Colorado’s recreational marijuana industry starting to take shape

 source: The Daily Caller - Greg Campbell

People who plan to sell legalized recreational marijuana in Colorado will be spared the hassle and expense of having to grow it themselves, thanks to the suggestion of an ad hoc committee of state lawmakers hammering together a workable bill for regulating legal pot.

Lawmakers have less than a month to introduce and vote on a wide-ranging bill that addresses everything from labeling standards for marijuana-infused products to tax rates.

They’ve relied heavily on the recommendations of a special task force that has been studying marijuana’s myriad issues since shortly after voters legalized the drug in November.

But in opting not to require future retailers to grow most of the pot they sell, they’ve deviated from the task force’s advice, which was to follow the model currently in place for medical marijuana. Under that system, dispensaries are required to be vertically integrated and must grow at least 70 percent of the pot they sell.

This was originally meant as a way to track marijuana from seed to sale and ensure that the pot sold didn’t come from the black market.

But a withering state audit released earlier this year found that medical marijuana regulators weren’t properly monitoring the industry.

“(Regulators) do not regularly determine compliance with other key features of the vertical integration model, such as the requirement that dispensaries grow 70 percent of the medical marijuana that they sell,” the audit said.

Lawmakers have instead chosen to set up a system more like that governing liquor, in which people in the industry can either produce or sell.

The decision, taken on the committee’s last day of work Monday, was met with mixed reactions by those in the marijuana community.

On one hand, existing medical marijuana businesses — which are by and large expected to convert to recreational retail establishments once the rules are decided — have endured a seemingly endless gauntlet of onerous regulations to remain in business. That includes the “grow your own” rule that required dispensaries to take on the substantial added expense of establishing a commercial grow operation.

But those who are opposed to vertical integration think a more flexible approach will encourage competition.

Jessica LaRoux, a marijuana activist, emailed lawmakers that the requirement for vertical integration means that “only the most well-funded current medical entities from the big city will be able to expand into new locations,” according to the Denver Post.

It’s also an unnecessary “pain in the ass,” attorney Warren Edson told the Westword newspaper.
“Medical marijuana is one of the few industries, if not the only industry, where retailers are forced to own the whole line of production,” he said. “It’s a huge pain in the ass to run a business like that — and to force that model into retail is ludicrous, particularly given that Colorado voted to regulate marijuana like alcohol, and alcohol is just the opposite.”

The committee also tackled the thorny issue of taxing marijuana. The amendment passed by voters in November requires the first $40 million raised in an excise tax be spent on schools, but Coloradans are required to vote on all new taxes. Lawmakers are in the delicate position of needing an excise tax for education, and a sales tax high enough to pay for enforcing regulations but not so high that legal pot would be significantly more expensive than black market pot.

They’ve proposed a 15 percent excise tax and a new 15 percent sales tax on top of various other local taxes. In some communities, the Associated Press reports that recreational marijuana could be taxed at a nearly 40 percent rate.

Coloradans are expected to vote on the taxes in November.
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