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For Pot Delivery Apps, Making Green Means Wading Into Legal Gray Area

Image: One- to two-week-old marijuana starts sit under lights at a growing facility.

One- to two-week-old marijuana starts sit under lights at a growing facility. Elaine Thompson / AP file

A fresh crop of pot entrepreneurs wants to provide a new way to get a buzz from your smartphone: marijuana delivered on demand.

Brand-new companies including Eaze and Canary aim to make pot delivery as easy as the tap of a few buttons. Upload ID proving you're an eligible medical marijuana patient, select the strain of your choice and wait for the goods to arrive at your door.

The potential business opportunity is massive: the on-demand craze popularized by Uber and Netflix, combined with a budding industry built on more states legalizing marijuana use.

But these startups must wade through a complex patchwork of laws that vary by state and even by city.

"All of these folks are operating in a gray area, going to bed each night knowing that their business model might collapse under the politics that gird all of this," Allen St. Pierre, the executive director of marijuana legalization lobbying group NORML, told NBC News. "'Is this commerce legal?' is a hard place to get your business started."

But that's exactly where weed-delivery companies like Eaze, which launched in San Francisco at the tail end of July, must begin. The service is currently available to medical users only.

"We absolutely want to expand quickly, to other states and recreationally, but there's a whole lot of regulations to consider," Eaze founder Keith McCarty told NBC News. "We rely heavily on legal counsel, because everything changes quickly."

The legal status of marijuana use and delivery is impossible to sum up succinctly: Medical marijuana use is legal in 23 states and the District of Columbia, while Washington and Colorado have legalized recreational use. Then there's California, where the enforcement and interpretation of laws depends on which county you're in.

2:10

Cash or credit?

The laws dictating use alone are complex enough. But apps like Eaze also must contend with murky rules around the delivery of marijuana -- and the question of whether banks can or will allow debit cards to be used.

That complex legal situation has delayed the launch date of at least one would-be Eaze rival. Canary originally planned to launch at the end of August and offer delivery of recreational marijuana in Washington and Colorado.

But it turns out that while those two states allow recreational pot use, they prohibit its delivery. So before even launching, Canary had to switch tactics. The company now plans to launch in September, available only to medical patients in the Seattle area at the outset.

"I'll be honest with you, the whole thing was kind of a snafu," Josiah Tullis, one of Canary's two 19-year-old co-founders, told NBC News, referring to the rollout of recreational marijuana legalization in Washington state. Navigating the regulations has been difficult, he said.

Tullis compared the struggle to that of taxi-hailing app Uber and home-rental service Airbnb, which have pushed or even broken the boundaries of laws in some areas as they expand.

One major shift that Canary has had to consider, Tullis said, is the question of whether his company can accept debit cards. Big banks have largely stayed away from dealing with legal marijuana-related businesses, but earlier this year the Treasury and Justice Departments issued guidelines intended to ease their concerns. On Tuesday, a top federal official revealed 105 banks and credit unions are now doing business with legal marijuana sellers.

"What's frustrating is all of this will change," Tullis said. "So we might develop a model that's regulatory compliant, and then in a week there'll be reform that will make it easier for the next guy to come in."

1:22

An $8 billion industry

That's simply the risk of doing business in an extremely new field -- but the rewards could be substantial, said Chris Walsh, the managing editor of trade publication Marijuana Business Daily.

"A year-and-a-half ago I'd have said you shouldn't get involved unless you have a huge stomach for risk," Walsh said. "But now is a great time. Even though there's still a good degree of risk, the momentum is there."

Walsh and his fellow staffers compile industry estimates in an annual "Marijuana Business Factbook," and they expect marijuana sales through dispensaries and retail stores will hit $2.6 billion. That figure is estimated to top $8 billion by 2018.

"You have two kinds of people: Those who want to get in on the ground floor of an industry that's about to explode, and those who are uncomfortable until there's a federal standard," said Michael Berger, founder and president of Technical420, a research firm that tracks publicly traded companies (there are more than 150 of them) in the cannabis industry. The firm’s tagline? "Buy Low, Sell High."

There's so much potential money to be made here, Berger said, "that I think there can be quite a few winners. Of course, those who figure it out early potentially have a lot more to gain."

The founders of Eaze and Canary are hoping venture capitalists agree. Both companies are self-funded for now -- McCarty was an early employee at Yammer, the enterprise software company that Microsoft bought for $1.2 billion in 2012 -- but have been fielding interest from investors who are willing to put money into a still-forming industry.

Avoiding the buzzkill

Meanwhile, there are also little guys in the pot-delivery space who aren't interested in dealing with venture capital or the legal headaches involved in expansion.

Seattle-based Nurse Nancy Medical Marijuana Delivery is a family affair. Michael Loudon, his brother Kelly and mother Lisa deliver to locals daily from noon to 1 a.m.

"We're not some big thing, but business has been pretty good," Michael Loudon told NBC News.

Getting off the ground wasn't easy, though; advertising networks and Google Adwords rejected Nurse Nancy's ads. So Loudon and family went with more grassroots way of advertising: "We got flyers and just kinda got on the ground and put them on telephone poles and stuff."

Eventually, someone snapped a photo of the Nurse Nancy flyer and uploaded it to the social-news site Reddit, where it proved so popular that users "upvoted" the post to the front page.

Loudon and his brother are able to make a living off Nurse Nancy (their mother still works as a nurse), and that's good enough for them, he said. While the family always looks for new opportunities, they're not trying to compete on the level that Eaze, Canary and the like may reach.

"I don’t know too much about venture capitalism, but it doesn't surprise me -- it's a good business," Loudon said. "There's still so much law and stuff to be worked out. But for us it's working out locally; we're making a living. And what more could you want, you know?"