On July 1, 2014, whether you knew it or not, the cannabis market in Colorado changed overnight. Expect to see a new wave of Colorado cannabis shops opening up, more jobs being created, and the market becoming even more competitive. This date marks the first opportunity for new entrepreneurs to apply for a business license to open a marijuana shop.
Previously, under Colorado law, only pre-existing medical marijuana dispensaries could apply to become a recreational store. In addition to the new rules, stores may now also function as a wholesale supplier and eliminate the storefront altogether.
University of Denver law professor, Sam Kamin, told The Cannabist, “We are going into uncharted territory. It’s something that hasn’t happened in medical (marijuana), and it hasn’t happened in recreational.” These are indeed uncharted waters; for the first time the recreational marijuana market has truly opened up.
What you are going to see in the next six months will be very different from the last six months of legalization. With more people able to sell recreational cannabis, prices will go down and recreational sales will go up. This is not necessarily a good thing for pre-existing businesses; more competition for them may mean a smaller slice of the pie.
Overall, the new changes are positive for the marijuana market. Yes, it is true that a more competitive market may hit the bottom line of some businesses; however, the inevitable price drop that comes with these new changes will likely lead individuals who were more inclined to buy black market cannabis to pursue the legal market. To put it simply: more market participation = lower prices = more consumption.
Elsewhere in the North West, Washington’s transition is having a bit more trouble. Amid confusion, impatience and bureaucratic foot dragging, many licensed growers and would-be shop owners are simply not ready for business. According to The Cannabist, of the over 2,000 applicants for marijuana cultivation, approximately 80 have been approved for cultivation, of which only a few will be able to harvest in early July. Many of the applicants have not even been reviewed yet.
To complicate the issue, Washington has capped the total number of approved retail stores in the state to 334. In an effort to make the process more arbitrary, recreational licenses are issued by lottery, creating more issues than solutions. In a cheap attempt to game the system, some individuals have taken to creating a myriad of shell corporations in order to enter multiple applications in the lottery.
Some of the shops that were chosen in the lottery have since lost their licenses. Many credit the loss of their license to small things like poor measurements rendering them too close to a school or that their application wasn’t “complete.” Many applicants that won the lottery and weren’t disqualified still have to wait until July 7 to get their recreational licenses, months after it was expected to be issued.
Randy Simmons, the pot project manager for the Washington Liquor Control Board, told the Associated Press, “This is a gold-rush mentality, and everybody wants to get rich. Some people just don’t have an idea what they’re doing — no clue at all. It slows down the process.” It is difficult to place blame on any one entity for the difficulties in Washington. Overly cautious regulators and overly ambitious entrepreneurs make the perfect recipe for inefficiency.
The cannabis industry as a whole is at a turning point in its early life; and it is presented with two different states and two different roads. On one side you have Colorado, a state that has taken the time to encourage a competitive market and enact thoughtful regulation, making changes as needed (like changing the rules on edibles).
On the other side you have Washington, a state that has created system that produces an arbitrary licensing system, bureaucratic chicanery by bad actors and an anti-competitive market. Washington’s marijuana market is by no means doomed, but the state is undergoing unnecessary growing pains. As other states begin to legalize and regulate cannabis, they must decide whether they want to be a state on the verge of another economic boom or a state that has to be more concerned with weed shortages and fraud.