US Marijuana Legalization Creating Growing Pains for Fledgling Industry

Grow Big lost its bank account; bankers concluded it was not simply a garden supply retailer

SOURCE: The Observer
AUTHOR: Andrew Gumbel

On a dark industrial street on the outskirts of Denver, Colorado, shabby cars and the occasional truck disappear down an alley, as though heading to a secret meeting. Their destination, around a heavily rutted corner lined by chain-linked fencing, is a large warehouse that used to be a paintball arena but now boasts row after row of sophisticated drug-making paraphernalia.

Bags of enriched soil for growing marijuana are stacked up on pallets. There are rows of lighting equipment and ventilation systems, shelves crowded with Liquid Karma plant food and bat guano fertiliser - everything a serious dope grower could possibly dream of.

At first glance it looks like the marijuana equivalent of the vast underground meth lab in the TV series Breaking Bad. But this is Colorado in 2014 and growing and selling dope for recreational use is legal. On this night, the Grow Big warehouse is thanking customers with free cocktails, a barbecue and go-go dancers twisting to a propulsive beat in improvised cages halfway up the graffiti-strewn walls.

To all appearances, Grow Big is living up to the promise of its name. Two years ago, there were only a couple of employees; now there are nearly 30. In June, the owner, Oliver Poiss, threw a huge summer solstice party with six wild boar roasting on spits and a $10,000 equipment giveaway. He doesn't just sell to Colorado's growing throng of dope dispensaries, but to individuals too. A starter indoor growing kit, with lighting, ventilation, pre-enriched soil and plant nutrients starts at $239.

Yet a whiff of the forbidden still attaches to the place. In his man-cave of an office above the main warehouse floor - with large black-and-white photographs of naked women on the walls and enough lingering smoke to make your eyelids burn - Poiss describes how, a couple of months ago, Grow Big lost its bank account because his bankers concluded he was not simply a garden supply retailer, but an indispensable part of the marijuana industry, which under federal law the banks are not allowed to service.

When a fire marshal visited recently, he inspected every corner of the place in search of the tiniest possible violation. (He found nothing.) When Poiss files his corporate taxes, he cannot write off the salaries of his employees, or his material purchasing costs, or his rent, or his lighting bills, or indeed the cost of all the food and drink he lavishes on his customers every Thursday night.

This is what America's great experiment in marijuana legalisation looks like: exuberant, energetic, expanding fast yet still bogged down by a government bureaucracy attached to the old way of thinking, before voters in state after state said they wanted to liberalise the laws on both medical and recreational marijuana and end the costly and, in many ways, damaging war on drugs.

Some of the new entrepreneurs, like Poiss, fit the dopehead stereotype, with shaggy hair, beards, a fondness for plaid shirts and a faraway look in their eyes as they speak. Others are sharper and better able to articulate their cause to sceptical lawmakers and to the conservative bedrock of Colorado's population outside the main urban centres in Denver and Boulder.

But they all straddle the fine and ever-evolving line between what is legal and what is not, what one city will allow but the neighbouring suburb will not, what the state gives its blessing to but the federal government still treats as anathema to civilised society.

Toni Fox, whose 3D Cannabis Centre made the first legal sale of recreational marijuana in Colorado in January, said she had to lobby her bank, her bank's lawyer and the federal banking watchdog before being allowed to maintain her bank account - and even then her bank was told she was to be an exception, not the new normal. Her sellers, known in the trade as "bud-tenders", can take only cash and they direct customers, if necessary, to a pair of cash machines in the entrance way. Security is an abiding concern.

"I have girlfriends in this industry who have vaults all over town full of cash," she said. "One was robbed at gunpoint outside a restaurant with tens of thousands of dollars on her. It's extremely dangerous. Will it take one of us getting killed to fix the problem?"

It is, of course, very early days. Colorado has allowed recreational marijuana sales for seven months and Washington state began less than a month ago. Most entrepreneurs are tough enough to put up with the many obstacles, because this is the new frontier and the market is taking off.

3D invites customers to tour its indoor plant-growing facility, much as wine buyers in the Napa valley might be invited to tour a winery. Dope tourism is booming, as tour companies offer smoke-clogged limo rides to cannabis shops, tourist sights and even - on the so called Willie Wonka tour offered by Rocky Mountain High Tours - a chocolate factory offering dope-infused food. People are offering rooms and apartments to tourists offering free samples, dope-infused mints on the pillow and, occasionally, instructions that while dope-smoking is tolerated or even encouraged, tobacco is not.

People in the industry are calling this the "green rush" and they couldn't be more excited. "We're creating a brand new industry," Fox said. "We have to have patience and also be a little crazy."

So they get creative when it comes to the lack of access to banks and financing. Poiss found another bank willing not only to take his business, but to relieve him of the onerous cash-handling fees his previous bank had levied - about $40,000 in 2014 alone.

The hope, over time, is that the federal government will lift the banking restrictions and bring the industry's tax reporting in line with all other businesses. And, if that happens, they fully expect big companies to move in, with investment capital, buyout offers and marketing muscle that will add to the mounting clamour for blanket legalisation of marijuana.

"National legalisation is on an expedited path," said Mark Scruggs, who helps run a website called weedmaps, the industry's answer to online directories and review sites like Yelp. "I thought when I got into this business that it would take 20 years longer. It's hard to change the mindset of 70 years of propaganda, but the days of cannabis prohibition will be over soon."

One promising sign is that last week the New York Times endorsed legalisation with a series of opinion pieces debunking myths about "reefer madness" and examining the social costs of locking up large numbers of young men, most of them black or Latino, on trivial possession charges. (That did not, however, stop Scruggs's organisation putting out an online petition calling on the Times‘ parent company to stop drug-testing its employees).

A more local development this weekend was Denver playing host to the first "pot pavilion" at a county fair anywhere in the US. Stands include tour companies, stores like 3D and Starbuds ("low prices for high people"), something called the Cannabis University (for "higher education"), and the inventor of a gadget called the Toker Poker, which helps pack hash into a pipe, cleans it out again afterwards and provides a handy pocket for a lighter.

Richard Scott Taylor, who put the pavilion together, described it as "a giant barrel of wacko". He couldn't have any dope on the premises and had to move an edibles cooking contest and other events off site. (But the Grateful Dead karaoke and the hemp socks stayed.) His reflection on the contradictions of Colorado's new world of legalised pot: "The large print giveth and the small print taketh away."

For all the growing pains, Colorado's experiment is broadly seen as a success. When the state first endorsed medical marijuana sales in 2010, it insisted that dispensaries grow most of their own plants - a move that minimised the risk of the black market bleeding into the legitimate market and gave dispensary owners a stake in the industry. When recreational marijuana was allowed this year, it was sold only by existing dispensaries at first so it did not become a free-for-all.

The state has thus struck a widely praised balance between liberalisation and regulation. When problems arise, as they have with dope-infused food that has proved too strong or too easy for children to get hold of, the industry and the state have joined forces to fix them.

Washington state, meanwhile, has gone in a different direction, erecting far stricter barriers to licensing through the state liquor control board, but opening the sale of recreational marijuana to just about anyone. The results have been rocky so far: only 24 dispensaries were licensed on opening day last month, and only one in Seattle, where the queues are monstrous.

A number of states have already followed Colorado's model for medical marijuana and the chances are that they will do the same as voters push to expand legalisation for recreational use later this year - in Alaska, Oregon and the District of Columbia - and beyond.

"It's not easy to regulate an industry that's never been legitimate," Scruggs said. "Colorado is an incubator, where the model is being refined all the time. The more it is shown to work, the harder it will be for naysayers in Georgia or Indiana or anywhere to argue that this is a bad idea."

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