Is the Washington marijuana industry threatened?
Nov 29, 2016, 8:45 AM
The Washington marijuana industry has been successful in the few years since legalization, but there is concern that President-elect Donald Trump’s incoming administration could put the industry at risk, especially because Trump is favoring officials with strict anti-marijuana positions, such as Alabama Sen. Jeff Sessions as the new Attorney General.
“Senator Jeff Sessions has been the single biggest opponent to marijuana legalization in the U.S. Senate, according to drug policy staff under Clinton and President Bush,” former Washington state Attorney General Rob McKenna told Seattle’s Morning News. “It is possible he will take a hard-line law-and-order approach and assert federal preemption over those state laws.”
Could that mean the feds will begin raiding legalized states — including the Washington marijuana industry?
“It’s possible,” McKenna said. “State medical marijuana laws and recreational marijuana laws are contrary to the federal criminal laws.”
McKenna notes, however, that the legal fight between the feds and states with legalized marijuana could be too steep of a battle to wage.
“You can only do so much,” he said. “So is this going to be the Department of Justice’s highest priority? Because it will bog them down in court for quite a while.”
“The other consideration is the fact that more than half of the states have legalized medical marijuana, and a growing number are legalizing recreational pot,” McKenna said. “So is this the fight they really want to have? He’s got to decide what his priorities are and whether the fight is worth it.”
Washington marijuana
Despite the future of recreational marijuana being up in the air, one Washington marijuana business is not so worried — at least in the same manner as others.
“There’s a lot of doom and gloom going around that Sessions, being the attorney general, will go after states for medical and recreational pot,” said Ian Eisenberg. “I’m not one of those people. It’s possible, but it’s not likely.”
Eisenberg is the managing owner of Uncle Ike’s, a Seattle-based pot retailer that has grown to three locations since legalization in Washington. It is also among the most successful Washington marijuana shops, only being outsold by one other retailer.
Uncle Ike’s has taken in tens of millions of dollars since opening. That financial factor is more of what Eisenberg is concerned about.
“My bigger concern is that we operate under what is called the Cole Memo,” Eisenberg said. “That’s a memo from the feds to the states saying ‘we will stay out of your business if you have a well regulated medical and recreational system — as long as you abide by certain rules.'”
The Cole Memo was issued in 2013 from the Department of Justice. It essentially set a policy at the federal level that allowed states to operate their legalized markets without federal interference — as long as states made sure that pot was staying out of the hands of minors, and that the legalized marijuana wasn’t slipping over state borders where the drug is illegal.
The Cole Memo also made it possible for recreational marijuana organizations to operate like other businesses. Banks generally don’t work with the industry, but credit unions have become the service Washington marijuana businesses use.
“Because of the Cole Memo, it allows credit unions to do business with us,” Eisenberg said. “That gives us services like armored car pickup, regular checking accounts – paying our bills by check, paying employees by check. My fear would be if the feds change the Cole Memo, the credit unions would have to rethink if they want to be involved with this industry. If they pull out, everything would change. It would be a cash-only business.”
Considering that hundreds of millions of dollars have been injected into the Washington marijuana industry alone, that’s a lot of cash.
“It would be like years ago when you watched news reports of medical marijuana, you’d see operators with piles of cash, hiding it in safes, or under pillows. That doesn’t exist in Washington,” Eisenberg said. “Because we have credit union banking, there’s not a lot of crime. There’s not a lot of people trying to break into pot shops in Seattle because there are no piles of cash sitting around. It’s picked up by armored car services on a regular basis and deposited. If that would go away, everything would change. You would have employees being paid in cash, they would be a target for crime.”
The change to banking is the top concern for Eisenberg, but he’s staying positive and doubts that any major changes will come.
“I don’t think there’s a lot of political capital in cracking down on pot,” he said. “I don’t know what Trump would gain by cracking down on cannabis. The country is pretty evenly split now (on marijuana legalization) and the popularity is rising. And Trump and the Republicans talk about states’ rights. Well, letting states’ do their own thing with pot is a pretty good example of a state right.”
Defending green with green
There may be allies on the Washington marijuana industry’s side that didn’t exist before legalization.
“Pot folks have always been worried about this, but now they have an ally in the state,” Reporter Mike Lewis recently told Seattle’s Morning News. “The state is collecting a massive amount of tax on this, so is the city. So that gives them somebody else to help. Even the folks who aren’t pro-pot, are pro money.”
“Certainly pot sales are up,” Lewis said. “The state hit $200 million in a quarter, which is a record and it’s probably going to hit another record the next quarter.”
The Washington industry for marijuana has been a boon for entrepreneurs such as Eisenberg. In fact, the state set a record in the first quarter of 2016 as marijuana outsold alcohol, according to the Bellingham Herald. With the shutdown of various medical marijuana organizations over the past year, it is expected that those customers will divert their business to the recreational shops, pumping more money into the market.
According to the Puget Sound Business Journal, Seattle is the top pot-selling city in the state, taking in $114.5 million, and paying $38.8 million in taxes during the first couple years of the recreational market. Uncle Ike’s is the city’s top seller, earning $25.5 million during that same time.
The state’s top-selling pot shop, however, has been Main Street Marijuana in Vancouver — it took in $28.6 million. Vancouver is the state’s second most successful marijuana-selling city with $67.6 million in revenue, paying $22.2 million in taxes. Tacoma is third with $54.6 million in revenue and paying $18.6 million in taxes. Spokane comes in fourth with $48.6 million in revenue and paying $16.5 million in taxes.
