PHOTO: A 50% OFF Sale, advertised at a Pagosa cannabis dispensary.
“Given the industry’s financial incentives to commercialize marijuana nationwide, I expect them to continue pressuring lawmakers to liberalize our federal marijuana laws…”
— CEO of Smart Approaches to Marijuana, Kevin Sabet, quoted in an article, “This can be done right: how Colorado sparked a decade of marijuana reform” written by Josiah Hesse and published in The Guardian, October 2022.
When a group of activists began designing Amendment 64 — the 2012 ballot measure that made marijuana possession, use and retail sales legal in Colorado, for adults 21 and older (though not necessarily legal under federal law) — one of the ‘selling point’ in marketing a ‘Yes’ vote was the fact that a portion of the taxes collected from retail sales would be used to help fund public education. The Amendment didn’t specifically set the tax amount; that occurred via legislative action the following year.
The taxes were set at an extraordinarily high level. More about that later.
Many of Colorado’s political leaders — including then-Governor John Hickenlooper and Denver’s then-Mayor, Michael Hancock — actively opposed Amendment 64. Mayor Hancock stated at the time:
“We don’t want to be the first state in this nation that legalizes marijuana. I believe we will lose our attractiveness to companies, employers who want to come to our state. Tourism is the number-one industry for the City of Denver, number two in the state of Colorado, and I believe that sector will be disproportionately harmed with the perception that Denver is the marijuana capital…”
In fact, Colorado’s economy has outshone many other state economies since 2012, and the tourism industry has flourished. At a 10-year celebration of Amendment 64, last year, one of the speakers was Mayor Michael Hancock:
“I was wrong 10 years ago. I’m a convert today. This can be done right and responsibly… Today I am the chair of a national mayors committee for sensible cannabis policy. I have testified in Congress that it’s time to legalize marijuana.”
It seems to me, there are four groups particularly interested in seeing marijuana legalized at the federal level.
1. Activists concerned about the mass incarceration of Americans, brought about by the federal ‘War on Drugs’.
2. Medical researchers who believe cannabis may have as-yet-undiscovered healing properties.
3. Investors looking to cash in on a growing industry.
4. Government bureaucrats who understand the tax potential for funding government programs.
Then, of course, we have the consumers, who can now purchase their recreational or medical marijuana legally, and conveniently.
As a wise person might have said, “It takes a village to raise a cannabis industry.”
During my interview with one of our local dispensary owners here in Pagosa, we talked about the ways the industry is changing, as society becomes more comfortable with legal cannabis sales. With more states legalizing recreational marijuana, some industry leaders are pushing to allow vendors to sell across state lines.
“Right now, you can’t sell across state lines. And interestingly enough, that is exactly what the big boys are pushing now. Like, ‘Hey, you’ve really constricted our industry… we want to be able to sell across state lines.’ Which is really going to help the big boys, and basically wipe out the mom-and-pop dispensaries, because we can’t scale up, big enough. The big boys are already scaled up. And they’ve got the lobbyists.
“I mean, what’s his name… the past Speaker of the House, for the Republicans?”
That would be Ohio Republican John Boehner.
“Yeah, Boehner. He’s a lobbyist now for the marijuana industry. Even though he shut down every single [proposed] marijuana law — like safe banking, etc. — he shut it all down. Now he’s a lobbyist…
“Now, honestly, us small guys, we always knew the strategy was to build a platform, and then have someone acquire you. My plan was four stores and a good grow. I have a very good grow. Of course, everybody tells you they have the best grow in the world… but that’s what my idea was. And we were actually approached by a couple of different SPACs…”
Special Purpose Acquisition Companies.
“What it is… they set up a shell company, and register it on some of the smaller exchanges, like Over the Counter (OTC) — not the big ones — because you start off small and then you build you way up. And they just have a shell, and they do all the registration — which can cost a lot of money, for the lawyers and so on — and then they fill that shell with assets. Like, they come to me and say, ‘We’re going to buy your stores and your grow. In exchange, we’ll give you a dollar and all this stock. And we’re all going to hit it big when we get up to the big exchanges’…”
OTC stocks are known as “penny stocks” because they generally trade for less than $5 per share. Penny stocks have always had a loyal following among particular investors who like getting a large number of shares for a small amount of money. If the company turns out to be successful, the investor ends up making a bundle. If it doesn’t, the loss is, hopefully, a small one.
My friend continued:
“It’s a Ponzi scheme. The whole stock market is a Ponzi scheme, but this is one of them. I elected not to do it. But that’s how the stock market works. You basically put all these assets in a shell company, and people are, like, ‘Hey, marijuana’s making a lot of money! I want to invest in marijuana! I’ll give you a buck…’ And then you get millions of people to do that, and you have yourself a successful IPO.
“Underneath it, the marijuana stocks are losing money like crazy. It’s like the mortgage-backed securities, frankly.” He laughed.
“So these two guys, they were both out of New York, and they were very good at making money. They didn’t really care about the business; they just wanted to put together some assets, issue a new stock… hope it all goes. They collect any cash flow until it does go…
“If it does go — like any Ponzi scheme — if you’re the first guy in line, you make out. If you’re the last guy in line, you don’t.”
Of course, the state of Colorado has a vested interest in the marijuana industry, as well, because they have been collecting hundreds of millions of dollars in sales taxes and marijuana excise taxes.
But the amount collected is declining? Right?
“Oh, yes, drastically…”
Taxes can be a double edged sword, as we all know.
Marijuana taxes appears to be causing a huge problem in another state that was one of the first to legalize recreational marijuana: California.
Or so some people claim…