Ease of Licensing Pot Businesses Depends on How Liberal a State Is

NEW YORK (MainStreet) — Nevada is the only state with a regulatory framework that includes full reciprocity, which allows patients from around the world to use their medical card to purchase marijuana.

“Reciprocity makes Nevada potentially the model for cannabis tourism destinations,” said Scott Giannotti, president of the Cannabis and Hemp Association (CHA), a trade association headquartered in New York.  

Of course, state regulatory models legalizing marijuana depend on the sophistication, budget and experience of its governing bodies.

“Unique regulatory models ensure that the politicians in charge reflect some sort of overt control over this national experiment,” said Bob Hoban, a cannabis attorney in Denver. Regardless of their differences, state regulatory models dictate private production, distribution as well as solicitation of dispensary and grow applications, award of licenses and enforcement of the code.

“The federal government has required that state regulatory models reflect the guiding principles in the policy memo issued by the Department of Justice,” said Hoban. “Most regulatory models do this.” The guidance was signed by Deputy Attorney General James Cole on August 29, 2013 and is known as the Cole Memo.

“Some states choose business licensing departments to govern,” Hoban told MainStreet. “Others select their health departments and still more choose the revenue department. It’s driven by the policy behind the specific legalization enactment.”

For example, Oregon will allow anyone from any state to procure a business license to run a cannabis operation while Colorado and Washington have restricted programs that require the license holder to be a resident of the state.

“Regulatory models impact the movement, because they cost the business money to adhere to these regulations,” Giannotti told Mainstreet.

Governed by its Marijuana Enforcement Division, the state of Colorado has raked in about $11 million in sales and excise taxes on recreational marijuana since January, according to statistics published by the Colorado Department of Revenue.


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Still, experts anticipate that once regulations are federally rather than state imposed, marijuana money will be harder to come by.

“The only way to get rich in a business is to get in before regulations because once there are regulations, the money train has reached its destination and it's time to move into a new industry,” said Giannotti.

Another common characteristic of regulatory models nationwide is their fluidity.

“They are changing every day across the U.S. to reflect the needs of consumer protection and safety, which is a sign that regulation actually works when the government can change the models and specific regulations to address an item that has been a problem, such as edible regulation, testing regulation, potency standardization and doctor regulation,” Hoban said.

Although regulatory models are helpful and are designed to protect the consumer from money laundering, diversion in the black market and edible safety hazards, many aren’t perfect.

“In Colorado, the recreational limit is one ounce per customer per month, but no checks are in place to stop a person from going to four different dispensaries and buying four ounces,” said Giannotti.

Written for MainStreet by Juliette Fairley

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