Week in Review: WA Regs Criticism, 1st City Owned Rec Shop + Tribes Move Towards MJ

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By John Schroyer and Tony C. Dreibus

A prominent cannabis executive and former governor badmouths Washington State’s recreational marijuana rules, the first-ever municipally-owned cannabis shop draws criticism, and more Native American tribes ponder joining the marijuana industry.

Here’s a closer look at several notable developments in the cannabis industry over the past week.

Washington State the ‘Worst-Case Scenario’?

That was the phrase used by former New Mexico Gov. Gary Johnson earlier this week to describe the regulatory situation in Washington for recreational marijuana companies. Johnson, who is now the CEO of Cannabis Sativa, specifically pointed out the high tax rate for rec firms, which have led many cannabis executives in the state to wonder what they’ll have to do to survive.

Johnson was only saying what many in the industry already believe, however.

Amy Margolis, a cannabis attorney in Portland, Oregon, has watched closely as Washington rolled out its rec system last year. She pronounced it a “disaster.”

“We’re hearing so many negative things about what’s happening. We’re hearing that black market dealers are sitting in the parking lots of dispensaries,” Margolis said. “People from Washington aren’t coming here and saying ‘This is working really well.'”

Though Washington State policymakers are weighing a change to the tax situation, what remains for future rec states is a lesson, said Johnson.

“Forget about tax revenue,” Johnson advised for more states that could legalize rec in the next few years. “The tax revenue from marijuana gets dwarfed by the savings in law enforcement, the courts and prisons. You are moving the entire industry from a black market.”

That cost savings benefit is one of the reasons that campaigners in Oregon last year focused on undercutting illicit sales by forbidding local governments from tacking on their own taxes to a state tax written into the ballot measure that passed last November. Legitimate businesses can’t compete with the black market if their prices are forced up by taxes, and that only gives life to street dealers who will sell, for instance, to kids.

That circumstance doesn’t benefit anyone in the cannabis industry, except those operating outside the law.

Read more about possible future recreational regulatory models in the May issue of Marijuana Business Magazine.

Critics Target City-Owned Rec Shop

Cannabis Corner, the rec shop owned by a municipal entity in North Bonneville, Washington that opened earlier this month, has drawn criticism from people who say the government shouldn’t be in the business of marijuana.

Mayor Don Stevens said he’s heard from members of the North Bonneville community who don’t approve of the rec shop, or marijuana legalization in general. That wasn’t unexpected since 55%, a slim majority, voted in favor of legalization.

He nonetheless vigorously defends the city’s decision to participate in the rec business from people who have called the situation “an embarrassment” to the town.

Stevens said since cities and counties in Washington state aren’t entitled to any tax revenue from the sale of adult-use cannabis, having the city involved is the only way for North Bonneville to capitalize financially. It also gives administrators more control over marijuana sales in their town, he said.

“A lot of naysayers say you can’t run the government on drugs, but you can’t just run it on property taxes or sales tax,” Stevens said. “You have to have a lot of tools in the box to get the job done, and this is just another tool in the box.”

“Nobody is happy with 100% of things in our country, but that’s the way it works in a democratic society,” he said.

Growing Tribal Interest in Cannabis

When news first broke in late 2014 that the federal government wouldn’t interfere with Native American tribes who would want to grow and sell marijuana on tribal lands, many dismissed the notion outright.

In fact, the federal memo that prompted many to start exploring the option of getting into marijuana was instigated by a request from several tribes who were interested in banning marijuana on reservations in Alaska, Colorado, Oregon and Washington, which have all legalized recreational use.

Now, however, it seems that barely a week goes by without news of more tribes expressing interest in the possible new revenue stream. Most recently, a trio of tribes in Maine, which may legalize recreational next year, went on the record saying that they are actively looking at the potential pros and cons of the cannabis industry.

“We have tribal members who are very interested in pursuing this. I have been approached by these members to get information,” Rep. Henry John Bear, who represents the Maliseet tribe in the Maine Legislature, told the Portland Press Herald.

Setting aside what the entry of Native Americans into the marijuana space could do to existing businesses, there are still legal questions swirling around the situation, and have been ever since the topic first came up last year.

Nevertheless, interest has been growing steadily. One tribe in California has already inked a deal for a large-scale greenhouse to grow marijuana with FoxBarry Farms, and the same management company reportedly is working with at least one other tribe in the state on a similar arrangement.

A spokeswoman for the Mountain Ute tribe in Colorado told CNBC recently more than one company has indicated interest in partnering with her tribe, and that the Utes could rake in $3 million a year if they were to start cultivating marijuana.

That number has to be tempting for many tribes.

According to the same CNBC story, some tribes are further considering growing industrial hemp but not marijuana, which could be an economic boon in and of itself.

With 566 recognized tribes in the United States, it’s a near certainty that at least a few more will be riding their own Green Rush in coming years.

John Schroyer can be reached at johns@mjbizmedia.com, Tony C. Dreibus can be reached at tonyd@mjbizmedia.com