rush Consulting is allowed to continue its consulting service in the state, Green Rush Consulting is “prohibited from engaging in any business activity related to securities in Oregon without permission from the Department of Consumer and Business Services.”

The foregoing is a cautionary tale for investors, marijuana businesses, and state regulators. Far too often, state regulators are too bogged down with satisfying current federal enforcement priorities to deal with the actual business of marijuana. So, I applaud the State of Oregon for setting an example for other states by actually taking relatively swift action here. As the industry matures in all states that seek to legalize, fraudster companies and at least some “cannabis consultants” will no doubt continue to take advantage of unwitting investors. In turn, state securities regulators should be setting their own guidelines for how to better prevent this kind of fraud. In the meantime, be careful out there and exercise caution when you receive a multimillion-dollar cannabis private placement.

 

A NEW GROWTH INDUSTRY FOR NATIVE AMERICANS: WEED

lead_960

Alana Semuels / The Atlantic

Alana Semuels     May 20, 2016

Can cannabis revive Oregon’s long-struggling reservation economies?

WARM SPRINGS, Oregon—The tribes on this reservation, located in the high desert on the eastern side of Mt. Hood, are accustomed to bad deals. Until the 19th century, the Wasco, the Walla Walla, and the Pauite survived off of the Columbia River, catching salmon and, eventually, trading for it. Then in 1855 they were forced onto the Warm Springs Reservation. It was 80 miles from the river, but they could still go there to fish—that is, until the U.S. Government started to build the Bonneville dam on the river in the 1930s and flooded their fishing spots.By the time the Dalles Dam was finished  in the 1950s—ending all hopes of fishing the river and the economic independence it brought—the tribe had been decimated by other factors too, including the removal of children to boarding schools, and the drafting of men to the Army.Now, the reservation, which spreads over 1,000 square miles in Oregon, is one of the most economically depressed places in the state. The unemployment rate is around 20 percent, and about one-third of its residents live below the poverty line. Sadly, the circumstances of Warm Springs are familiar for many Indian reservations. Nearly 30 percent of American Indians and Alaskan Natives lived in poverty in 2014, according to Census data, which is the highest rate of any race group.

Now, the Confederated Tribes of Warm Springs are trying to reverse that history by taking advantage of the intricacies of federal law that made them sovereign tribes with the ability to make their own rules. Between 1778 and 1871, American Indian tribes signed treaties with the federal government in which they gave up land and were granted sovereign nation status. Under the treaties, tribes have the ability to make and enforce civil and criminal laws, to zone land, and to license and regulate activities on their lands (with some exceptions in the court system).

The tribes in Warm Springs want to use that sovereign status to grow cannabis on their land and sell it off the reservation in Oregon, which in 2014 approved the use of recreational marijuana. Because the tribes are a sovereign nation, leaders say,  they will be able to start an operation quickly, without having to deal with the headaches of city, county, and state government. Recently, the tribes broke ground on a 36,000- square-foot greenhouse, and hope to get product to market by next year. Finally, after centuries of being on the bad end of deals with the government, the tribes’ status could give them a key advantage.

The idea of growing cannabis on the reservation has residents’ full-fledged support. In a referendum on whether to grow cannabis this winter, 1,252 voted for the idea, and just 198 voted against it, and turnout was high despite a snowstorm that could have kept people home.

9a0679313

A voter casts a ballot in the cannabis referendum in Warm Springs in December 2015 (Pi-ta Pitt)

“I don’t smoke but I thought it was a good idea to bring in revenue,” Tom Kalama, a tribal member and reservation resident who voted for the initiative, told me. And the tribes are in need of more money. Tribal members used to get $100 a month from the tribe, dividends from economic ventures, Kalama told me. Now they get $25. Seniors used to receive $600 a month, now they receive $300.

Tom Kalama was sitting under a canopy where his wife Jeanine was selling Indian tacos (meat or beans on frybread) to passers-by. Their sons, ages 44, 42, 41, and 35, want to work on the reservation, but it’s hard to find jobs, Kalama told me. Instead, they drive outside the reservation for work, if they can find anything close to home.

The move to start a cannabis operation could also serve as a blueprint for other tribes that have yet to figure out how to gain from their sovereign status. “We’ve yet to see tribes fully exercise their sovereignty, and I think that cannabis is strangely a lens that will demonstrate the capabilities of taking that on,” Pi-Ta Pitt, the cannabis project coordinator for Warm Springs Ventures—the tribes’ economic development arm—told me.

Sovereignty is a big deal for tribes across the country. For centuries, despite the treaties, decisions on reservations were made by people at the Bureau of Indian Affairs in Washington, or by other state or federal agencies. Then, in 1970, Richard Nixon started to shift the federal attitude towards tribal sovereignty. The U.S. government had been controlling and subjugating the tribes for far too long, he said, in a speech to Congress. The federal government should step back, he argued, and let American Indians control their own resources.

The Indian Self-Determination and Education Assistance Act of 1975 ushered in what’s known as the era of self-determination, according to Robert J. Miller, an expert on Indian law at Arizona State University. It’s taken awhile to take hold, he said. The Bureau of Indian Affairs and other agencies resisted ceding control for a long time, but the tribes are trying to be more independent now.

“Communities that call their own shots and have flexibility in making their own decisions bear the risk of failure but also reap the benefits of success,” Eric Henson, a research affiliate at the Harvard Project, told me. A series of studies by the Harvard Project on American Indian Economic Development backs up that claim. Comparing tribes that were economically successful and those that weren’t, the studies found that tribes that make their own decisions about economic development outperform those who cede such decisions to outside agencies.

In Mississippi in the 1970s and 1980s, for instance, a tribal leader named Phillip Martin created a manufacturing hub, industrial park, and eventually a theme park, on the Mississippi Choctaw reservation, lifting the tribe from poverty to wealth. Because of his efforts, the unemployment rate on that reservation fell to around 4 percent, at a time when the rest of the nation was going through a recession. Tribal businesses employed 7,000 people at the time of Martin’s death in 2010. This was an especially remarkable feat because Martin led the tribe to self-sufficiency before the federal Indian Gaming Regulatory Act of 1988 made it easier for tribes to operate gaming businesses in their territory.

What’s more, the tribes’ ability to call their own shots could be essential in the cannabis business, Pitt told me. Private growers might spend thousands to set up an operation somewhere and then get harassed by city or county authorities who don’t want a cannabis operation in their vicinity (the use and growth of marijuana is still illegal under federal law). The tribes also don’t pay county or state land taxes, which could give them a big financial leg up in a state like Oregon, which levies high property taxes to make up for the lack of sales tax.

The Confederated Tribes of Warm Springs have tried other things to lift themselves out of poverty—efforts such as gaming which also takes advantage of their sovereign status—and most haven’t been successful. Warm Springs has a casino, a hotel and lodge, and, up until very recently, a timber mill (the mill went bust).The casino was far from the target market of Portland, a hilly two-hour drive away. The hotel and lodge are dated and have to compete with hundreds of other resorts closer to Portland. The timber industry has been dying for years. Marijuana, on the other hand, is a market that’s just starting up, and the outcome could be very different, tribal leaders say.

5fd343c02

Ben Bisland on the area the tribe has cleared for the greenhouses (Alana Semuels / The Atlantic)

“The tribe has really been on the decline for several years—this will be a good foothold to start climbing again,” Ben Bisland, who manages projects for Warm Springs Ventures told me, standing on the flat expanse of land under a butte that will house the greenhouse.

Nationally, it can be difficult for tribes to thrive because of the circumstances that led them to reservations in the first place. Native people were often confined to reservations with barely farmable land and with few resources. Reservations often don’t have infrastructure like broadband or railway lines that could help support industry. Overlapping jurisdictions between federal, state, and tribal entities made it difficult to get anything done. And “It’s literally been American policy to acquire all the resources and land the indigenous peoples had,” Miller, the ASU professor, said.

The gaming act has made winners out of some tribes, mostly those located close to cities who can start up casinos and attract a high volume of customers. But others, like the tribes in Warm Springs, have not found casinos to be very profitable, because their reservation is too far from big population centers. The Warm Springs tribes are situated in the perfect location to grow cannabis, though, Pitt said. There are more than 300 days of sun a year, and the reservation is close enough to easily bring product to market.

Warm Springs is not stopping at marijuana. They’re moving ahead on other economic development opportunities, too.  “Marijuana is notthe answer. It’s part of the answer,” former Oregon Governor Ted Kulongoski, who serves on the tribes’ economic development board, told me. The tribes are trying to become a national testing site for unmanned aircraft systems, or drones, and want companies to test how to use drones to fight forest fires on the reservation. Warm Springs Ventures, the tribes’ economic development arm, recently booted a private telecom company and founded its own tribal telecom company. Its also getting into the carbon offset market. “Think about 200 years of deprivation, being driven onto the poorest land available— – you don’t overcome that with a decade of gaming,” Henson, from Harvard, told me.

But as a way to test the sovereign power of tribes and their ability to create economic development for themselves, marijuana could be a big deal. Because Oregon has approved recreational marijuana, and because it has independent tribes, the state could become a testing ground for a new industry that could replace, or supplement gaming, on reservations. This is not true in other states: Despite a 2014 Department of Justice memo that said that the federal government wouldn’t interfere with cultivation on tribal lands, state interference in South Dakota has motivated one tribe to suspend its marijuana operation, while a sheriff’s office in California raided anothergrowing operation on tribal land there. Warm Springs, for once, has been able to take control of its own business, and perhaps set a path for other tribes.

“This is something that can be an inspiration to other tribes, to be able to learn, what does sovereignty look like,” Pitt said.

How Cannabis Clubs Provide Support And Community To War Veterans

May 09, 2016 1200x600

Underneath a billboard advertising premium cannabis is one of Portland’s only operating cannabis lounges, and on any given day at the Northwest Cannabis Club the bar is full of U.S. military veterans.

Thomas Cashman is a veteran and vice president of the Oregon chapter of Grow For Vets, a non-profit organization headquartered in Colorado. He says he feels more comfortable there than at Veterans of Foreign Wars (VTF) clubs.

“Self-isolation is a huge symptom of PTSD and for me it was the most challenging one to break,” says Cashman. “Not every veteran wants to go to the VFW and drink whiskey and tell war stories. I don’t like to tell war stories and I don’t even like hearing them anymore. We have had a decade of that, I have heard them and I am done. I want to talk about how we can help more veterans and how we can get more veterans involved in helping more veterans.”

Grow for Vets supplies veterans with cannabis

980x

Grow For Vets provides any U.S. military veteran over the age of 21 with a regular supply of free cannabis, regardless of formal medical marijuana program status. Their mission is to “save more than 50 veterans who die each day from suicide and prescription drug overdose” by providing veterans with a “safe alternative to deadly prescription drugs…and resources necessary to obtain or grow their own cannabis for treatment of their medical conditions.”

There are currently 21 million living U.S. veterans of all wars. Nearly 50,000 of them are homeless. Median incomes are low, around $30,000 and between 15 and 30 percent have been diagnosed with post-traumatic stress disorder (PTSD), with higher rates among Iraq and Afghanistan war veterans.

Many veterans are undiagnosed. Those who are diagnosed usually are prescribed combinations of psychotropic prescription drugs, and many self-medicate with illegal drugs. Many have turned to alcohol abuse. Every day, about 22 (or more) veterans will take their own lives. A growing movement of veterans are using cannabis to treat both the physical and mental wounds of war.

“This is basically our unofficial clubhouse, it’s our basecamp,” Cashman says of the NW Cannabis Club.

Cashman says the club, which is private and “BYOC” (bring your own cannabis), allows Grow For Vets to host events and the club also hosts events in their honor. Veterans receive discounted membership and collection jars for the organization are displayed prominently at the register.

“This has become a gathering place for veterans who don’t drink,” Cashman says.

Retired soldier uses cannabis to treat PTSD980x1

One of those veterans is K. Patton, a retired army soldier working in Oregon’s new legal cannabis industry. Patton is a conservative and a registered Republican, who believes safe access to cannabis is a bipartisan issue. He is a veteran of the Iraq and Afghanistan wars, diagnosed with PTSD and using cannabis in place of pharmaceutical drugs to help combat the symptoms.

After returning from a tour of duty in Iraq and a tour in Afghanistan, Patton has had difficulty adjusting to civilian life. He didn’t have much of a support system and was having trouble sleeping, keeping a job and maintaining relationships.

“If I heard a loud noise, I wouldn’t hit the floor but I would tense up, ready for a strike. My life was in the shitter and somebody told me I needed to get help,” says Patton.

He decided to seek professional help but instead he waited for months to be seen at his local VA hospital in Atlanta, which was ill prepared for the flood of new veterans created by the wars in Iraq and Afghanistan and caught up in bureaucratic scandal over secret waitlists.

He says he went nearly homeless for months to save up the money to relocate to Portland, where he was able to see a VA doctor without a long wait. He says although he had a great doctor, the drugs he was prescribed didn’t work.

“The only tools the government lets [my doctor] have are pharmaceuticals,” Patton says.

He was prescribed Citalopram, an SSRI anti-depressant drug.

“I tried to take it for awhile. I felt like something added was in my brain, it wasn’t stopping anything, it was just there. It was unsettling,” he says.

He was anti-drug before using cannabis980x2

Photo credit: Thomas Cashman

Prior to trying cannabis he says he was very anti-drug. He grew up watching drugs and the war against them destroy his community and his own family. He says his military service combined with extensive world travels have changed his perception of the War on Drugs and cannabis specifically.

“I got to see [the international drug war] from several different perspectives. I have been smart enough to study it. I could have been a statistic – any wrong move and I could have fallen into the system. Anything from having a kid or having no money to going into selling drugs, taking the easy way out,” says Patton.

Patton was born and raised in Elizabeth, New Jersey, in the late 80s and early 90s. He never knew his father and because his mother had a substance abuse problem he became the primary caretaker for his younger siblings. He refers to the era when he grew up in the New York City suburb as the “crack wars.”

As a kid, he read science fiction to escape and knew he wanted to travel when he grew up, which inspired him to enlist.

“There were always people on the corner using kids to sell drugs. The drug dealers would use everybody and anybody around them to sell drugs, including their own family,” he says. “One day, the police – the good guys – ran up on all the kids and other minors coming out of school and had us against the wall, patting us down – all that stuff. I didn’t have anything to do with it and I am getting pat down like I am the guy on the corner. I didn’t hate them for it but it pissed me off, I knew it wasn’t right. I didn’t know at the time they were taking my civil liberties away.”

Patton says the wars in Iraq and Afghanistan don’t compare to the war he grew up in; the foreign wars were more dangerous but the one at home is more frustrating.

“It’s war-like, but it’s war against America, it’s a war against ourselves. We kill each other, we throw each other in jail, waste money – it’s a war on ourselves.”

He says witnessing the corruption on the streets and the governmental corruption led by Democratic state administrations in New Jersey led him to register Republican. Shortly after graduating high school, Patton enlisted in the U.S. army in August 2001. He was planning to be a career officer.

“I knew I wasn’t going to have enough money for school… I wanted to be a solider because it’s an honorable profession. I just knew it was what I wanted to do and was grateful to be doing it.”

Patton fought in two wars980x3

Photo credit: Thomas Cashman

A month later the September 11 attacks happened. He says he knew he would fight in a war, but didn’t imagine he would fight in two. After being stationed in Korea, he was deployed to Iraq in 2005.

In Iraq, Patton was part of an artillery unit, Convoy Logistics Patrol, that delivered ammunition to bases around the country, in addition to being on active duty guarding bases in Baghdad.

“If you didn’t get mortared the night before, then you would wake up in the morning,” he says. “We would get our mission, check vehicles and do maintenance.”

The deliveries were usually carried out overnight, when it was slightly safer to travel.

“It still wasn’t safe – far from it,” he says.

After 13 months in Iraq, Patton left the military, moved to Georgia and joined the Georgia National Guard. He says one of the motivations for leaving active duty was because he had become more politically aware and no longer agreed with the wars. Before going to war he says he primarily watched Fox News and had general faith in the government.

“My whole belief system was questioned.”

Shortly after the presidential election in 2008, he was called back to active duty in Afghanistan. When he found out he was going back he says he was frustrated at first – he was just coming out of his shell, making friends and had stopped carrying a gun with him everywhere. He says, however, he was ultimately honored to serve again.

Afghanistan was far more dangerous for him than Iraq. “Afghanistan was a whole different type of war we were fighting. Here we were a handful of men for hundreds of hundred of miles, fighting an unseen enemy. It was kinda like Vietnam – they knew where we were at all times and we just wait to get attacked.”

Afghanistan changed his views on drugs980x4

Photo credit: Thomas Cashman

He says his views on drugs really shifted during his time in Afghanistan. In much of the country both cannabis and poppies used to cultivate opium are grown in the open. He says the U.S. military tried to encourage the farmers to grow other agricultural crops, but no longer tries to eradicate the fields.

“It’s a part of life, we could destroy all the poppy we want, but they [the Afghani farmers] have nothing, if we destroyed their crops they would go after us. It wasn’t worth it to U.S. commanders on the ground.”

Patton says his exposure to cannabis culture, and international drug culture generally, has really altered his perception of it. He wishes it was taken more seriously by the government so it can be studied and properly administered by medical professionals.

“I just saw the toll of the drug war first hand. I saw addiction in my family, the amount of money we [the United States] have spent fighting it, seeing minorities and the poor people in America that are targeted by the War on Drugs. We need to have smart decriminalization and rehabilitation – we need to say we are going to stop it now, today.”

Since leaving active duty and relocating to Portland, Patton met and became active with Grow For Vets and frequents the NW Cannabis Club informally with many of the other local members.

Cannabis lounge gives them a sense of community980x5

Photo credit: Thomas Cashman

Thomas Cashman says so many vets have been drawn to Portland’s cannabis lounge because fighting in wars bonded them to their fellow soldiers. They crave the sense of community, unity and family cultivated by service to their country and each other but are often isolated in civilian society, which further exacerbates PTSD.

Cashman says the Oregon chapter now has about 150 members they serve with free cannabis provided through donations from local growers and cannabis companies. Many of the growers are often veterans themselves.

“There are a good number of veterans that are growers,” he says. “There is crossover in those communities. It’s people who are used to standing on the edge and looking over. They understand that freedom is inherently unsafe and they accept and assume that risk.”

Cashman joined the military in 1989 and fought in both the first Gulf War in the 90s and the Iraq war in the 2000s. He was discharged in 2013 after a traumatic brain injury he suffered from a motorcycle accident while he was off-duty. He drank heavily to cope with his symptoms of PTSD.

After his discharge a friend whose parents were growers started providing him with free cannabis. He said having the regular supply changed his life. He stopped drinking, enrolled in school and started working through his PTSD.

“The biggest thing cannabis does for me is helps me sleep, sleep is so key to health,” says Thomas Cashman.

They also host educational events to bring more veterans into the fold, he says.

“My hope is the more veterans who successfully use cannabis, the more veterans will successfully use cannabis to treat their symptoms and as an alternative recreation to alcohol as well.”

Photos by Thomas Cashman

Seattle-based tech company binds itself to cannabis industry

May 9, 2016, 1:43pm PDT  Coral Garnick

kelly-ogilvie-3750xx466-262-0-33

    Kelly Ogilvie is CEO of DeepCell Industries, a new company that licenses technology to… more

Through a new licensing agreement between two Washington-based companies, cannabis-infused sugar and salt can make its way to the state’s recreational retail marijuana market.

Seattle-based DeepCell Industries developed a technology to fuse THC from marijuana with crystals, like salt and sugar. Now, Green Labs, a licensed producer/processor in Raymond, have inked a deal to manufacture and distribute DeepCell’s brands.

Terms of the agreement were not disclosed.

DeepCell has three brands so far, Ruby (THC-infused sugar), Sapphire (THC-infused salt) and Emerald (THC-infused no-calorie sweeter). Ruby is currently in the process of being approved by the Washington State Liquor and Cannabis Board, and DeepCell CEO Kelly Ogilvie expects Green Labs to submit Sapphire and Emerald for approval in the fall.

The industry standard right now for pot-infused edible products is butters and oils. Though infusing those products changes their flavor, Ogilvie said.

“What we are trying to do is unlock a new corner of edibles by allowing not just candies, gummy bears, cookies and brownies,” Ogilvie said.

Dosed packets of the DeepCell branded products will be available at recreational pot stores for use in say lemonade and coffee or to season a steak or pasta sauce. They could also be used in baking so a brownie can taste like a brownie.

The names and design of the products are marketed toward women and people who would drink a glass of wine or sip a scotch, versus taking shots or chugging a beer. This means no pot leafs on the packaging and a focus on quality ingredients.

One thing Ogilvie is sure to make clear, and it says it on almost every page on the website: DeepCell does not ever touch the marijuana.

The reason: Ogilvie actually left his job as senior policy advisor in Gov. Jay Inslee’s office in November to become the CEO of DeepCell. So, he knows the rules and regulations of the industry better than most.

A friend of Ogilvie came up with the technology to infuse crystals with the THC from cannabis, but Ogilvie saw the market possibilities to go beyond what started as a sugar tablet for the medical marijuana industry.

Because DeepCell can license its technology to regulated companies across state lines, it has even bigger market potential than just Washington’s recreational scene.

“So, we forgo some of that margin,” Ogilvie said about not producing the products within DeepCell itself. “But, it allows us to keep an arms distance from the licensing process and it allows us to cross state lines.”

The Failed Promise of Legal Pot

New laws on marijuana were supposed to boost tax revenues and free up cops to go after “real” criminals. But underground sales—and arrests—are still thriving.

1920

It’s just after four o’clock on a hot Seattle afternoon, and Thomas Terry is standing in the parking lot of a Jack in the Box. Known for fights that end with police sirens and sometimes ambulances, it’s a spot some locals half-jokingly call “Stab in the Box,” but today the scene is quiet.

A man is walking up the street toward Terry and a few other young men who are gathered in the shade of a brick wall where the parking lot meets the sidewalk. As he draws near, one of them opens his mouth, and the words tumble out:

“Kush? You want some weed?”

Whether the man does or not, he says nothing, and keeps walking. It’s the middle of August, two years and eight months after voters in Washington passed an initiative to permit both the possession and sale of recreational marijuana—making the state the second in the nation to do so. In large part, the law was aimed at eliminating the black market for marijuana and redirecting those sales from parking lots and living rooms into stores, where the state could monitor and tax the transactions. Yet, although legal marijuana has generated real declines in arrests, the presence of Terry and the young men on the corner points to a hitch not just in the nuts and bolts of marijuana sales but in one of legalization’s most touted goals.

Asking to be identified only by his initials, D.C., one of the young men on the corner, breaks it down. Business has fallen since the law passed, but enough people think they can score a bargain, or simply don’t trust the shiny new stores, to keep things moving. The police know about it—they always have—and they still bust dealers. Sometimes they do sweeps, D.C. says, referring to a well-publicized raid downtown. The cops are definitely more relaxed about it, he says, but sometimes they still show up and bust whoever’s around.

A few days later, the corner is empty. The reason is a Ford SUV, painted black, blue, and white, idling at the curb a few feet away; a police officer’s arm hangs out the window as he surveys the faces passing by. A few hours later he is gone, and the crowd is back. Mostly, the crowd is black. Mostly, the cops who will bust them are white. Mostly, on the corner it’s hard to see how anything was changed by a movement that aimed to change everything.

The dream of legal marijuana as it is being sold to the American public is that it will not only give states a chance to reap a tax windfall off of a drug millions of Americans already use; it will end the back-and-forth tussle among cops, users, and dealers, and shift police resources to more serious crimes. Most compellingly, advocates hold out the promise of a major step toward dismantling one of the pillars of racially biased policing—the war on drugs—and finally reeling in a legal net that has long entangled black men at vastly disproportionate rates.

Proponents of legalization make this case explicitly. In factsheets and reports, the American Civil Liberties Union describes marijuana laws as generating “staggering” racial bias. And the statistics do paint a stark picture: Although whites are as likely to use marijuana as blacks, nationally black people are almost four times more likely to be arrested for possessing the drug. In some states, it’s closer to nine times. Those arrests in turn show up on background checks for everything from apartments to jobs, and despite the courts’ presumption of innocence, arrests are often treated by society as de facto markers of guilt. So in one fell swoop, voters are told, they can balance government budgets, begin to close a pipeline that sends one in three black men to prison, and free up the cops to chase real criminals. Plus, now it’s legal to get stoned.

One-half of the dream is coming true. In the first two states to go legal, arrests for marijuana possession have dropped dramatically—by 98 percent in Washington and 95 percent in Colorado as of last year—and high taxes in both states are generating tens of millions of dollars a year for education and public health. At the same time, legal markets in Washington and Colorado along with loosening medical-marijuana laws around the country have together exerted enough downward pressure on street prices that Central American cartels have reportedly begun to shift production away from marijuana, toward more profitable drugs like heroin.

But the other half of the dream is faltering. The rub lies in reconciling those dramatic statistics with the reality on the street: The same faces standing on the same corners. The same neighborhoods cruised by the same cops. The same cautious side-to-side look before a thickly flowered stem is removed from a backpack, peered at closely, maybe smelled and rolled between the fingers, and, in a quick change of hands, finally sold.

As legalization efforts proceed apace, the risk is that even as possession arrests taper off, black markets will continue entangling young black men. Half of all drug arrests are for marijuana, and about one in eight of those is for distribution. According to experts, even that number likely conceals cases where police target dealers but ultimately arrest them only for possession, which has lower probable-cause standards. And like possession arrests, arrests for selling marijuana show broad trends: The sellers who the cops catch are mostly male, more than half are under 24, and black people are arrested at four times the rate of whites, even though whites are up to 32 percent more likely to sell the drug.

The risk is that, by itself, legalizing marijuana possession changes none of this and that, even as legalization spreads, young black men will continue to be arrested at disproportionate rates for selling the drug. In turn, this leaves intact a version of the same specter that helped spur legalization in the first place: An arrest record’s scarlet letter will continue to blight the collective futures of urban communities of color, the natural effect of an economic incentive the state did not remove.

Why is a black market that was supposed to be vanquished still thriving? In short: economics. Judging the size of a black market has always been a tenuous endeavor. In Washington, one of the first big unknowns the state tackled when it set about creating a legal market was the size of the demand—a state that had just made a historic change to marijuana laws didn’t even know how much of it people smoked. But aside from some brief initial shortages, stores in Washington and Colorado haven’t generally had a problem keeping the shelves stocked. Partly, that’s because both states had preexisting medical-marijuana markets, and some of those producers easily migrated into the new legal recreational system.

Instead, what is keeping people in Colorado’s black market is price, with a dose of convenience thrown in, says Mark Vasquez, a former narcotics detective and now the chief of police in Erie, Colorado. Vasquez heads the Colorado Association of Police Chiefs’ marijuana working group and has traveled nationally to educate other departments about Colorado’s experience with its new legal system. “The black market,” he says, “is alive and well and will continue to thrive in Colorado.”

There are a few basic reasons for this. First, the medical market, Vasquez says, can sell marijuana more cheaply than the state-licensed and -regulated stores because medical dispensaries don’t have to charge most of the combined 27.9 percent tax on the drug. This increases the resale of medical marijuana on the street. Second, there are the plants that are grown for personal use, which are allowed under the law. Vasquez says the result is a steady supply of marijuana not only for street dealers but also for Craigslist sales, which have become so ubiquitous that some city departments don’t have the resources to crack down on them.

With various illegal sources flourishing, Vasquez says, the challenge for regulators “is trying to find the sweet spot, where the taxes are low enough that there’s an incentive for people to go to the regulated stores.”

Francisco Gallardo, a community leader in Denver, summarizes the situation more succinctly: “If it’s ridiculously expensive and they can get it from their homie cheaper, that’s what they’re going to do.”

As a former gang member and a program director for Denver’s Gang Rescue and Support Project, Gallardo works to help predominantly young men of color escape gang and street life in metropolitan Denver, where marijuana culture is a constant presence. Informal dealing, he says, is still very much a part of life in the city, especially in Denver’s urban core. Like Vasquez, and without prompting, Gallardo pinpoints the issue as one of price. In Colorado stores, prices are higher than on the street, Gallardo explains, leaving space for dealers to make a profit while still undercutting the legal market. “There’s people out there definitely shucking and jiving, there’s no doubt about that,” says Gallardo. “If you can do it without the taxes and the cost, people are going to try.”

Data that might tease out the size and extent of the black market since legalization is by turns scarce and mixed—but doesn’t contradict either man’s point. While marijuana distribution arrests in Colorado as a whole fell sharply after legalization—almost 98 percent—in urban Denver, the decline wasn’t nearly as pronounced. Compared with the three years before legalization, the three years since show a decline in distribution arrests of only 36 percent. And that number should probably be even lower: After the law first passed, Vasquez says, some police officers backed off on making any marijuana arrests, choosing a hands-off approach until they had more clarity about what exactly what was legal under the new rules.

Off the top of his head, Gallardo says, he could name four marijuana dispensaries within walking distance. But even with the stores so close at hand, Gallardo explains, some people keep going to street dealers for one reason: It’s just plain cheaper. The only way to get street sales down, Gallardo says, “is if they reduce the tax.”

Enter the dead admiral.

In his office at the University of Washington, surrounded by books lining three walls from floor to ceiling, Bill Rorabaugh is every inch the historian. With white hair, wire glasses, and a grandfatherly crinkle around his eyes, he smiles and leans back in his chair. A scholar of 19th- and 20th-century America, Rorabaugh didn’t start out specializing in black markets—and certainly not black markets for marijuana. Instead, early in his career, Rorabaugh studied alcohol, especially in the pre-Prohibition era, and wrote his first book, The Alcoholic Republic. But in the course of that research, a man came to his attention who seemed to understand black markets especially well—and how to end them. He was Rear Admiral Luther E. Gregory, and he held the solution to a much earlier black market in Washington state.

By the beginning of the 1930s, America’s alcohol prohibition was coming to an end. The beneficial effects predicted by prohibition boosters—from reduced crime and mental illness to lower taxes—had not wholly materialized. Instead, violent gangs had taken over the supply chain as well as significant swaths of U.S. cities. Speakeasies sprang up as quickly as the police could close them down, and gangsters massacred opponents in the streets.

In the throes of the Great Depression, legislatures all over the country were also beginning to see alcohol as a way to fill state coffers. Slogans like “Give us beer and balance the budget!” appeared on parade floats and posters. Everyone wanted to bring liquor back—and the lawmakers wanted to do it with a hefty tax. The only problem was that the bootleggers were well established, and fixing prohibition meant finding a way to force illegal operations to go straight or close their doors.

When repeal finally came, Washington’s then-Governor Clarence Martin asked Admiral Gregory to head the state’s new Liquor Control Board. Critically, Martin gave Gregory carte blanche to mold the new policies as he saw fit. Gregory took up the challenge—and surprised everyone.

First, instead of cracking down on bootleggers and speakeasy operators, Gregory gave them amnesty and issued licenses to anyone willing to play by the state’s rules. Second, backed by the governor and his influence in the Senate, Gregory arranged for alcohol taxes to be set as low as any in the nation, which allowed those willing to follow the law to keep a significant amount of their profits, and it made room for legal operators to compete with bootleggers’ prices. Third, Gregory punished anyone who broke the rules—even once—with an iron fist, blacklisting them from ever making or selling alcohol in the state again.

Predictably, this caused some turmoil in a legislature anxiously awaiting an infusion of cash from liquor sales, but the governor backed Gregory. Faced with a low cost of entry and legal profits, bootleggers and speakeasies around the state mostly turned legitimate. Meanwhile, the few remaining stragglers were quickly put out of business, and drinkers flocked to a competitive legal market.

That might have been the end of it, but there was one more piece to Gregory’s plan. After holding down taxes—and thus prices—for three years, Gregory abruptly raised taxes so much that they were among the highest in the nation. The price of booze went up, of course, but people kept buying legal liquor and beer. There was no alternative left. Gregory had broken the back of the black market.

What the admiral saw so clearly was the importance of the legal market’s cost-price margin—the difference between production cost and final selling price. Gregory knew that margin was where bootleggers lived, and shrinking it would leave less room for them to undercut legal prices and still turn a profit. By bucking the revenue-hungry legislature and setting taxes low in the early years of Washington’s liquor market, Gregory stripped the black market of its ability to compete.

The strategy hasn’t exactly been lost in time. When Vermont commissioned the RAND Corporation to put together a survey of the different scenarios for legalizing the drug in their state, the policy research behemoth referenced the approach Gregory used as one possible option. Although the report pointedly stopped short of making recommendations, it emphasized the importance of making the legal retailers competitive with the black market.

The report also emphasized that the Gregory plan isn’t without risks. Since marijuana makes up a very small part of most users’ budgets, the report notes, even a relatively high tax would only have significant negative effects on heavy users, and a low tax wouldn’t save average users much money. What’s more, the report warns, allowing prices to drop too low would remove the disincentive of cost from those teetering on the edge of using too much of the drug.

Another, potentially larger risk of the strategy, notes Jonathan Caulkins, the lead author of the report and the former co-director of RAND’s Drug Policy Research Center, is that during the period of initially low taxes and correspondingly high profits, a marijuana business lobby might be able to become sufficiently entrenched in a state to interfere with later plans to raise taxes. And of course, the parallel between street corner weed sellers and bootleggers isn’t a perfect one: Unlike a speakeasy, which might be able to obtain a business license and reopen as a legal business right away, the average drug dealer is separated by a wide gulf of capital and expertise from being able to open a storefront marijuana retail operation.

But Gregory’s strategy can still be mined for shards of economic and social truth. Costs of entry to the legal market matter, as do prices. Dealers’ networks and producers’ facilities take time to set up, and illicit production especially has significant startup costs of its own—which means that while black marketers may have to be coaxed out of business, once they’re out, it’s likely they’ll stay out. And for a policy movement that promised to reform criminal justice, perhaps the most important lesson to take from Gregory is that a disincentive from the state is infinitely more effective when coupled with positive and easily accessible rewards for following the rules.

One looming unknown pointed out in the RAND report was exactly how much of a premium consumers would be willing to pay to buy marijuana from a legal store. Only one survey had been conducted, the report said, a small poll of Washington-state residents who self-identified as marijuana users. On average, respondents said that they would be willing to pay about $5 more per gram to buy marijuana from a legal store. For a gram that costs between $10 and $15 on the street, that’s a price bump of one-third to one-half that consumers would tolerate. But the average belied a split in the respondents: While almost half said they would be willing to pay between $5 and $10 extra per gram for legal marijuana, nearly a third said they wouldn’t pay anything extra at all. Altogether, just under half of those polled marked maximums of $2 or less, with the heaviest users indicating the least willingness to pay more.

Parsing the survey too closely would be a mistake, Vermont’s RAND report warns, especially with such a small sample size and a methodology that let participants opt in using an Internet form. But despite their lack of specificity, the results paint a plausible picture: a market split between a slim majority of users willing to pay more in a legal store and a smaller but still significant portion who are relatively happy buying on the black market.

In perhaps the ultimate historical nod to the admiral, legislatures in both Washington and Colorado independently lowered taxes in both states last year, explicitly citing the goal of putting pressure on illegal markets. But both moves were small. Washington’s effective tax rate, including sales tax, went from about 44 percent to 43.5 percent; and Colorado passed a measure to reduce its tax from 27.9 percent to 25.9 percent by 2017, leaving both states near what the survey, however imperfect, paints as the upper end of acceptable rates.

The move itself also acknowledges a more worrying possibility. In a classic case of diminishing returns, if even 75 percent of smokers can be enticed into the legal market, a state will capture the majority of the possible revenue from marijuana. But if the Washington survey is even generally right, creating a system that entices every buyer to participate would require setting taxes so low that revenue from the whole system would plummet. For states, eradicating the last stubborn traces of the black market may in fact carry little positive incentive.

Yet, even acknowledging such a policy for what it is—a plan for half success—the insidious temptation is that from the outside, the failure built into it looks almost inevitable. After all, getting 75 percent of smokers to go legal is pretty good, right? And lawbreakers will always exist, won’t they? In fact, the question of eradicating the black market goes as deep as the roots of crime itself.

In Seattle, a few feet off the corner, Terry explains that he started selling weed when his mom lost her job. He had never sold before, but he’d seen his friends do it. He knew it was possible, he knew how it worked, and he knew he could make money doing it. He was 16.

“If I didn’t provide money, no one else would,” Terry says, adding that he also tried mowing lawns that year. “I couldn’t just wait there and pray that someone would pay the rent.” Later, he dropped out of school, and even though he got a normal day job, he had become familiar with a routine that worked too well to give up. Soon he had a child and, always, there were bills to pay.

Today, Terry says, dealing isn’t his main source of income. He still works a regular job—he’s a dishwasher—and that job provides most of his income. But he’s not full time—few people at his work are, he says—and at $11 an hour, most weeks he brings home about $300. After bills and rent, there’s not much left over. The hustle, Terry says, is good because it’s there when he needs it, and it pays cash. “My money that I use to pay for diapers, formula, stuff like that, comes from selling,” says Terry. “Unless you’re the budgeting king of the world, you’re not going to be able to make it on $300 a week.”

As Terry and others on the corner talk, a picture starts to emerge of dealing as a kind of safety net. A few mention having jobs, and when Terry says that the hotel where he works might be hiring, another man quizzes him for details. But to a man, each also describes his own version of an economic cycle in which the ends that are supposed to meet often don’t: low pay, part-time hours, child support for some, the difficulty of finding a job with a criminal record, and rents that only seem to go up.

“I know that under any circumstances,” says D.C., “I can come out here, and you can give me a bag of weed, and at the end of the day, I can have some money in my pocket.”

Some on the corner are clearly in the game for something more than diaper money. While Terry and D.C. talk, another young man bounces up to the group. All bravado, he’s hoping to sell to the sellers, offering to weigh everything out on an electronic scale in his SUV parked nearby. Flashing a grin, he says selling weed lets him support four girlfriends.

But for Terry and the others who share the corner with him, the day is short on glamour. After the young man with the SUV and the scale leaves, they go back to what they were doing—taking turns calling out muted offers to the faces walking past, occasionally making a sale, and treading the line between gossip and trash-talking to pass the time. It’s an economic equation built around skimming the margin: Buy an ounce, sell it in grams, dodge the cops, and keep the difference. Legalization pinched dealers, D.C. says, because it drove prices down. But there are still customers, and that means they can still make money, even if it’s not as much as it used to be. As long as that’s true, he says, the work will be what it always has been: reliable.

In one form or another, marijuana legalization is coming, almost without a doubt. Four states and the District of Columbia have legalized recreational marijuana, 16 have decriminalized it, and seven allow medical use of the drug. Altogether, 27 states have relaxed their laws on the drug, and President Obama himself, speaking to Vice last March, admitted that if enough states legalized marijuana, it would be natural for Congress to consider removing it from Schedule 1 of the Controlled Substances Act—a move that would amount to overnight legalization nationwide. In March, the Supreme Court declined to hear a suit, filed by Nebraska and Oklahoma, that sought to strike down Colorado’s law. Less than a month later, Democratic presidential candidate Bernie Sanders floated the idea of de-scheduling the drug at the last Democratic presidential primary debate, and no one batted an eye.

It would be a mistake to call marijuana legalization a failure, even in the loosest sense of the word. After all, nationally, just fewer than one in eight marijuana arrests on average are for distribution; the other seven are for simple possession. That means that out of eight marijuana arrests that would have happened tomorrow in Colorado, seven of them won’t, because possession is legal. That means seven Coloradans who could have lost everything—from their jobs to their housing to their college financial aid—as a result of an arrest or conviction will instead simply go about another day of their ordinary lives. But the persistence of that eighth arrest—the roughly 12.5 percent of marijuana arrests that are for distribution—means that legalization isn’t a complete success, either. Those few distribution arrests cause the majority of marijuana-related incarcerations, and still disproportionately affect black men.

On the corner by the Jack-In-The-Box, the greeting/offer is called out again, and again the target keeps walking without reply. Far from being bothered, the young men barely seem to notice. They know their customers are out there, and they are content to wait.

A larger but still familiar cycle is also at play. A few weeks later, as summer is winding down, Seattle police conclude a buy-bust operation months in the making—focused on the corner. Nearby shop owners and residents had complained. The young men made them feel unsafe, hanging around late into the night, offering drugs, and making catcalls. The police go so far as to close nearby alleys, where sales had been occurring, and over two days arrest 20 people for sales of all types of drugs, including nine marijuana sales. Of the 24 people targeted in the sting, 20 are black. The neighborhood is 75 percent white.

Legalization has changed the black market. Gallardo points out that, in Denver at least, it is neither as large nor as violent as it used to be. Plus, instead of buying from cartels, the dealers mostly seem to buy from what Gallardo calls “mom-and-pop operations.” Altogether, even with the remaining risks that arise from dealing, selling marijuana seems to have become a more relaxed affair.

The cops haven’t changed as much. People seem less fearful of arrest, but it still happens. And, Gallardo says, the police still seem to use marijuana raids as a tool whenever they want to crack down on a particular corner or block. The drug still amounts to a vector of suspicion, which police are still free to follow into citizens’ lives as they see fit. Or, as a Drug Policy Alliance report puts it, noting that black Coloradoans continue to be arrested for marijuana at 2.4 times the rate of whites: “While the number of marijuana possession arrests has dropped, the law enforcement practices that produce racial disparities in such arrests have not changed.”

The stores and the street also attract different sorts of people, Gallardo says. The black market isn’t as appealing to people who have the money to pay legal prices. They even seem to understand that, if it costs a bit more, some of the higher prices in regulated stores help to pay for important programs—plus, there’s no risk and they can afford it. The street, however, is a draw for people who can’t afford legal marijuana. And in most urban centers, the people with the least are also usually people of color.

Listening to Gallardo, the risk begins to sound not so much like one of outright failure, but of a success rendered hollow by its unequal distribution. The new system has clearly not replaced, or even threatened, corner dealers either in Washington or Colorado. Rather, they fit into the cracks of a new world, where middle-class stoners are able to engage in a favorite pastime without fear of prosecution, and an expensive legal market keeps everyone else looking for a bargain. The result: Small-time, under-the-table dealing remains lucrative enough to entice young black men to cross the line, to be arrested far more frequently than their white peers. And the hustle continues.

Low-cost highs: Price of legal marijuana plunges in Washington state

572a0d06c46188e0018b4587

Recreational marijuana use has been legal in Washington State for two years, and while sales of the drug have been filling public coffers with tax revenues, the prices for pot have also been shrinking considerably.

As of March 2016, the price of legal marijuana in Washington was $9.32 per gram, the Washington Post reported, citing data from the state’s Liquor and Cannabis board. The wholesale price of the drug was $2.99 per gram.

In September 2014, pot was selling for about $25 per gram, according to a report from KUOW News. By August 2015, marijuana prices had plunged more than 50 percent to $11 per gram.

Although prices initially went up after the drug was legalized, that surge was linked to increased demand and limited supply, according to Steve Davenport of the Pardee RAND Graduate School, who helps aggregate data from the Washington’s cannabis board. Since then, prices have been coming down at a rate of 2 percent per month, he told the Post, and they could potentially shrink 25 percent every year.

“It’s just a plant,” Professor Jonathan Caulkins, of Carnegie Mellon University, who works with Davenport, told the newspaper. He said the drug could become so inexpensive that certain types are essentially given away for free.

“There will always be the marijuana equivalent of organically grown specialty crops sold at premium prices to yuppies,” he said, “but at the same time, no-frills generic forms could become cheap enough to give away as a loss leader – the way bars give patrons beer nuts and hotels leave chocolates on your pillow.”

The news out of Washington State has also been echoed in Colorado, another state where marijuana has been legalized. In June 2015, an eighth of an ounce of cannabis (about 3.6 grams) cost between $30 and $45 – notably less than the $50-$70 it was going for the year prior.

As pot prices trend downward, there could be positive and negative consequences for states. Since pot is taxed by sale, falling prices mean each sale results in fewer dollars for the state government. However, cheap marijuana could end up pushing more people to abandon the black market and stick with purchasing legal pot. Fewer drugs being moved on the black market could also mean fewer costs for law enforcement.

Even with pot prices clearly dipping last year, though, new businesses continued to crop up, KUOW reported.

“The fact that prices are falling, and people are still entering the business – it’s confusing to me,” Tracey Seslen, an economics lecturer at the University of Washington’s Foster School of Business, told KUOW. “Standard theories of economics would only suggest entry into an industry when people see that it’s profitable.”

Perhaps one reason that people keep trying to enter the marijuana business is that, novelty aside, it’s simply becoming easier to do so. Over the last two years, the number of banks and credit unions willing to do business with pot shops has increased substantially – from 51 in March 2014 to more than 300 now.

Although federal law still prohibits banks from handling cash derived from the marijuana trade, the Treasury Department has stated it will not go after banks if they are certain that businesses are complying with state pot regulations.

 

RT.com

Oregon’s first cannabis campus opens, aims to boost pot tourism

 

A Portland cannabis farm is expanding with its sights on making Oregon a marijuana tourism destination.

“It is the epicenter of some of the best cannabis in the world,” said William Simpson, owner of Chalice Farms.

Chalice Farms opened up its headquarters and campus on Northeast Airport Way. It’s 30,000 square feet, and includes something unique to dispensaries.

Following the model of wineries and breweries, Chalice Farms allows customers to see how their product is grown from the store.

“(Come) off the airplane, you can come in to Chalice Farms and see cannabis and see the entire campus,” Simpson said.

A wall separates the extraction lab from the dispensary, which is required by Oregon law.

Down the hall is a small kitchen where edibles are made.

The grow site even has a vault where excess cannabis will be stored.

“It’s overkill frankly, but why not?” Simpson joked.

An operation like Chalice Farms is illegal in Washington state, where every step of the growing process must be separate.

The vertical integration of Oregon cannabis farms is giving it more of a “big business” feel than its neighbor to the north.

“They’re going to stop talking about Amsterdam and/or Colorado. They’re going to all be coming to Oregon for cannabis tourism,” Simpson said.

Investors Should Be Encouraged by 3 New Marijuana Statistics From the “Greenest” State

Recreational marijuana is having a major impact in Oregon, and investors are taking notice.cannabis-culture-flickr_large

We can assume there were quite a few cheers when California passed Proposition 215 in 1996, becoming the first state to legalize marijuana’s medical use, but 2016 could go down as the most remarkable year for the marijuana industry to date.

Since this first approval 20 years ago, the marijuana industry has witnessed 24 states in total legalize medical marijuana, of which Pennsylvania became the latest just this past week. Additionally, four states – Colorado, Washington, Oregon, and Alaska – have legalized the use of marijuana for recreational purposes. The 2016 elections could result in a sizable boost to both figures as favorability to marijuana among the American public continues to rise. Gallup’s national poll from Oct. 2015 showed that 58% of its respondents favor the idea of nationwide legalization, whereas a CBS News poll conducted a year ago this month demonstrated that roughly five in six people want to see medical marijuana legalized.

But just as exciting for the industry is the opportunity that may be at hand for investors. Marijuana is among the fastest-growing industries in the U.S., with ArcView Market Research expecting the industry to grow at a brisk compounded annual rate of 30% between 2016 and 2020, ultimately reaching an approximate market value of $22 billion by 2020. Investment opportunities where industries can sustain a 30% growth rate for a half-decade or longer simply don’t come around very often, making marijuana a seemingly attractive investment opportunity.

1270260990_0f83b1e7b9_z_large

Three statistics that should excite investors in marijuana’s greenest state
These industry dynamics and investors’ opportunity are especially evident in what I’d dub marijuana’s “greenest” state, Oregon.

What makes Oregon so particularly attractive is its wide-scale medical marijuana infrastructure that was already in place before the 2014 approval of recreational marijuana by voters. Having the groundwork in place was expected to translate into immediate results for Oregon’s marijuana businesses and perhaps even investors.

How’d they do? I believe the following three statistics speak for themselves.

1. 112% sales growth in Oct. 2015
Although marijuana possession (under a certain amount) became legal on July 1, 2015, it wasn’t until Oct. 1, 2015, that recreational marijuana began retailing in medical marijuana dispensaries in Oregon. In October, based on the surveys of dispensaries conducted by Sam Chapman of New Economy Consulting and Beau Whitney of Whitney Economics, and included in the Oregon Cannabis Jobs Report, medical marijuana dispensary sales rose by 112% to approximately $23 million. Furthermore, median marijuana sales among dispensaries rose from $23,000 in September to $58,000 in October.

2. An estimated 2,155 jobs created
Second, and also from the Oregon Cannabis Jobs Report, it’s estimated that the booming recreational industry will create 2,155 jobs in 2016, generating $46 million in wages, and having an initial market within the state of $300 million. The vast majority of these jobs will come from dispensaries that sell both recreational and medical marijuana. Chapman and Whitney also suggest in their report that an additional 200 to 700 jobs could be created by Oregon’s marijuana industry in 2017.

3. $181 an ounce
Another interesting statistic comes from Priceofweed.com, a website that allows consumers to anonymously input their purchase price for marijuana regardless of whether it was bought legally or on the black market. Using “medium grade” marijuana as the benchmark, no state in the U.S. comes in with a lower price per ounce, rounded up to $181 per ounce, than Oregon.

As noted by the Oregon Cannabis Jobs Report, the number of dispensaries in Oregon has jumped dramatically within less than a year to 413 from 230, of which 326 participate in recreational marijuana sales. This abundance of retail options, as well as Oregon’s already vast infrastructure, is allowing it to be as competitive as possible with the black market.

Still an uphill climb
Yet, in spite of these resoundingly positive numbers out of Oregon, the “green standard” of the marijuana industry, I’d still view the marijuana industry to be in an uphill struggle without the support of the federal government.

Even in Oregon, dispensaries face an uphill battle against the black market. The reason? Licensing fees for dispensaries and taxes associated with the sale of marijuana make it very difficult for businesses to compete with the black market, which has no such fees to contend with. It’s possible that, as Oregon’s marijuana industry matures, we could see it become increasingly competitive with the black market, but my initial inclination is that a price gap will remain as long as the federal government views marijuana as a schedule 1 substance.

Tax and banking disadvantages exist as well. Because marijuana remains illegal at the federal level, marijuana businesses have extremely limited access to basic banking services, meaning most are dealing solely in cash. This, as you can imagine, can present security concerns and constrain expansion efforts. Additionally, marijuana businesses get creamed come tax time because they’re disallowed from taking normal business deductions.

All three of these factors make it very difficult for the marijuana investor to succeed, even with state-level expansion. It continues to look as if investing in the marijuana industry will remain extremely risky, despite its strong sales growth, until the federal government changes its stance on the drug.

Washington marijuana sales see ‘border effect’ from Oregon’s new recreational market

By Noelle Crombie | The Oregonian/OregonLive

At an age when most people are eager to retire, 68-year-old Margie Lemberger cleaned out a chunk of her savings and started a business.

The retired pharmacist outfitted her homespun shop along a quiet stretch of the Columbia River Gorge with a second-hand couch and other thrift store finds. She picked up display cases from an old grocery store.

It’s easy to imagine the store’s shelves lined with homemade pies or curios. Instead, they’re crowded with Super Sour Diesel, Dirty Girl, Cherry OG and dozens of other marijuana strains.

At first, Margie’s Pot Shop, tucked off Washington State Route 14 in Bingen, hummed. Hikers dropped in after a day in the woods. Marijuana smokers from Goldendale and White Salmon in Washington and Hood River in Oregon drove to the outpost marked with a yellow and red sign that Lemberger painted herself.

 

Sales grew for most of last year, peaking at an impressive $172,000 for the month of August. That was before Oregon opened its own recreational marijuana market in October. Now anyone 21 and older can walk into any one of the state’s estimated 333 medical marijuana dispensaries that have opted to serve the recreational market to buy pot.

Overnight, Lemberger’s sales went into freefall. Between October and February, they plunged 50 percent. Lemberger brought in a dart board so budtenders could pass the time.

Towns along the Washington border have felt competition from Oregon’s nascent state-regulated marijuana market more keenly than anywhere else. Revenue in those counties has seen a steep drop since last fall, even as overall pot sales in Washington continue to climb.

(See related: Oregon marijuana by the numbers)

Consider Klickitat County, home to Margie’s Pot Shop and two other cannabis retailers. The county saw cannabis tax revenues drop 47 percent since October, according to an analysis of Washington sales data by the Oregon Office of Economic Analysis.

In September, marijuana shops in Clark County accounted for 12 percent of all pot sold in Washington — a good share of the sales to Portland’s cannabis enthusiasts. Three months after Oregon began recreational sales, that number dropped to 7 percent, according to the Washington State Economic and Revenue Forecast Council’s recent analysis.

“Night and day,” said Lemberger, describing the impact that Oregon’s new market has had on her business.

***

Economists in both states say they aren’t surprised.

“We see this all the time,” said Josh Lehner, an economist with the Oregon Office of Economic Analysis who in February wrote a blog post he called “Border Effect, Weed Edition.”

Lehner said Washington’s recreational cannabis sales numbers since last year illustrate how pot is the latest “vice” to succumb to the “border effect” between states, a common phenomenon fueled by tax policy, convenience, selection and price.

For instance, Washington imposes a 37 percent state tax on recreational marijuana, compared to 25 percent in Oregon. (Oregon’s rate will drop later this year when recreational sales shift to the Oregon Liquor Control Commission. New tax rates will range from 17 to 20 percent.) A gram of cannabis costs more, on average, in Washington than it does in Portland, according to Leafly, a popular strain and dispensary review site. The average price of a gram on Oregon’s recreational market is $13.67, compared with $14.68 in Washington, Leafly says.

A price gap between Oregon and Washington is likely to drive cannabis consumers who live or work along the border in search of the best deal.

Mark Kleiman, a public policy expert whose think tank, BOTEC Analysis Corporation, has served as a consultant to Washington on its cannabis program, said the two states should set similar tax rates to discourage interstate trafficking.

Ultimately, states with the lowest taxes, he said, “will flood the rest of the country” with black market pot.

“This is something that the two governors should be talking about hard,” said Kleiman, a professor at New York University’s Marron Institute of Urban Management.

“It’s crazy to have a big tax differential across a short border.”

The two states already have seen the border effect play out with liquor and cigarettes.

Take cigarettes. Since 2010, Oregon has sold more packs of cigarettes than Washington, even though Oregon is home to fewer people and the two states have similar smoking rates, said Lehner. Between July 2014 and June 2015, state economists say, Oregon sold 20 percent more — about 30 million packs — than Washington.

The likely explanation: Washington’s cigarette taxes add up to $3.03 per pack, compared to $1.32 in Oregon.

Same with alcohol. Washington’s move in 2012 to privatize liquor sales drove up prices there by 15 percent to 20 percent, say economists. Liquor stores along the Oregon side of the border have seen a nearly 40 percent spike in sales since then, according to a recent analysis by the Oregon Liquor Control Commission.

It’s too soon to tell how the two states’ regulated cannabis markets will affect each other in the long run, said Steve Lerch, Washington’s chief economist.

Washington’s market has experienced major upheaval in a short span, including the introduction of Oregon’s regulated market, which was untaxed at first. Washington will undergo yet another big shift in July, when its medical and recreational markets will merge.

Despite the fluctuations, Lerch expects Washington’s pot tax revenue to continue to climb to $207 million this year, compared with $110 million the state received last year.

“I still don’t think we have enough information to know how it’s going to shake out in the long term,” he said, “because we keep having things change.”

***

Oregon’s new market hasn’t walloped all of Washington’s marijuana shops along the border.

On a recent weekday morning, Main Street Marijuana in Vancouver bustled with customers. The shop, owned by two brothers, Ramsey and Adam Hamide, is one of Washington’s top pot sellers.

Adam Hamide said the shop’s foot traffic — about 1,500 to 2,000 customers a day — gives him negotiating power with pot producers to buy larger quantities at lower prices. That translates into cheaper prices for consumers.

He said his shop offers 3.5 grams of marijuana flower, or an eighth of an ounce, for as low as $10. He sells a gram of cannabis extract called “wax” for as low as $20.

“Nobody can match it,” Hamide said. “Nobody in Washington or Oregon.”

Typically, an eighth of pot sells for $20 to $50 in Portland dispensaries. A gram of wax goes for about $20 to $35, Portland shop owners said. Plus, Oregonians can get products in Washington that for now remain off-limits here: marijuana-infused edibles and extracts.

Still, Main Street Marijuana has seen fewer Oregon customers since last fall, Hamide said. Last year, Oregonians made up about half the shop’s business. That’s dropped to about 20 percent, he said.

Monthly sales, which peaked at more than $2 million last September, dropped to $1.3 million in October. Sales figures on 502data.com — a site owned and managed by a Washington marijuana retailer who regularly updates and breaks down the state’s publicly available pot sales data — show that Main Street Marijuana’s sales are down from last year but steadily climbing back up.

(Oregon, by contrast, does not have such detailed publicly available marijuana sales data. The state only began collecting sales taxes on recreational marijuana in January.)

The shop’s prices, said Hamide, have attracted new customers from Clark County and longtime black market consumers.

“Who wouldn’t want a $10 eighth or a $20 gram of wax?” Hamide said. “The black market can’t compete because the (regulated) market has matured.”

***

Lemberger, for her part, isn’t discouraged by the new market to the south. Instead, she’s considering diversifying. Maybe adding some fishing poles and lures, for instance. She’s also boosted her monthly budget for advertising and is negotiating prices with marijuana producers so she can stay competitive.

Overall, while business has dropped at Margie’s Pot Shop since last fall, February sales improved over the previous month, according to 502data.com. She sold $84,000 worth of pot in February — the most since last November, according to 502data.com.

Worried about the future, Lemberger scaled back her ambition for her shop.

“We just won’t be that big store that makes a lot of money,” she said. “We will just be a local mom-and-pop store.”

Noelle Crombie