Week in Review: New Market in New York + Unorganized Crackdown in LA & Telling Crime Stats

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By Chris Walsh

New York finally goes green, a development highlights how unorganized the Los Angeles dispensary crackdown has been and crime stats show that fears over recreational cannabis are unfounded.

Here’s a closer look at some notable business-related developments in the cannabis industry over the past week:

New York Pioneers New Market

Medical marijuana is coming to the Empire State – only the industry will be far different than those that have emerged in other markets.

New York lawmakers passed a bill early Friday morning that allows the sale of cannabis oils, tinctures and other infused products but bans smoking of the plant. This last stipulation will greatly change the dynamic of the market, bringing in a host of new considerations in the areas of cannabis cultivation, product development and dispensary operations.

New York will pioneer this new type of market along with Minnesota, which recently passed similar legislation.

As we detailed in a feature story about Minnesota earlier this month, a ban on smoking could make it more challenging for entrepreneurs in the early days of the program. Business owners will have to invest in expensive extraction systems, train employees to create concentrates and oils and possibly use industrial kitchens.

Still, the two states could emerge as hubs of innovation for infused products and related technologies and techniques. They also could be at the forefront of a new trend in medical marijuana legalization, as lawmakers in other states could push for similar measures that ban smoking but allow other forms of cannabis consumption.

The big question now: How large is the New York market from a cannabis business perspective? As with any state, it’s difficult to say until the program is up and running. And it’s even harder to put numbers around this particular market because there’s really nothing to compare it to.

Having said that, we estimate annual cannabis sales could be anywhere from $40 million on the low end (assuming just .1% of the population registers for the program) to several hundred million dollars if participation rates are higher. And that doesn’t include sales of ancillary products and services supporting the industry as well as those aimed at patients.

Any way you look at it, the industry will generate a lot of money.

Embarrassing Disconnect in LA

One reason hundreds of illegal dispensaries are still operating in Los Angeles is that police don’t have a comprehensive list of where these businesses are located, making it difficult to track them down.

But a pretty useful list of these businesses does exist – the police and other officials just never asked for it, or possibly didn’t even know about it.

As we reported earlier this week, the city’s finance office apparently has a list of the names and addresses of nearly 1,000 cannabis dispensaries that have registered to pay taxes. The police department and the city attorney’s office, however, haven’t been using it to enforce Proposition D, which bans all but about 135 dispensaries in Los Angeles.

Instead, they’ve employed other strategies for finding dispensaries, like telling cops and city workers to be on the lookout for them, which is not a very efficient or organized way to approach such an important task.

It seems the agencies charged with enforcing the law either didn’t know the list existed or didn’t ask for it, and the finance office didn’t think to offer it up on its own.

This huge disconnect came to light at a recent city council committee meeting.

“I’m struggling to deal with how it is that we’re not staying more ahead of the curve in the enforcement of Prop D,” one councilman said about the situation.

Indeed, this lack of communication is astonishing. It’s not as if the list was a big secret. In fact, the city’s finance office released figures earlier this year showing that more than 1,000 dispensaries had registered to pay their taxes. Numerous people dropped the ball along the way.

The city’s inability to enforce Proposition D effectively to date has hurt dispensaries that are allowed to stay open under the law, and these businesses certainly have a right to be frustrated.

Fortunately for them, the city council ordered the finance office to share the list with police and other officials. That could help significantly with enforcement, and many dispensaries might be forced to close in the coming months.

Crime Fears Unfounded

A common argument of cannabis opponents is that legalizing marijuana for recreational (and even medical) use will boost crime and wreak havoc on communities.

That doesn’t appear to be the case in Colorado, where retail stores have been selling marijuana for nearly six months.

In fact, the opposite is true: robberies and burglaries involving cannabis businesses are actually trending lower in Denver this year vs. 2013 and 2012. What’s more, crime in Denver overall is down so far in 2014.

These statistics are extremely important to the cannabis movement, as they help show that marijuana legalization doesn’t lead to the chaos some predict.

The same situation has played out time and again with medical marijuana. Influential lawmakers and community leaders in states considering medical marijuana legalization often spread fears that such laws will lead to more burglaries, robberies and murders, hurting the quality of life as a result.

In fact, the president of the Florida Sheriff’s Association is using this as an argument for opposing legalization efforts, saying that crime rates will soar.

That simply isn’t the case in many states that have legalized medical marijuana and have tight controls on the industry.

The same seems to be true when it comes to recreational cannabis, judging from the Denver crime stats.

Sure, five months of crime data in Denver does not present conclusive evidence. It’s still way too early to gauge the full effects of legalization on crime. But the early results are encouraging.