Marijuana retailers may not have to grow their own -- and that's great, attorney says
Last month, the governor-appointed Amendment 64 task force recommended that retailers taking part in the recreational marijuana industry be required to grow 70 percent of their product under a business model known as vertical integration that's currently imposed on medical marijuana outlets. Yesterday, though, members of the legislature's A64 joint committee rejected that advice. Their word isn't final, but a longtime critic of vertical integration thinks consumers will be much better off if they get their way.
Under state law, MMJ dispensaries must obey the 70/30 rule, which means they are required to grow at least 70 percent of their own product, while acquiring no more than 30 percent from other sources. But marijuana attorney Warren Edson says "my focus is less on 70/30 and more on vertical integration -- because without that, you can't have 70/30."
And vertical integration makes no sense to Edson. For one thing, he maintains, "the skills needed to be a retailer aren't necessarily the skills needed to be a grower -- but they pretty much force you to have the same skills or find somebody to work with who has the skills you don't. That works sometimes, but it doesn't always.
Photo by Sam Levin The first task force meeting took place in mid-December.
"Medical marijuana is one of the few industries, if not the only industry, where retailers are forced to own the whole line of production," he goes on. "It's a huge pain in the ass to run a business like that -- and to force that model into retail is ludicrous, particularly given that Colorado voted to regulate marijuana like alcohol, and alcohol is just the opposite."
How so? Edson points out that "at a recent city council meeting, they did a nice job of talking about the history of prohibition, and how you're not allowed to be an alcohol distributor and a manufacturer. They thought it would be an easier way to regulate and control if they were separate -- yet some members of the medical marijuana industry and some of the legislators act like vertical integration is easier."
The latter theory got a whupping thanks to a state auditor report blasting the Medical Marijuana Enforcement Division, the agency in charge of enforcing regs on the MMJ industry. The title of the auditor's release about the document -- "State Oversight of Colorado's Medical Marijuana Industry Ineffective" -- neatly encapsulates the analysis, which faulted the MMED for failing to develop seed-to-sale tracking, ineffectively managing its money and taking nearly two years, on average, to process license applications.
The A64 task force "said over and over that vertical integration was safer because we already have this in place and we allegedly know how to manage this," Edson says. But the auditor's report "was the kicker. If we'd had an audit that said we have bulletproof seed-to-sale and there's no problems, that would have justified the idea that we had a system in place that was safe and totally controlled, so why rock the boat? But the auditor's report said just the opposite.
"Consumers deserve better, and it's not the government's role to shove something down an industry's throat."
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