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Pot Legalizations Push U.S. Closer to Weed Business Boom

A budtender pours marijuana from a jar at Perennial Holistic Wellness Center medical marijuana dispensary in Los Angeles, California. David McNew / Getty Images

Voter legalization of recreational marijuana in two more states plus the District of Columbia this week mounts pressure on the federal government to decriminalize cannabis — nudging America closer to a weed business boom, pot advocates and opponents agree.

A federal law banning marijuana sales remains the biggest blockade to the dawn of a national cannabis industry. That law causes many banks to avoid dealing with legal pot retailers, forcing weed entrepreneurs in Colorado and Washington to run cash-only operations — a daily danger, the owners say.

“But the direction voters are moving in is obvious, and with additional states it’s now harder to call Colorado and Washington 'experiments,’” said Derek Peterson, founder and CEO of Terra Tech Corp. The Irvine, California company focuses on local farming and medical cannabis — likely the first publicly traded company, Peterson said, to hold a medical marijuana license.

Marijuana, Gun Rights and Minimum Wage: How America Voted 1:20

“These are the same voters who elect our federal lawmakers, which I think is the major reason you’re seeing such a quick and dramatic turnaround on these policies in Congress,” Peterson said.

In July, for example, the U.S. House voted in support of a measure to make it easier for banks to conduct business with legal pot shops and providers of medical marijuana. That bill has not yet cleared the Senate.

Tipping the scale?

At Seattle-based Privateer Holdings — which invests in the cannabis industry to acquire and create mainstream brands, like Leafly.com — Patrick Moen, a former DEA agent now on staff, says he remains cautiously optimistic that a federally reversal is “inevitable” given the latest votes.

"This is just another thumb on the scale with regard to the whole panoply of federal issues here,” said Moen, managing director of compliance at Privateer. “It represents the will of the people. Eventually, the federal government will catch up.”

"“It's right in their backyard. They’ll get to see firsthand, not only is legalization not harmful, but it’s actually beneficial to society."

But one more federal obstacle, Moen said, also must be removed: IRS tax code 280E, which bars companies from deducting expenses if their business dealings consist of “trafficking in controlled substances.” Under federal law, marijuana is a Schedule I drug, classified as such like heroin and ecstasy.

That’s where voter legalization of pot in the District of Columbia will be particularly meaningful to changing minds on Capitol Hill and in the White House, Moen said.

“It's right in their backyard. They’ll get to see firsthand, not only is legalization not harmful, but it’s actually beneficial to society,” Moen said. “And Congress will have the opportunity to potentially veto or override this (federal) legislation. So, we’re going to see, probably in short order, exactly how Congress feels about this.”

Marijuana Apps Deliver Weed to Your Doorstep 0:42

Anti-marijuana activist Kevin A. Sabet, president of Smart Approaches to Marijuana (SAM), calls the D.C. approval merely symbolic. In the near term, he expects no change in the federal position on cannabis because neither party seems to have an appetite to address the issue.

Sabet also contends that most Americans don’t favor a commercialized pot industry that “acts like like Big Tobacco or Big PhRMA.”

In fact, a recent Gallup poll showed the majority of Americans supporting legalized marijuana has narrowed to 51 percent from 58 percent last year — and that trend coincided with the first legal recreational marijuana businesses opening their doors.

Is change on the horizon?

Still, Sabet sees the legal pot business eventually going coast-to-coast.

“Indeed, I do envision a national marijuana industry. They already have a lobbying group in D.C., and that is exactly the direction they are heading," he said.

“They are taking their cues from Big Tobacco: Downplay the risks, encourage heavy use, start em' young, and fund your own advocacy. We're seeing history repeat itself before our eyes,” he added. “The question really is: Who will we listen to this time? A national industry, or the scientific warnings of expanded use of a mind-altering substance?”

Some pot supporters see a historic, federal change on pot laws occurring within four to six years.

To be more precise: That shift may come one congressional session after the 2016 election, predicts Tom Angell, chairman of Marijuana Majority, an advocacy group that favors regulating cannabis sales and ending pot arrests.

The politicians, Angell said, simply need to read the polls.

“We can expect to see more members of Congress and even presidential candidates working to court the cannabis constituency,” Angell said. “And I think this is going to happen rather quickly, just as happened with marriage equality.”