Federal Marijuana Enforcement could wreak havoc on Colorado’s recreational marijuana industry — if it happens
June 5, 2017
After two years of revenue boom, marijuana advocates fear that a federal crackdown on recreational marijuana would be catastrophic to Colorado's economy.
With Alabama Sen. Jeff Sessions being appointed as the U.S. attorney general, marijuana businesses are left uncertain about how he might approach federal law on marijuana. The Obama administration chose not to enforce the federal ban on the drug when states led by Colorado legalized it.
Furthermore, during a White House briefing on Feb. 23, press secretary Sean Spicer hinted that there would be greater enforcement of federal marijuana laws. He said there is a vast difference between the use of recreational marijuana and medicinal, stating that the Justice Department may be interested in "looking into" states that have legalized. The department declined to comment on the issue at the time.
Shortly after Spicer's statements, a Quinnipiac poll announced that American voters — 71 percent across every demographic — oppose a federal crackdown on states that have legalized marijuana for medical or adult use; 59 percent say marijuana should be legal.
Kyle Del Muro from Nison+Co, a public relations and consulting team working with the marijuana industry, said that clients with publicly traded companies took a hit in stock prices after Spicer's comments.
Philip Wolf, the CEO of Cultivating Spirits in Breckenridge, said that Spicer's comments on medicinal use versus recreational use goes against the government policy of Schedule I drugs.
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"If it's a Schedule I substance it should have no medicinal value whatsoever," he said. "I think being de-scheduled is everyone's biggest hope ultimately."
Sessions, on the other hand, has been a longtime opponent to marijuana legalization in general. During his confirmation hearings, Sessions admitted that enforcing marijuana laws would cause strain on the government, but did not commit to allowing states to regulate their own laws. On Feb. 27, Sessions called marijuana an unhealthy practice that was causing a rise in violence.
Colorado Rep. Jared Polis, D-Colo., said that many of marijuana's opponents have been citing untrue statistics. During the briefing, Spicer mentioned a rise in opioid addiction across the nation, adding that states should not be encouraging the epidemic.
"They paint this picture of Colorado as some kind of crime-ridden cesspool where everybody's addicted to drugs, and what we point out is we have lowered drug dependency rates," Polis said. "They really have the wrong facts and I hope that they will be able to open their eyes and be willing to look at reality."
Polis added that, at this point, there's no telling what the federal government will do, but that he would fight back against any movement to penalize those following Colorado's current marijuana laws.
"It's a civil rights conversation. In Colorado, we've changed our conversation by amending our Constitution," said Jason Mitchell, manager of Roots Rx in Eagle-Vail.
Medical marijuana is now legal in 28 states, Guam, the District of Columbia and Puerto Rico.
Wolf said that he has already had problems with his business since President Donald Trump's election. The uncertainty for the future of the industry caused him to lose an investor.
"For me, my hands feel like they're tied. It's an uncomfortable feeling," he said.
Colorado and Washington in 2012 became the first states to legalize recreational marijuana for personal use. Now recreational use is legal in eight states and the District of Columbia, whose populations are 69 million people, almost 20 percent of the U.S. population.
"What Sean Spicer says during press conferences doesn't necessarily reflect what the administration's policies are," said Kevin Fisher, co-owner of Rocky Mountain Remedies in Steamboat Springs.
Michael Gurtman, owner of Aspen's newest marijuana dispensary, Best Day Ever, says it's a states' rights issue, as President Trump did while on the campaign trail last year.
"I am disappointed and, frankly, somewhat shocked at the White House's latest remarks in regard to a possible crackdown on states that have legalized marijuana," Gurtman said. "Trump ran for president under the pretense of states' rights. Cannabis has proven to be a billion-dollar industry in Colorado, creating thousands of new jobs and helping to boost our economy. A unilateral decision to take away states' rights would be detrimental to an already divisive country, and end up driving the industry into the hands of the drug cartels."
Trump has said consistently he believes marijuana is a states' rights issue.
"When it comes to upending not only state laws but in some cases state Constitutional amendments, you can bet that whatever Attorney General Jeff Sessions does will have to pass through the White House," said John Hudak, a drug policy expert with the Brookings Institution.
"They are trying to make sure that adults who choose to purchase marijuana know what they're getting," Hudak said.
The vast majority of Americans agree that the federal government has no business interfering in state marijuana laws, said Mason Tvert, communications director with the Marijuana Policy Project.
"This administration is claiming that it values states' rights, so we hope they will respect the rights of states to determine their own marijuana policies. It is hard to imagine why anyone would want marijuana to be produced and sold by cartels and criminals rather than tightly regulated, tax paying businesses," Tvert said in a statement.
California was the first state to flout the U.S. Controlled Substances Act when, in 1996, voters there approved marijuana for medical use. Federal law prohibited marijuana for all uses then, and still does.
"Jeff Sessions really does hate marijuana," but this is going to come down to a states' rights issue and the resources the federal government is willing to dedicate to marijuana enforcement, said Brian Vicente, a Denver-based marijuana attorney and advocate.
Colorado's recreational marijuana industry includes 440 retail marijuana stores, 623 cultivation facilities, 240 product manufacturers and 12 testing facilities, Robert Goulding, Colorado's Marijuana Enforcement Division spokesman, said via email.
The Colorado Department of Revenue collected $141 million in revenue from taxes, licenses and fees from the medical and retail marijuana businesses in 2016,
Eagle County's government collected $160,069 in retail marijuana sales tax in 2016 on sales between $2 million and $2.5 million. In Steamboat Springs, $10.8 million worth of marijuana was sold, generating $431,113 in tax revenue for the city.
Glenwood Springs marijuana shops had a total of $6.7 million in sales last year, according to a city revenue report, bringing in $248,084 in sales tax for town coffers.
This is an industry that does more than $1 billion annually in direct sales, about $800 million from recreational marijuana and $300 million from medical, said Vicente.
Factoring in affiliated industries including commercial real estate, construction, ancillary goods and services, legal services and tech services, the Colorado marijuana industry's total economic impact in 2015 was $2.3 billion, Kristi Kelly, executive director of the Marijuana Industry Group, wrote in an email.
At the first of this year, 30,866 people in Colorado held marijuana occupational licenses, though that doesn't mean that many people were employed as such.
The marijuana industry has about 18,000 jobs across the state, with 10,000 of those in Denver alone, said Vicente. Kelly estimated the number at more than 20,000 people working directly in the licensed industry.
"That's a lot of high-paying middle-class jobs," said Kelly.
A crackdown on recreational marijuana would probably launch Denver into a recession, which would reverberate throughout the state, said Vicente.
"It would likely lead to a recession in Colorado and beyond," said Kelly. "Cannabis was credited at one point for resurrecting Denver's commercial real estate market."
Added Vicente, "Losing that job creation and commerce around the state from the last several years would be a major blow to the economy."
Sessions would not be able to change Colorado criminal laws, so if you're an adult 21 or older, you could still possess and grow marijuana.
And though Sessions could have the Drug Enforcement Agency come in, raid stores and arrest owners, that's a resource-intensive option that Vicente regards as unlikely.
"But they could try to shut down the regulatory structure that empowers the industry," he said.
Another option is for the federal government to send a series of letters or memoranda to the state pressuring it to comply with federal prohibition, or it could threaten to sue Colorado's Marijuana Enforcement Division, the state's regulatory arm over marijuana that issues the licenses allowing recreational businesses to operate.
That would be extremely disruptive to the recreational marijuana industry, and it would arguably cost only the price of postage, said Vicente.
It would be somewhat resource-intensive to file a lawsuit, but there's definitely an argument that the Marijuana Enforcement Division itself is violating federal law by issuing licenses.
Congress has passed a budget rider restricting the DEA from raiding medical marijuana businesses, though that doesn't apply to recreational marijuana,
"It seems like even Washington, D.C., realizes it's not a good use of DEA funds," said Vicente. "I think (federal enforcement) would be wildly unpopular but not impossible."