Weekly Wrap-Up: WA or CO Better for Cannabis Entrepreneurs? + Another State Leans Toward MMJ

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First Colorado, then Washington.

The two states that legalized marijuana for recreational use in November are both moving forward quickly on the regulatory side, with Colorado approving final rules on the industry earlier this month and Washington State releasing proposed regulations on the cannabis business last week.

It’s a gargantuan task given the tight deadlines – retail marijuana stores are slated to open in both states by early next year – and the fact that this hasn’t been done before. The states are approaching the issue in much the same way (heavy regulations and strict oversight), though there are some key differences as well that will have real-world business implications.

So which one will be better for cannabis entrepreneurs?

Some might find it easier to get involved in Washington’s marijuana industry, at least at the outset. Should the proposed rules stick, individuals who want to open a retail marijuana shop, grow site or infused-products company in Washington must live in the state for three months before applying for a license – a much shorter period than the two-year requirement in Colorado. Additionally, Colorado will only allow existing medical marijuana dispensary owners to apply for retail cannabis store licenses until the fall of 2014, while Washington State’s proposed rules don’t have the same stipulation.

So if you don’t live in either state right now – or you live in Colorado but don’t run a dispensary – Washington could very well give you the best shot at getting in on the ground floor of the recreational cannabis industry.

Washington might win out in another area as well: Costs. In Colorado, application fees for marijuana business licenses will run $500 for those who currently run a licensed medical marijuana business and $5,000 for those who don’t. In Washington, it would cost just $250 to apply for a license – regardless of whether one runs a dispensary or related medical marijuana operation – to start a retail shop, infused products company or grow operation under the proposed rules.

Dispensary owners in Colorado, however, will likely have a much better go of it than their counterparts in Washington. For one, they will have a big head start on the competition, given that only individuals with MMJ business licenses – or those that are in the process of obtaining one – can apply for recreational licenses at first. They also are already intimately familiar with many of the rules and restrictions present in Colorado’s recreational marijuana regulations, as they currently operate under a very strict regulatory framework.

In the long-term, it remains to be seen which state has created a better cannabis business climate. Each state’s regulations have benefits and drawbacks in this regard. Washington’s proposed rules would put  a cap on the number of retail stores in each county, for example, which will limit competition but will also limit opportunities. What’s clear is that each state has set relatively high barriers to entry, meaning we won’t see nearly as many of the types of fly-by-night businesses common in the medical marijuana industry in some areas of the country.

Also last week, Illinois took a major step toward becoming the 20th state to adopt medical marijuana laws. A bill to legalize the cultivation, sale and use of marijuana for medical reasons has cleared the legislature and will now go to the governor’s desk. If the measure gets the final green light, it will be a huge day for the medical marijuana industry given the business possibilities. Illinois would quickly usurp Massachusetts as the hottest medical cannabis market, as the bill calls for up to 60 dispensaries statewide and nearly two dozen cultivation sites.

Getting Illinois on board with MMJ is extremely important for the medical cannabis movement, as it would further the cause immensely given the state’s size and further erode the government’s arguments against the industry.

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