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Cannabis Goes Corporate

As marijuana moves from the shadows to the marketplace, regulators fear another Big Tobacco.

We’ve all seen the beer commercials set in big beach dance parties: the bikini-clad woman passing a frosty bottle over to her partner, a well-muscled specimen with an equally bare midriff and a knowing smile. No one ever appears intoxicated and everyone is beautiful: it’s Spring Break and in between the belly flops and break dancing, the suds are cold and plentiful.

Now imagine the same commercial with weed. Coy, sleek models passing a fat joint along a train of sexy co-eds. They’re dancing, they’re surfing, they’re toking. No one is glassy eyed and everyone is beautiful: it’s Spring Break and the buds are literally growing on bushes.

It sounds a bit ham-handed, but it just might be the future. Popular opinion and state legislation is shifting toward legalization at a pace not seen since marijuana was declared a Schedule I drug in 1970, making it illegal on the federal level. The prospect that this grand experiment could someday morph into Big Marijuana—an industry of corporate conglomerates dominating supply, lobbying against limits, and garishly exploiting the newly indoctrinated and habitual user with billion-dollar promotional budgets—seems, at least to some, uncomfortably close.

“Right now all the legalization proponents are saying, ‘problem? What problem?’” charges Mark Kleiman, a drug policy expert and professor at the University of California, Los Angeles, in an interview with TAC. Marijuana is still a drug, with all of the public health pitfalls regarding underage use and its lure for those with substance abuse issues, he notes. While legalization may someday be inevitable, smart implementation is critical in order to avoid the profit-chasing exploitation of the young and vulnerable.

“I’m pretty sure that commercialization is not the best approach, which is the current approach we’re taking,” he said, referring to the Colorado model, in which the state licenses retailers to both grow their own marijuana supply and sell it. In return, the state reaps the tax revenues. Localities are allowed to pass their own ordinances regarding the number and placement of retail shops within municipal limits.

By all accounts, business in Colorado is booming and legalization is catching fire in other states. This sets into motion a serious debate about how to handle this burgeoning industry, now in its infancy. Is there an immediate need for government to control it, or should the market decide?

In January, Colorado collected $2 million in tax revenues for its state coffers (this is lower than initially expected). Meanwhile, according to a range of sources, the investment space for cannabis stock is expanding in ways no one may have anticipated a year ago. “This market has surprised me because it’s been so strong,” noted Alan Brochstein, in an interview with The Cannabist. He is the CEO of 420 Investor, a subscription-only resource hub on Marketfly.com for marijuana investors, and is an organizer of the Cannabis Investor Conference, also known as “WeedStock,” in Denver this June. “There are people within our service who have already made $1 million.”

The market has been helped along, for sure, by the federal government signaling that it’s safe for banks to work with marijuana businesses in the states where marijuana is legal. This means Colorado and Washington, where it is fully legal, and 21 states, including the District of Columbia, with medical marijuana laws. Just recently, both Maryland and D.C. voted to decriminalize pot possession. Though Capitol Hill still seems reticent to take pot off Schedule I, Attorney General Eric Holder said last week that, “our administration would be glad to work with Congress if such a proposal were made.”

In fact, this easing by the administration—and the president’s own words about marijuana—has seemingly accelerated the country’s 21st-century gold rush.

So how to handle it? Very carefully, says Kleiman and others who prefer a model with greater government control—a monopoly even. They say that managing accessibility is the only way to keep prices from going too high or too low, as well as ensuring that weed stays out of the hands of children and the public health risks are emphasized over the glorification of the drug.

“What’s needed is federal legislation requiring states that legalize cannabis to structure their pot markets such that they won’t get captured by commercial interests.” Instead, only allow the sale of marijuana through nonprofit outlets like co-ops, or state-run stores, much like the way hard alcohol is sold in Virginia and New Hampshire today, Kleiman wrote in March.

While libertarians may chafe at the notion, the alternative isn’t necessarily attractive either. One can imagine a Wal-Mart of pot driving out the mom-and-pop operations with big professional farms, supplying companies “that use marketing savvy to develop and exploit brand equity…driven by profit and shareholders’ interests, not concern for public health or countercultural values,” writes Carnegie Mellon’s Jonathan Caulkins for Washington Monthly. Soon, pot, like in the ubiquitous aforementioned advertisements, will become a staple in American social identity, ready or not. One needs only to look how alcohol advertising (an estimated $6 billion a year industry) is used to target teens today to see how crude the transformation might get.

“A new version [of implementation] has to be done if we don’t want bud versus bud light in next year’s Super Bowl,” asserts Kleiman.

In March, several experts, including Kleiman, came together on a panel to talk about the big pot rollout. But unlike Kleiman, Susan Rusche of National Families in Action opposes legalization of marijuana, and is more inclined to tick off the horrors of the weed industry under a free enterprise model by comparing it with the alcohol and tobacco markets. She cited data indicating that eight out of 10 of new drinkers are under the age of 21, as well as studies that show targeted advertising is at least partially to blame. She said this is intentional.

“The younger the customer, the easier they will become addicted and lifetime customers,” she told the audience, pointing to the state tobacco lawsuits in the 1990s. They revealed how the industry had illegally marketed cigarette products to children, and conspired to cover up their harmful health effects in order to maintain industry profit margins.

“Will commercial marijuana do the same thing?” she asked pointing to a now infamous statement by a R.J. Reynolds executive in 1973 that emerged during the 1990’s trial: “realistically,” the executive said, “if our company is to survive and prosper, over the long term we must get our share of the youth market.”

She said the only way to pursue legalized marijuana is through a tightly regulated public health vehicle, like a nonprofit corporation, which would oversee the growing and selling and conduct research, evaluation, and testing of the product. In addition, she said, all edibles, like marijuana cookies and the like, should be banned outright due to their unpredictability and attractiveness to kids. “Allowing a corporate takeover,” she said, “would end up in addiction, increase of use, automobile crashes, mental illness,” as well as school failures, “and other health and safety issues.”

But proponents of a more hands-off approach balk at such a rush to judgment. They say a growing number of Americans—including President Obama—agree that pot is no worse than alcohol (though not without risks), so why treat it any differently? In fact, the medicinal uses for marijuana—which 20 states and the District of Columbia agree exist—make it better than alcohol.

Alison Holcomb, criminal justice director for the American Civil Liberties Union, who wrote the ballot initiative that led to legalization in Washington State, believes a well-regulated system like Colorado will allow the legalized marijuana trade to flourish, while helping her state to concentrate efforts on why kids become addicted to drugs in the first place.

“We’re not spending so much time focusing on supply-side strategies. One of the greatest failures of prohibition is trying to control the people who supply and not spending enough time on the demand side,” she told the audience.

She reminded the audience that the government’s “Just Say No” campaigns did not work.  “What works is a holistic approach,” which promotes things like keeping kids in school, and helping single parents cope. “If we can protect children and help them to make smarter decisions, we’ve won again.”

Holcomb said 80 percent of marijuana excise taxes in her state have been dedicated to education, treatment, prevention, and research. Meanwhile, she has more faith in the market than the others, and wants a process that will “incentivize socially conscious capitalism” rather than demonize the business of weed from the outset.

Steve Fox, cofounder and strategic advisor for the National Cannabis Industry Association, which represents marijuana-related businesses, told TAC he was disappointed the panel did not include any industry voices. The panelists almost seemed disdainful that his organization recently fielded the first pro-pot lobbyist on Capitol Hill.

“I don’t see a strong reason for imposing state control over the sale and more importantly, over the marketing,” he added. “I do think there is an opportunity for the cannabis industry to self-regulate in a manner—something that the Distilled Spirits Council has done—that ensures you are not marketing in a way that is appealing to teens and so on. We are all in favor of that.”

However, he continued, “there is no need to treat marijuana as though it is more dangerous than alcohol,” which is how it was outlawed in the first place. “Yes, it is important to regulate for minors … but there are no dangers associated with marijuana that would necessitate it be regulated in a manner more restrictive than alcohol.”

As far as “Big Marijuana” goes, Fox said, “so what?”

“You have the beer industry and the wine industry and you certainly see big players. You could end up with something like that. You have Coors in Colorado and but then you got something like 200 microbrews. But that is just the nature of capitalism, I guess.”

Kelley Beaucar Vlahos is a Washington, D.C.-based freelance reporter and TAC contributing editor. Follow her on Twitter.



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