The marijuana debate: $1 million in a day

One million dollars in marijuana sales in one day. That’s the estimate from Colorado’s ‘weed’ retailers after the state licensed sale of the drug for recreational use — a first for the western hemisphere.

  Here in Bermuda, the Cannabis Reform Collaborative (CRC) will examine policies like Colorado’s to determine, among other things, revenue potential.

In 2012, more than $7 million worth of marijuana was seized on the island, according to the Bermuda Drug Information Network. The price tag of the cannabis that wasn’t seized is, in all likelihood, much higher.

In a Bermuda Sun column, PLP Senator Marc Daniels suggested government consider ways to recover “some benefit” from the cannabis trade. 

But how does legalization work? Inside we talk to  a Denver law professor who served on a task force about  regulation.

High stakes: could Colorado become the Vegas of weed?

The licensed sale of marijuana for recreational use is now allowed in Colorado, marking a first for the western hemisphere.

Colorado marijuana retailers estimated that there was more than $1 million in marijuana sales on New Year’s Day, the first day of legalization.

The state estimates it could reap as much as $67 million in annual revenue from marijuana taxation.

Here in Bermuda, the Cannabis Reform Collaborative (CRC) will examine policies like Colorado’s. 

A subcommittee of the collaborative has been tasked with examining the potential for revenue generated from changed cannabis laws on the island. 

In 2012, more than $7 million worth of marijuana was seized on the island, according to the Bermuda Drug Information Network.

The price tag of the cannabis that wasn’t seized is, in all likelihood, much higher. The CRC will also consider such fiscal realities and the potential revenue if the drug were to be legalized.

The CRC is not alone in assessing the potential financial repercussions of changes to Bermuda’s marijuana law. Last autumn, in a Bermuda Sun column, PLP Senator Marc Daniels suggested the government consider ways to recover “some benefit” from the island’s multi-million dollar cannabis trade.

“It is also arguable that by regulating cannabis, the government could better protect young people rather than leaving this substance to the whims of the black market. So what benefit does the prohibition really bring?” he wrote in an opinion piece.

Legalization in Colorado comes tethered to extensive regulations and rules governing both the possession and sale of the drug.

The penalties vary, but it’s fair to say you can still get entangled in a legal mess if you run afoul of the law. You must be 21 to buy. Sale to minors is outlawed, as is the use of weed in public. No, the new law does not allow you to drive while stoned. Personal possession of marijuana — less than an ounce or six plants for state residents — has been legal in Colorado for more than a year, while a slew of states have approved the medical use of marijuana. But now, Colorado becomes the first in the union to regulate and tax the legal sale of the drug for recreational use. 

This reporter contacted Sam Kamin, a law professor at the University of Denver, who served on a Colorado task force that made recommendations about marijuana regulation. He was recently featured in a 60 Minutes piece about the new rules. 

Walk me through what exactly is happening in Colorado.

Professor Kamin: There are two steps, really. The first has already taken place: it is legal to have less than an ounce of marijuana. It is not a crime to have that or to have six marijuana plants. That’s already happened.

OK, what happens if folks exceed that amount?

Prohibition is still in place unless you can show you have qualified as a medical patient, that’s still against the law. Six plants will produce much more than one ounce, obviously, and you’re entitled to keep all that marijuana so long as you can prove it was grown by you rather than purchased somewhere.

How do you do that? Are we talking about lab tests to prove something like that?

People have suggested doing it photographically. Take pictures of your plants. Take pictures of your harvests.

Take pictures of you laying out your bud. Put it in labelled containers. So if they come and bust you and you have a pound you can say “Yes that’s a pound but here’s how I grew it”.

What about the larger manufacturers and retailers, how is that regulated?

This is the second step [which took effect January 1]… the sale of licensed retailers of up to an ounce of marijuana per person (for state residents). That’s licensed by the state’s Department of Revenue.

You can get a license to grow, you can get a license to sell, you can get a license to make marijuana-infused products. 

Sales for compensation can only be done by licensed dealers. Even though you can grow your pound or whatever, you can give that marijuana  away, but you can’t receive compensation for that. The only people who can get paid for distributing marijuana are those who have a licence with the state.

What’s to stop someone from buying weed in bulk from a bunch of different retailers and turning around and flipping it? Is there anything in place to prevent a secondary market?

I was on the governor’s task force to implement Amendment 64 (the piece of legislation that legalized weed) and we spent an inordinate amount of time talking about that very problem. 

You have someone drive in from Kansas, they go to a bunch of different dispensaries. 

They buy marijuana from each, they take their pound back to Kansas and sell it in eighths to middle schoolers. What can stop that? Well, for one, that’s prohibited by federal law. That’s prohibited by Colorado law. That’s prohibited by Kansas law. You’d be breaking any number of laws if you were to do that.

Colorado still makes it illegal to distribute to a minor. It’s illegal to take it across state lines. You’d violate a number of laws.

You don’t need to be a Colorado resident to buy marijuana from a licensed dispensary or retailer, right?

That’s right, the only difference is there’s a limit you can buy if you’re from out of state. (Editor’s note: Out-of-state residents are limited to one quarter of an ounce per purchase, but can still possess a full ounce.) 

To get your pound and head back to Kansas or wherever now you have to go to a lot of dispensaries. The thinking was that this rule would make that whole idea look a lot less attractive. 

What’s the federal government’s attitude towards all this? The feds still view marijuana as illegal. Are they just turning a blind eye toward this? Talk to me about the state vs. federal dynamic, that’s something that will have to be resolved at some point?

Absolutely. Right now any sale of marijuana is prohibited by federal law, possession of marijuana is prohibited by federal law. 

Growing marijuana is prohibited by federal law, that can actually lead to 25 years in prison. 

So you have this burgeoning industry right now where all the sales are still federal crimes. You’re absolutely right, that can’t continue.  You  can’t have an industry  based on conduct that the federal government continues to see as criminal. 

The federal government has a number of times tried to explain its position about law enforcement in those states that legalized, at first for medical use and now for all adult users. 

The most recent statement says, “Look, we know you’re legalizing, if you’re doing a good job with it, if you’re keeping it from being devoted to kids, the black market, if you’re keeping gangs out of it. If you’re not selling other drugs…” 

There’s this litany of concerns. They’re saying, “If you can address this litany of concerns, we’re not going to promise anything, we’re not going to repeal prohibition, but we’ll largely leave you alone.  We’re not going to bust,  we’re not going to prosecute, we’re going to look to see how well you do with your own regulations. If you do a good job, we’ll try to stay out of it.”

How has this affected dealers and suppliers that were previously dealing illicitly? Have any of them gone legit? Have they left Colorado? Are they still there, waiting to undermine the legal market?

Initially, anyone who ever had a drug arrest was banned from being a licensed marijuana creator. That, like the prohibition, has been relaxed. Now it’s not that you can never do it, but (the arrest) has to be in the distant past. One of the real concerns with legalization, especially with taxation is, “Well, what about the black market?” There are high sales taxes, high excise taxes. What if the price of legal marijuana is two, three times that of illegal marijuana? Maybe there’ll still be a market for the street dealer. Also, since people are allowed to grow, what’s to say they won’t sell what they grow off the books?

Is the taxation on this onerous enough to keep a secondary or underground market alive?

That’s the biggest question out there right now: what is the appropriate tax rate to make this system at least self-funding and probably bring in some income and to keep the black market suppressed. If you make it 100 per cent tax, people will look elsewhere.  If you make it a five  per cent tax, all the money you bring in to the state will possibly just go right to the regulations themselves.

It’s finding that sweet spot, where you get the revenue without encouraging the black market.

(Editor’s note: There is a 15 percent excise and a 10 percent sales tax that will be imposed on recreational pot sales.)

What’s the revenue projections? What’s the state going to get?

Well, it’s almost impossible to tell, because we don’t know how many people are going to transition their medical licences to retail.

For the first nine months, only people who are in the medical market – those who have medical licences, can get retail licences. So it’s unclear how many of those people are going to take that opportunity. 

We don’t know how big the tourist market is going to be. Is this going to make us Vegas? Are people going to come here for the weekend, buy their quarters, get high all weekend and fly home? It’s impossible to know how big that market is going to be.

(Editor’s note: The Colorado Legislative Council estimates recreational sale of cannabis could yield $67 million.)

Does this mean that we’ll see less prosecution for marijuana-related crimes? Government and law enforcement have had to put energy and resources into establishing and enforcing the new rules. At the end of the day, has this been a net positive for governmental and law enforcement efficiency?

What’s interesting is the regulation is onerous. We have video surveillance, from seed to sale. You have to show your manifests of your weed, where it went, you have to do that on camera. You have to keep your video. All these regulations. Someone has to go out and make sure these things are in place. It’s an expensive process.  There’s going to be less law enforcement, but there won’t be no law enforcement. We saw these busts here back in late November, where there were a number of dispensaries that were busted, the allegations were they were operating outside of the law, they were tied to drug cartels and you know someone is still going to have to police that, to make sure that people who are playing the game are following the rules. What’s interesting is the industry, to a large extent, was OK with that.

This interview was edited and condensed.