Obstacles Facing the Legal Marijuana Industry

As the legal recreational marijuana industry in the United States passes its infancy stage, it has begun confronting a few obstacles along the way. As the industry gets bigger and bigger, competition becomes more and more intense. Prices are needing to drop, and competition between neighboring states is also becoming rather tricky. This leads to differing levels of success in different states. For instance, in Washington state, competition is causing sales to slow. In Oregon, on the other hand, sales of legal marijuana are increasing significantly.

To add to the mix, in Colorado and Oregon, out of state investors are also getting increasingly interested in the legal pot business. Meanwhile in California, voters will decide this November whether they will finally allow recreational marijuana in their state. It’s safe to say that the ball is rolling in the American marijuana world.

A risky business

Although things are definitely happening on the marijuana legalization front, that doesn’t mean everything is going perfectly just yet. Part of the reason for this is the fact that it remains an illegal industry in the eyes of the federal law. This means that bank accounts aren’t easy to open -- and without a bank account, everything ends up being done in cash. Businesses with lots of cash and nowhere to put it are at a much higher risk of theft.

This, of course, can make investors nervous as well. It also doesn’t help that the federal Department of Justice does not see investors from other states in a good light. Therefore, despite the fact that the money is there, and the industry is booming, inevitable roadblocks keep it from expanding as much as it could.

Marijuana money

marijuana-plant

The money in the legal marijuana business is a force to be reckoned with. Sales were up to $5.7 billion last year, which represents an increase of nearly 25% from the year before. This was helped by the fact that there were three times the number of states allowing recreational marijuana as there was the year before. If this continues as is projected, we could be seeing $22.8 billion in sales in less than four years.

The United States has reached a milestone in terms of how many states have legalized marijuana. With Ohio legalizing medical marijuana, 25 states (as well as Washington, D.C.) now allow medical marijuana. Recreational marijuana is legal in four U.S. states. Nine further states are progressing toward the legalization of marijuana (including California).

If California does legalize recreational marijuana, it will bring in a huge amount of sales for the industry – as much as $15 billion. A hefty portion of that money will go directly back to the state through taxes, jobs, and an overall economy boost. If you look at Colorado’s economy boost from legalizing recreational marijuana ($1 billion), it’s easy to imagine how California (whose economy is much larger) would benefit in an even greater way.

California’s medical marijuana industry is already the biggest in the nation; due in part to the fact that it was the first to legalize it, having done it already back in 1996. If recreational marijuana is legalized, it’s likely that the medical market would drop in California by about $100 million.

Marijuana laws on the federal level

The difference in the way the federal government sees marijuana compared to how now half of the U.S. states in the country see it is vastly different. This difference does not seem to be going away anytime soon, unfortunately. Republican Senator Chuck Grassley of Iowa and Democratic Senator Dianne Feinstein of California have come together with their Judiciary Committee and Caucus on International Narcotics Control. They are having a hearing about whether or not the federal government is doing a good enough job keeping people “protected” from what is happening with the surge of states legalizing marijuana.

According to the Government Accountability Office, the Department of Justice has not done enough in the face of so much state-level legalization. It recommends that it should closely monitor what the effects of legalization are. Of course, the Government Accountability Office is also being criticized for going after people who are legally using marijuana in states where it is allowed. In short, since the public clearly wants it to be legal, eventually the public servants will have to come around.

Marijuana in 2016

Ultimately this has been (and will continue to be) an exciting year for the legal marijuana industry. Prices are being driven down in states like Washington and Colorado, or they are predicted to start dropping later this year (such as in Oregon). Tax differences between bordering states can make a significant difference in terms of competition, leading to some sort of border wars between states such as Oregon and Washington.

The country waits to see how Alaska will do this year when it begins releasing its recreational licenses. It may look different from other states, if only because marijuana businesses must be entirely owned and run by Alaskans. This could mean slower growth for the Alaskan recreational marijuana industry. On the other hand, Alaska is allowing marijuana edibles along with other forms, meaning they could see something like Amsterdam’s “coffee shops” cropping up this fall and winter.

Written by Robert Bergman, founder of ilovegrowingmarijuana.com. Robert has been passionately exploring and experimenting with cannabis seeds for over 20 years and shares these insights to help prospective growers get the most out of their plants. On top of that, Robert engages to fully liberate marijuana by offering his views in the political, social, market and industry area of our beloved plant.