The anticipated “green rush” on Native American lands has failed to materialize, contrary to earlier signs that dozens of tribes were poised to capitalize on the opportunity to grow and sell cannabis.
The turnaround has dampened, for now, the opportunity for entrepreneurs in states without legalized medical or recreational cannabis.
It also has quashed opportunities for ancillary businesses to target a new crop of retail stores/dispensaries, cultivation sites and infused products companies.
The change in tack follows raids by local and federal law enforcement on existing tribal cultivation operations, as well as one tribe’s decision to scrap a recreational marijuana resort. The handful of tribes moving forward in the business are taking a go-slow approach, which so far has succeeded.
“The lesson we’ve learned from the last year is to be cautious, deliberate, no pie-in-the-sky,” said Lael Echo-Hawk, a Washington DC-based attorney and general counsel for the National Indian Cannabis Coalition. “For a lot of tribes, it is just wait and see.”
Raids quell initial enthusiasm
Hopes for a Native American cannabis industry were fanned in 2014, after the U.S. Department of Justice issued a memo that seemed to grant tribes the go-ahead to grow and sell marijuana as long as certain guidelines are followed.
The decision unleashed a rush of marijuana-related companies that sought to persuade Native American tribes to sign on with them to begin growing and selling cannabis.
Moreover, many observers speculated that tribes could enjoy a major advantage over traditional cannabis companies because they aren’t required to pay federal taxes and could conceivably undercut competing retailers on price.
But much of that has failed to come to pass.
Instead, tribes that tried to jump at the chance of a quick marijuana-related buck were cut off at the knees over the past 18 months.
Three developments suggested a go-slow approach would be more prudent:
- Last September, local law enforcement raided a high-profile Native American cultivation operation in California.
- In October, federal agents raided the Menominee Indian Reservation in Wisconsin, alleging the tribe was growing marijuana. The tribe maintains it was growing hemp legally.
- In November, the Flandreau Santee Sioux in South Dakota canceled plans for a recreational marijuana resort next to its existing casino, and instead burned its cannabis crop before it could sell a single gram.
By contrast, tribes that moved slowly and cautiously have succeeded in setting up cannabis ventures.
That includes the Squaxin Island Tribe in Washington State, which opened the first-ever Native American recreational cannabis shop on its reservation last November, southwest of Seattle.
Handful of tribes in the business
Echo-Hawk, the attorney, said she knows of three other tribes up and running in the industry currently, and a handful more that are pursuing cannabis projects. But the vast majority of the 557 tribes in the United States are sitting on their hands for now.
She noted the Squaxin Island Tribe “started with small retail stores, and they’re going to grow from there. That kind of movement is what we need right now.”
Even the Squaxin Island shop isn’t taking full advantage of tribal sovereignty. Tribal leaders instead signed a compact with the Washington State government so that they’re paying roughly the same cannabis-related taxes that competitors are.
The Confederated Tribes of Warm Springs, in Oregon, are taking a similar approach and working with every possible local and federal government agency. It’s basically an insurance policy of transparency, project leader Don Sampson said, because the tribe doesn’t want to invest considerable time and resources only to get shut down at the last minute, like the South Dakota tribe did.
“We met with the U.S. attorney general’s office on two occasions already, and we’re closely coordinating with them,” Sampson said. “We’ve pretty much got them on board with what we’re doing and how we’re proposing our cannabis project.”
Sampson said the confederation also has been working closely with the governor’s office, and will sign a compact on taxes similar to the one the Squaxin Island tribe agreed to. After that, he said, the hope is to break ground on a 36,000-square-foot cultivation facility at the end of April, and then over time open three recreational stores in Oregon – although none on actual reservation land.
The entire project will cost roughly $5 million, Sampson said, and much of that was posted by the tribes’ partners: Sentinel Capital Partners, a New York private equity firm, and Colorado-based Strainwise, a cultivation and retail company.
Another tribe moving forward with a similar project – albeit focused on medical cannabis instead of recreational – is the Las Vegas Paiute Tribe in Nevada.
The Paiute project also is expected to cost about $5 million, said Benny Tso, chairman of the tribe. The tribe hopes to build an 85,000-square-foot cultivation site along with two dispensaries, including one near downtown Las Vegas, right off the strip.
“I’m going to probably say in about nine months we should be open with a dispensary and a grow, barring any setbacks with construction,” Tso said this month. “We spent a good year doing research, myself along with the tribal council, getting educated on the whole cannabis industry.”
The Paiutes announced in February they are moving ahead and partnering with Arizona-based Ultra Health, another MMJ company.
Tips for tribes
Both Sampson and Tso agreed on some advice for any tribes looking seriously at getting into marijuana:
- Don’t even consider it unless the tribe is in a state with some form of legal cannabis already. That’s a recipe for disaster, they both said, as illustrated by South Dakota.
- Don’t just sign up with the first marijuana businessman to come along. Tso said his tribe was immediately approached by a flock of would-be partners with get-rich-fast schemes. “Do thorough checks on them. Make sure they’re real, that they’re tried and true. With every new venture… people promise you the next best thing since sliced bread,” Tso said.
- Be transparent, and communicate with all possible stakeholders. That means the DOJ, the Bureau of Indian Affairs, the local U.S. attorney, the state government, local governments – in other words, practically any agency capable of slowing down or scuttling any plans.
“If you don’t have a relationship with the governor or the attorney general’s office, if you don’t have a good relationship with the U.S. attorney, then it’s going to be more difficult,” Sampson said. “We’re going to do it right. We’re only going to get one shot at this. And we want to set the model for other tribes to follow. Hopefully more tribes will do this and won’t be afraid.”
John Schroyer can be reached at johns@mjbizdaily.com
