NEW YORK (MainStreet) - In 2015, thanks to voters in this year's midterm elections, four states in the U.S. will see recreational marijuana market development continue strongly into next year. These include the two states that got started in 2014 (Colorado and Washington state) as well as new market entrants Oregon and Alaska, which successfully passed their voter initiatives in the off-year electoral vote on November 4. Despite the immediate blow of the medical marijuana "loss" in Florida, it also means that medical use will be a continuing issue in state politics in the Sunshine State and far beyond, with implications on federal reform.
According to Joe Brezny, executive director of the Nevada Cannabis Industry Association, the results of the midterms are actually a major victory for reform proponents, no matter which aspect they prioritize. Yesterday marked anoter victory for reform efforts in his state in that reformers announced they had gathered the required 200,000 signatures to get recreational use on the 2016 presidential ballot.
Nevada is one of the most interesting reform states because of the focus on tourism and state reciprocity agreements for medical visitors.
"It is ironic that Florida was a loss this year when it had the highest level of support at 58%, but was hampered by a 60% requirement for the measure," he told MainStreet. "This midterm election had the lowest national voter turnout in over 70 years. By any rational measure, we should have been soundly defeated at every turn, and instead we ran the table on public support. We won three, and got to 58% on our only loss."
The impact of these wins will shape public debate and policy for years to come and on issues that directly affect business not just individuals. One of the most pressing issues still on the table is where marijuana reform meets federal law and financial regulatory infrastructure, and of those, along with banking, taxation is the biggest piece.
The main differences in tax structure in existing markets, particularly in the face of lagging federal reform, make the forward progress on the business front as a result, an ongoing challenge that reformers have targeted squarely for the near future.
In states with a bifurcated structure, like Colorado (and presumably Oregon), the tax structures will hover around a minimum state sales tax for medical purchases and add considerable excise taxes on top of that for recreationally bound product. This differential may prove critical in creating a new model which has not yet been tested that does not divert product into the black market (or gray market) because users have access to cheaper and less taxed pot (for either use). The Oregon market for this reason, if not in Nevada as well, may prove to be a national showcase state on a tax policy that is more realistic for the two verticals and allows businesses serving one or both kinds of customers to weather the transition.
The imminent future of Washington, D.C.'s new recreational market -- which has developed precariously as a medical market for the last two years and has been under the continually hostile purview of a federal Congress and its jurisdiction -- is one that may foreshadow future federal openness to a reality whose time has come. District residents voted in 1998 for the first time for medical marijuana reform. The nascent medical market that has grown up over the last few years is not large enough yet to support a recreational market now approved by voters. If Congress does not vote to override the voter measure, the expansion of both medical and recreational in the city may create another interesting model that has a great deal of national influence just because of proximity.
It is too early to tell.
According to Brezny, at least, the situation created after this year's midterms opens up not only more space for recreational reform, but more progress on the medical front too.
"I think that this opens up opportunities to pass medical marijuana legislation across the country," Brezny said, assessing the impact of the elections in summary. "Elected officials want to do the right thing, but that is their second priority. Their first priority is getting re-elected, so they have thought it better to do nothing than to risk doing the wrong thing."
And as the 2014 ballot decisions percolate not only through state processes now and in the immediate future, it is clear that political reform in the states is driving the pace of other conversations on the federal level including taxation and other financial policy related to reform of all kinds. On the taxes front alone, federal reform would give businesses the ability to deduct legitimate business expenses (a major driver of cost right now for all parts of the industry) if not move banking reform forward for the industry in every state.
Those issues, post 2014, are clearly on the table.
"This election cycle should remove all doubt that the other side is out of steam," Brezny concluded. "It's safe for elected officials to now take action on this. No one is coming after them for legalizing medical marijuana."
The impact that alone has on the other pressing issues related to the whole industry, will continue to drive reform through the presidential elections of 2016 and far into the future.
--Written by Marguerite Arnold for MainStreet