Cannabis Regulation in 2018

By Kyle Swartz

April 16, 2018

The movement to legalize cannabis continues to gather steam throughout America.

Four more states, plus the District of Columbia, approved recreational pot by way of voter referendum in 2014. These gains increased the number of states with recreational cannabis to nine, now including the country’s entire west coast. Then earlier this year, Vermont became the first state to pass recreational cannabis through congressman approval.

Whether by their voters or legislators, more states are poised to approve pot in the near future. The cat seems out of the bag on this issue. State governments cracking down on legal cannabis is unlikely. Public opinion is strongly enough pro-pot that anti-legislation would be politically unwise.

As more states approve and then move to administer new cannabis markets, the job of regulating has commonly gone to government officials who already oversee alcohol. Why not? In both control and private states, effective and proven systems are already in place to supervise the alcohol industry. Why build something new when prove infrastructure already exists?

By The Numbers

About 61% of American citizens are now in favor of legal cannabis, according to a survey conducted last October by the Pew Research Center. That’s nearly double the number who supported legalization back in 2000 (just 31%). That’s also up from 57% who answered in favor of pot when Pew ran a similar poll in 2016.

For its most recent poll, Pew interviewed 1,504 adults, 18 years of age or older, living in all 50 U.S. states and the District of Columbia. The younger the respondent, the more likely they supported cannabis.

The majority of Millennials, 70%, were in favor. Same for Gen X (56%) and Baby Boomers (66%). Only the Greatest Generation saw a minority (35%) who would welcome legal pot.

Politically, Democrats favored legalization (65%) more often than Republicans (43%). Yet, some of the most prominent supporters of pot among politicians, state and national, are members of the GOP. While social and public safety concerns do remain, legal cannabis has proven to be a considerable source of tax revenue. That’s a budget-helping windfall that both parties can bet behind.

In some states, the market for legal cannabis has been even larger than anticipated. “We had no idea how sales would look and we’ve since found that some of our revenue estimates were grossly underestimated,” says Rick Garza, director of the Washington State Liquor and Cannabis Board.

Washington set the trend when it became the first state to legalize cannabis in 2012. Two years later, when its first retail stores opened, the state saw $200 million in sales. The following year that quadrupled, and then reached $1.3 billion in 2016. Garza says the state is on pace for $1.5 billion in sales this current fiscal year.

Altogether, recreational pot in Washington has generated nearly $1 billion in excise tax already. “The proof is in the pudding,” Garza says.

Federal Intervention

Though national threats remain. U.S. Attorney General Jeff Sessions has long opposed pot. His recent statements and actions have done little to quell fears of federal intervention.

Sessions in April 2017 said that “good people don’t smoke marijuana.” Pot was a “very real danger,” he added, “Not the kind of thing that ought to be legalized.” A month later, during a speech to law enforcement in Richmond, Sessions expounded:

“I realize this may be an unfashionable belief in a time of growing tolerance of drug use. But too many lives are at stake to worry about being fashionable. I reject the idea that America will be a better place if marijuana is sold in every corner store. And I am astonished to hear people suggest that we can solve our heroin crisis by legalizing marijuana — so people can trade one life-wrecking dependency for another that’s only slightly less awful.”

So it was little surprise when Sessions in January of 2018 rescinded the Cole Memo.

This Obama-era document, drafted by then-U.S. Attorney General James M. Cole in 2013, had in part instructed law enforcement and prosecutors to remain hands-off with state-legalized cannabis, unless they had reason to think intervention was necessary.

The new memo from Sessions read in part:

“In deciding which marijuana activities to prosecute under these laws with the Department’s finite resources, prosecutors should follow the well-established principles that govern all federal prosecutions . . . Given the Department’s well-established general principles, previous nationwide guidance specific to marijuana enforcement is unnecessary and is rescinded, effective immediately.”

In other words, federal prosecutors no longer should defer to state laws about legal cannabis. They are welcome to crack down — should they choose.

Tellingly, none have. Nor did national Republicans come out in force to back the memo. Quite the opposite, many in the GOP criticized Sessions for infringing upon state rights. Ever since, the attorney general has been relatively mum about cannabis.

Perhaps this has much to do with President Trump continually and publicly lambasting the attorney general.

“I think Sessions is too busy these days worrying about whether he’ll even be attorney general in six months,” says Randy Smith, CEO of Sunday Goods, a vertically integrated cannabis company in Arizona.

Meanwhile, Trump remains unpredictable as president. After speaking favorably of medicinal cannabis during his campaign, he has said little of the drug while in office. Anyone in the pot industry trying to forecast its future under President Trump will likely receive few clear signs from the White House.

And while Sessions may have rescinded the Cole Memo, state regulators continue to follow its safety guidelines. The memo contained public safety directives, including: keep the product out of the hands of kids, keep criminals and cartels out of the industry, and prevent the diversion of product.

“We’re successful as a retailer and regulator of cannabis if we’re living up to the areas of safety as outlined in the Cole Memorandum,” says Garza. “Everything in our system was built towards those policies. Our success is running a tightly regulated industry.”

Safety Issues

There are a number of unanswered public safety issues that linger with legal cannabis. Perhaps chief among these is the DUI problem.

How can law officers realistically, and fairly, determine whether a driver is intoxicated under the influence of cannabis?

Malama Minn, Vice Chair of the Honolulu Liquor Commission, suggests an eye test. You should be able to tell when someone is intoxicated if you get them out of their vehicle and run them through a roadside sobriety test, she argues. Slurred speech and poor balance still speak volumes.

Agreeing with Minn is Gary Kessler, Deputy Commissioner of the Vermont Department of Liquor Control. “I think it’s possible to convict someone who’s impaired based on observations,” he says. “Back in the day it was difficult to convict someone for DUIs without giving the judge or jury their BAC number. People respect those numbers. But now we have different tools, like police cameras. We can show in court how someone could not understand directions and had reduced coordination.

Kessler is among a group appointed by the Vermont government to study best practices for legal pot after state legislators approved legalization. To help law enforcement better observe whether drivers have had too much cannabis, Kessler suggested increasing the number of drug recognition experts (DREs). Police officers would receive training in this expertise.

This practice is already underway in west coast states that have legalized cannabis. Washington and Colorado have increased their DREs. They also believe they have a system for measuring cannabis consumption that effectively mirrors BAC.

The legal limit for stoned driving in both states is 5 nanograms of THC per milliliter of blood.

“Otherwise we would have people pulled over for intoxicated driving who would just show the officer their medical card,” explains Garza. “A lot of police would be reluctant to write that violation. Why go after someone who was sick? That went away when we set the nanogram limit. That’s also why we’ve seen an increase in cannabis DUIs out here.”

Officers must bring suspected intoxicated drivers back to the station or a lab for a blood test, of course. And there’s the issue of whether the THC detected is active or older. Cannabis can remain in the blood system a long time, particularly for regular users, who may have 5 nanograms or more of THC in their system at all times. For this reason, many medicinal users have protested the nanogram limit as too low.

But Garza believes the system can determine whether THC is active or inactive. In other words, was the pot consumed recently or in the past? This obviously matters greatly when concerning a DUI.

Also problematic is that the time required to transfer a suspect to a lab for testing may take several hours, reducing their THC level by the time blood is drawn. Overall it’s a system not without flaws.

Alternative methods of determining cannabis DUIs remain in research and redevelopment. In the meantime, states may choose to consider the nanogram limit as merely a presumption, not confirmation, of stoned driving, given its potential drawbacks.

Another public safety concern with recreational pot has been the risk of children mistaking edibles for candies. This seems to have generated a uniform response from regulators. Overwhelmingly they have moved to limit edibles that look like something kids might want to eat. Gummy bears, cotton candy, cookies, etc.

For further protection, many states have set up listing committees that approves new cannabis products prior to public sale. As with alcohol, this prevents potentially unsafe products from reaching the retail market.

“We would still want to provide products people want to consume,” says Kessler of Vermont. “But along the same reasons to why our state said ‘no’ to cotton candy vodka, you have to ask, ‘What is the actual audience for this product?’”

Another common practice now is limiting the amount of THC that can be in a package of product and also a single serving. “We’d want to make sure that if someone accidently ate an entire package, they wouldn’t dangerously overconsume,” says Kessler.

Black Vs. Public Markets

Among the benefits of legal pot, according to its supporters, is that the movement can put a dent in the black market. But protesters argue that legalizing and publically selling pot would actually increase the illegal aspects that accompany the drug, through diversion and abuse.

“We already have a large cannabis market in Vermont, and they’re all obtaining it through the black market,” says Kessler. “People who say we shouldn’t make it legal out of concern for public safety are missing the point. It’s already being used by a lot of people and they’re all breaking the law.”

Nor does Kessler buy the anti-pot argument that legalization would increase public violence. “From my earlier career working with criminal prosecutors, I can’t remember one case of domestic abuse where someone was too stoned to know what they were doing,” he says. “If there were a real problem, we’d already be seeing it, because we already have a large population here using cannabis.”

Garza believes that Washington sales have reduced its black market “by at least 50%.” That estimation may be conservative, he adds. The state is commissioning research into the matter to determine more exactly its success against the black market.

Washington is thorough in keeping out criminals and cartels. Anyone who applies for a license in the cannabis industry undergoes a full criminal background check, through state and federal records. Same thing for any investors and financiers.

“We don’t even do that for our alcohol industry,” says Garza of the latter. “We want to know where the money is coming from.”

Better Banking

A major problem with working in cannabis is the monetary headache. Because the drug remains federally illegal, most banks cannot accept finances from cannabis businesses. That means these businesses must pay their taxes and payrolls in cash. That’s a lot of bills to carry around — hardly a safe practice.

Washington believes it has a solution. The three state credit unions and four state banks are allowed to partake in the cannabis business.

Now, people who work in cannabis can bank with institutions and receive loans. “That’d be impossible for them if they were in the black market,” says Garza. It’s another reason for these people to work on the legal side of the industry.

So to does it fix the cash problem for taxes. Washington now collects 97% of its excise tax in forms other that cash, Garza says, compared with closer to 50% for its neighbor Oregon.

This system also doubles as another safety measure. State banks can keep an eye on cannabis finances and ensure that what’s reported for sales remains consistent with what’s actually going in and out of the bank accounts. “It’s another way to track the money,” Garza says.

What’s Next?

As grows the momentum behind the cannabis movement, so too does the conversation expand among regulators who oversee the industry.

Last year, Washington hosted a meeting of cannabis regulators from across the country. For a day and a half the officials discussed issues and topics amongst themselves, Garza said, and shared best practices.

Six months later, Oregon played host to another meeting in Portland. Those invited this time included Canadian officials, and additional regulators from other states that are considering or have recently approved recreational laws.

The regulators will meet again this May, in Denver. Officials from states with medicinal programs will join the event for the first time. “There’s opportunity here for us to learn from one another,” Garza says.

Only regulators are invited to these meetings, which keeps the conversation private and on point among those officials tasked with determining the future of legal cannabis.

Kyle Swartz is editor of Cannabis Regulator. Reach him at kswartz@epgmediallc.com or on Twitter @kswartzz. Read his recent piece, Paul Hletko on How Legal Cannabis and Alcohol Can Coexist?

Leave a Reply

Your email address will not be published. Required fields are marked *