Top 10 Legal, Regulatory and Business Predictions for Medical Cannabis in 2012 – and What They Mean For You

By Chris Walsh

Making predictions about the medical marijuana industry could be considered a fool’s task. It’s impossible to guess what will happen tomorrow or next week, let alone next month or later in the year. Just look at all the unexpected events that unfolded in 2011: An about-face by the Obama administration. Dozens of dispensary raids. Threatening letters sent by district attorneys to dispensaries and their landlords. Medical marijuana moratoriums and bans in cities across the country.

Still, it’s important to make an educated guess about what’s coming down the pipeline. Everyone in the MMJ business must attempt to anticipate – and brace for – what will happen next. Otherwise, they’ll be caught flat-footed and unprepared, and that could have devastating consequences.

So, I’m going to put on my fortune teller’s turban and attempt to make some sense of all this murkiness. Here are my top 10 predictions for MMJ in 2012

#1. The federal MMJ crackdown will soften later this year

The government’s coordinated campaign to crack down on dispensaries was easily the biggest MMJ news of 2011, leading to a huge contraction of the industry and creating a precarious situation for medical pot businesses. It’s unclear just how far the government plans to go in 2012, but officials have indicated they will continue to conduct raids and exert pressure on the industry.

However, I think we’ll actually see the government ease up as the year goes on. This prediction hinges on the assumption that the Obama administration is simply trying to make a statement before the presidential election and scare the MMJ industry just enough to keep it contained.

The crackdown has already had a chilling effect that will last through 2012, even if the government completely backs away. Obama can still claim that he took a tough line against medical marijuana, but he can also say that the whole industry developed in the first place under his watch. In other words, he can try to appeal to both MMJ opponents and supporters, and he’ll likely want to keep it that way by not going overboard with the crackdown. Whether his strategy works is another matter, as he has already angered one side and at the same time been accused of not going far enough by the other.

#2. Colorado will become the first state to legalize marijuana for recreational use

In November, Colorado voters will decide whether to legalize cannabis for recreational use and regulate it in a manner similar to alcohol. There’s an identical measure on the ballot in Washington, and California is attempting to put the issue in front of voters as well.

But in my opinion Colorado is the most likely of the three to legalize marijuana. Marijuana has long had strong support in the state. And although residents rejected a similar measure several years ago, attitudes have changed, and voters are used to seeing MMJ dispensaries on every corner.

The heavily regulated nature of the medical marijuana industry in the state has helped Colorado avoid the problems that have cropped up in other MMJ states like California, so residents are likely more accepting of legalization in general. If Colorado does indeed vote to legalize marijuana, you can bet other states will soon follow.

#3. The MMJ industry in Arizona, New Jersey, Vermont and Washington DC will flourish

I fully expect that we’ll see dispensaries operating in all three states and the District by the end of this year despite a host of delays that put the programs on ice longer than expected.

Arizona’s medical marijuana program, for instance, has been in limbo since last spring, when Gov. Jan Brewer essentially put the brakes on the licensing process for dispensaries. But a judge threw out a key lawsuit tied to the issue, and it now appears Arizona could see its first dispensaries by summer.

The other three areas have navigated similar roadblocks and challenges, but they all appear poised to move forward with their medical marijuana programs in the coming months as well.

I think the areas will see their budding MMJ industries grow by leaps and bounds literally overnight. Most would-be dispensary owners and other MMJ professionals in these regions have been waiting on the sidelines for what must seem like an eternity. Expect them to get moving quickly and build up an industry as soon as possible.

#4. Several states will pass medical marijuana legislation

Nearly 20 states – including Florida, Massachusetts and Illinois – are considering legalizing MMJ or putting the idea to voters in 2012. Getting more states on board would help the larger cause, as it would be harder for the federal government to justify its position against medical marijuana. But let’s be honest: Most of these measures will fail to materialize, as is often the case.

However, I think we’ll see two or three new states adopt MMJ laws, given that there’s still solid momentum behind medical cannabis nationally. The million dollar question: Which states will it be? The crystal ball gets extremely murky on this one…

#5. The MMJ landscape in California will change dramatically

The unregulated nature of medical cannabis in California finally came back to bite the industry last year, when the state became the prime target of the federal crackdown. Hundreds of dispensaries closed, leaving some communities without medical marijuana storefronts. Now, even the MMJ hotbed of Los Angeles is considering a ban, which would ripple throughout the state and possibly sink California’s entire medical cannabis community.

That’s the worst-case scenario, and while I don’t think it will happen, I’m pretty comfortable predicting that the state’s MMJ industry will undergo some huge changes this year. There’s a variety of legal and regulatory proposals on the table, both statewide and in individual cities. Something has to give, and this year marks the boiling point. Expect sweeping changes in the coming months.

The industry will probably continue to shrink, and lawmakers will likely introduce tougher regulations. But I don’t think the entire industry will evaporate. Rather, I think we’ll see an attempt to backtrack and set up an entirely new regulatory system to ensure that officials can keep it under control this time around.

#6. Michigan will overhaul its medical cannabis laws, but dispensaries will have a place

Aside from California, I’m convinced big changes are coming to Michigan as well. The state saw hundreds of dispensaries close last year after a judge ruled that Michigan’s MMJ laws do not specifically allow dispensaries and store-front cannabis shops to operate. Michigan’s Attorney General also has come down hard on the industry, saying it has been hijacked by pot advocates that want full legalization.

You’d be forgiven, therefore, for thinking that the medical marijuana industry is on its way out. But I simply don’t think that’s what will happen.

Only a fraction of the dispensaries that once populated Michigan remain open, operating at great risk. I believe the state will overhaul its MMJ rules, but not completely eliminate dispensaries from the equation.

The state might never see the number of dispensaries it did at its height. There will be fewer cannabis shops, fewer growers and fewer vendors. But they will all still have a place in the state’s new MMJ legal structure.

#7. Federal lawmakers will continue to ignore MMJ-friendly legislation

Every year, we see a few bills introduced in Washington, DC that aim to help pave the way for access to medical marijuana. And every year, it seems, lawmakers shoot them down or shove them aside. This year will be no different. Medical marijuana doesn’t have enough political support, and it’s not yet mainstream enough for lawmakers to attach their names to the issue. That’s especially true in an election year, when politicians try to avoid controversial issues that could lose them voters.

#8. Banking will remain a major issue for dispensaries

If you’re looking for some relief on the banking issue this year, don’t hold your breath. The demise of a recent proposal in Colorado to create a financial institution specifically for MMJ companies sunk any chance for a resolution in the near future.

There are several promising legislative initiatives, backed by the National Cannabis Industry Association, on the table federally. But even the most optimistic MMJ supporters don’t think we’ll see any movement until next year.

Without political support, banks will continue to shy away from medical cannabis companies given that marijuana is still illegal federally. That means businesses dealing directly with marijuana (primarily dispensaries will continue to have a hard time opening bank accounts). Add in the fact that American Express and other credit card companies block transactions involving medical marijuana – making payment processing a nightmare – and it’s no wonder many dispensaries have moved into an all-cash business.

#9. Investors will stay on the sidelines

Until a majority of U.S. states pass MMJ legislation and the federal government eases up on medical cannabis, investors are going to remain extremely wary of pumping money into the industry. There are simply too many risks. Constantly changing state and local laws, confusing regulations, federal opposition and the high possibility that a business could be forced to close literally overnight outweigh the promise of profits. Investors also face the possibility of fines and jail time for funding entities that handle marijuana, exacerbating the situation. The investment landscape for dispensaries and growers will remain gloomy this year and possibly for a long time to come. But there are other investment opportunities, which I will discuss shortly.

#10. The medical marijuana industry will still exist

It’s easy to get discouraged about the state of medical marijuana these days. Some observers and industry insiders are afraid of a worst-case scenario where the medical marijuana industry is forced out of existence. The federal government, they say, will crack down heavily in Colorado and California. Los Angeles and other large cities will end up banning dispensaries. That will ripple throughout the MMJ industry, triggering its collapse.

While this scenario is indeed a possibility, I don’t think it will play out for two main reasons: Support of medical cannabis nationwide remains strong, and more Americans are in favor of general marijuana legalization than ever before. The cat is out of the bag, and it’s not going back in.

When you look at recent events from a macro level, the crackdown federally and by individual states has more to do with the lack or regulations and control than the fact medical marijuana exists. The Obama administration has largely targeted dispensaries and growers it believes are violating state laws or are too close to schools.

Although the feds have  gone after some MMJ businesses that were reportedly in compliance with state regulation, they have not launched an all-out assault on the industry. Additionally, some top officials in key MMJ states such as Colorado, California and Washington support MMJ and are trying to find ways to make it work. This all bodes well for the future of medical cannabis.

Interesting predictions, huh? But I bet you’re wondering what the heck it means for you.

I’m one step ahead of you (the crystal ball told me)….

How these developments would impact:

MMJ lawyers – Plan the long-awaited expansion on the house, because you’re going to make a lot of money. No matter what happens, lawyers will have their hands full helping MMJ businesses and patients navigate through choppy waters and battle back against cities, states and the federal government.

Vendors/suppliers – On the surface, it’ll be a mixed bag this year. If you’re located in a state like Arizona or Vermont,growth could be on the horizon as nascent MMJ industries develop. If you’re located in California or Colorado, your current market might shrink – in some cases significantly – depending on how much pressure the federal government experts.

Bit dig a little deeper, and you’ll see that this could be a gold mine for everyone. Get ready for cross-state expansion and the development of a national brand. Vendors and suppliers – from companies that make security systems and MMJ sales software to hydroponics firms and businesses that sell cannabis containers – will have the opportunity to widen their reach and expand into new markets.

There’s another positive aspect to all of this even if the MMJ industry shrinks in some states: That will open up a host of new opportunities to service home growers and smaller caregivers who want to provide medicine to small groups of patients.

Cannabis investors – Hold onto your shirts, because you’re going to lose them if the industry contracts and more dispensaries close. Those with money already invested won’t get much sleep this year, as any number of factors and developments could derail everything. Those who are ready to take new risks, however, could get some decent returns if they invest in medical marijuana centers and grow operations in states that expect to get their MMJ programs up and running this year. Still, in a risk business, this might be one of the most risky years of all to invest in MMJ.

The best strategy – and most profitable path – is to put money into the MMJ vendors and suppliers who are able to cross state lines to expand. This segment of the medical cannabis community is also less risky, as the federal government likely won’t target businesses that aren’t directly involved in growing, distributing or selling marijuana. Think large hydroponics companies and businesses that have a national presence, like the handful of publicly traded MMJ companies, including General Cannabis, Cannabis Science and Medical Marijuana Inc.

Dispensaries and growing operations – It’s probably going to be another tough year for both these groups in states with existing MMJ laws. There will be plenty of uncertainty and doubts about the future of the industry, which will up the stress levels. Communities, cities and states will also continue to refine their pot laws, meaning dispensaries and grow operations will have to continue to be flexible and adapt. However, new ones will crop up in the handful of states starting their MMJ programs, helping to make up for some of the losses in other areas.

Daily News | Legal & Regulatory News for Marijuana Businesses

 2 Comments

  1. Matthew Abel March 8, 2012
    • chrisw March 8, 2012

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