Where Washington Went Wrong with Weed

Errors made during the implementation of legal Cannabis in Washington state present a cautionary tale for other states looking to legalize.

It is no secret that the legal weed industry in Washington has not enjoyed the same smooth success as its counterpart enterprise in Colorado, where millions of dollars of taxed Cannabis revenue have streamed into the state since its inception. Bureaucracy, murky comprehension of existing laws and regional discrepancies abound, presenting a fine example of what to keep and what to expel in subsequent legal states.

To be fair, being the second state in the entirety of the country to outright legalize Cannabis is a huge accomplishment, but it is also one that has been closely watched by other prospective legal states - in addition to detractors hoping that legal weed implementation will fail and the United States will return to incarcerating drug users in droves. Anyone interested in legalization in their state should closely examine the approach taken by both Washington and Colorado, as we may all learn how to do it properly, in the case of the latter - and how to screw everything up, in the case of the former.

Not Enough Shops or Cannabis, Too Many Customers

Seattle, in the state's most populous King county, is home to only one pot shop. That particular location currently comprises half of all shops in the entire county. Thus, even though King has the highest population in the state, only two licenses have been issued to cover all potential customers in the area. Shortages are imminent and have already been experienced by retailers. Such shortages have artificially inflated prices, encouraging many smokers to simply stick with their local (black market) dealer, and medical card holders to continue to patronize dispensaries rather than recreational pot shops. Additionally, some smokers will be deterred by having to drive twenty, fifty or even a hundred miles to the nearest pot retailer when their roommate sells it for the same price or less.

The main reason that Washington's relatively new pot shops are already out of weed is that the state hired a consulting firm whose responsibility it was to determine roughly how much Cannabis would be needed to stock the few shops that were initially allowed to open at the beginning of July. Unfortunately, these estimates are quickly playing out as having been far too conservative and the implications are grave.

The firm is called BOTEC, which is shorthand for 'Back of the Envelope Calculation', perhaps revealing how inaccurate their estimates would prove to be. The idiom generally implies hasty scribblings on the nearest available scrap of paper - such as the back of an envelope - and although the data would be more accurate than a regular guess, the implication is that the conclusion would not be reached as a result of methodical, mathematical calculations resulting from detailed analysis of available statistics. As it turns out, the company's projections were way off base.

In 2013, BOTEC informed the governing body of legal Cannabis, the Washington State Liquor Control Board (WSLCB), that the state would need to license two million square feet of Cannabis canopy over the first year of the legal industry. This would account for only about twenty-five percent of the state's needs - based upon current, existing figures for the market. Where the remaining (illicit) seventy-five percent would originate is anyone's guess, and those estimates are, unsurprisingly, far less sufficient than predicted. To make matters worse, those projected figures have not been fulfilled.

Just after legal weed was implemented, Brian Smith, a spokesman for the WSLCB, told Seattle's The Stranger that fewer than eight percent of the estimated canopy intended to replace black market weed had been addressed. He confirmed that only ninety production licenses had been issued for a total canopy of 687,644 square feet.

Due to constantly changing rules and a rushed application and licensing process, many of those state-approved gardens were nowhere near harvesting by the time the first pot shops opened, leading to mass shortages and swiftly rising prices.

Legal Cannabis Is Just Too Expensive

SSUSA previously reported on issues plaguing the WA industry just a few weeks after its inception and, unfortunately, the situation has not improved. Prices were originally artificially inflated due to shortages and not enough retailers; however, the pricing problem persists and not just because there is not enough weed to go around. Taxes, although exorbitant, have earned nowhere near enough revenue, in spite of Cannabis being taxed three times throughout the retail process, meaning that consumers are on the losing side of bud bureaucracy.

Washington was intended to earn $51.2 million in tax revenue between 2015 and 2017, but the industry is already falling far short of such projections.

Pot products are initially taxed three times at a twenty-five percent rate, forcing customers to pay around forty-four percent taxes on each purchase. A twenty-five percent tax is levied at the growing and production, wholesale and retail phases, creating an unnecessary price hike that consumers can avoid by instead choosing to purchase their smoke from an illegal dealer. Many medical patients have eschewed pot shops and continued purchasing Cannabis from dispensaries instead, due to the lower prices available in the medical scene.

While weed from a dealer usually costs between eight and twelve dollars per gram, licensed medical dispensaries are pricing their grams at around ten to fifteen dollars. Legal recreational Cannabis, on the other hand, is being sold for anywhere from eighteen to forty dollars per gram, forcing customers to choose between dealers and the legit, regulated industry for which many activists have been fighting over the past decade or more.

Carbon Footprint Concerns

Because there have been so few shop licenses issued across the state, some customers will be forced to drive up to a hundred miles in order to score some legal pot. Add the cost of gasoline for a trip of that length, and legal weed suddenly costs a lot more for consumers than when simply purchasing it from a friend or local dealer.

Additionally, having so few growers and processors supplying the initial 334 license holders in Washington means that fewer producers must somehow transport their weed wares to awaiting shop owners - on top of higher mileage and associated costs, such as security, some business owners are now wondering if there will be an increase in road incidents, for example, robberies or carjacking.

WA Policies Do Nothing to Quash Cartels, Street Dealers or Drug Gangs

As previously mentioned, flaws in the new system - such as too few license-holders in populous areas, not enough product or suppliers and long drives to the nearest weed retailer - mean that the current system in Washington state does little to deter street dealing, or cartel or gang activity. The holes in the market have not been filled by the WSLCB's implemented policies, as the over-regulation of legal Cannabis has deterred many legitimate would-be entrepreneurs; illicit distributors are feeling no ill effects of the legal pot industry, which means that the state has not done enough to replace the black market or to deter normal, law-abiding folks from choosing a street dealer over a licensed shop.

Black Market Lives On; Cannabis Is Not Legitimized

Washington's system is intended, and theoretically designed, to replace the black market trade of Cannabis. However, hasty and inaccurate projections have resulted in a system that replaces under ten percent of illicit marijuana. Again, poor dispersion of not enough licenses has left giant gaps in the distribution process of legal weed, creating multiple dead zones across the state where adult smokers must choose between a long drive and potential disappointment when the shop they finally reach is out of most - or all - of their Cannabis, or sticking with illegal and unregulated sources of their preferred relaxant.

Perhaps the strangest aspect of shop license distribution - which superficially affects potential customers more than the distribution of licenses for growers - is how few have been placed in densely populated, urban areas. High prices and shortages mean that weed is still less expensive and easier to purchase from friends, or worse, on the street, where everyday folks may become victims by being subjected and exposed to a criminal element. This approach fails to legitimize legal Cannabis and its users, while concurrently failing to create the customer protection and industry transparency that initially compelled weed legalization.

Bureaucratic Approach to Legalization by the WSLCB Was Hurried and Poorly Prepared

A strange blend of heavy-handed and ill-timed strategies - combined with constantly changing sets of rules, a lottery that shut out some strong prospective retailers and a fallacious approach of basing pot regulations upon the state's alcohol history - have created a quagmire of confusion. It appears that the rushed implementation is not based upon facts or reliable conjectures, which is strange, considering how well Washington's medical Cannabis industry has worked. Apparently the WSLCB applied skewed logic, research and projections when determining their rule-making process and, according to some, failed to maintain a standard throughout the application and implementation periods. This has led to an unstable industry and unpredictable market - save for the vast shortages that are raising prices and limiting accessibility and revenue across the state.

Unusual Processes Used to Determine License Holders

Rather than welcoming and licensing potential owners who had passed strict vetting processes and giving people time to prepare their businesses, the WSLCB allowed those pursuing licenses to submit as many applications as they wanted during a month-long window in late 2013, not long before implementation, as long as a $250 fee was paid for each attempt. Although business owners are limited to having three or fewer pot shops, potential retailers could submit unlimited applications and those submitting multiple applications may have skewed the lottery in their favor, potentially bypassing other experienced and deserving applicants.

This also invites an uglier side of the legal marijuana business into Washington, as already wealthy weed magnates from states such as California and Colorado attempt to insert themselves into the state's newly-formed legal industry. Rather than licensing those who are well equipped and qualified local business owners, the hapless lottery approach has allowed unprepared or questionable entrepreneurs into Washington's system.

Perhaps one of the largest issues plaguing the WA weed industry is that, sometimes, even the state is unclear on exactly where pot shops may legally be opened. This is a result of murky zoning language in Initiative 502, leading to confusion at the lack of the WSLCB's ability to provide guidelines on where such shops are prohibited.

Lessons to Be Learned

While the implementation of legal Cannabis in Colorado has not perhaps commenced as smoothly as some would have preferred, it is clear that the approach made by proponents and authorities in that state merits some praise. The profits are higher, bureaucracy has run more smoothly and business owners and customers alike seem to be generally happier than their counterparts a few states away in Washington. Perhaps the Colorado industry should serve as a basic template for those wishing to legalize, while Washington's approach and subsequent mistakes are regarded more as a cautionary tale.