The Unintended Consequences of Legalizing Weed

In 2015, the Colorado’s legal weed market saw a whopping $700 million in sales, generating $63 million in tax revenue.

[Photo Credit: Chicago Tribune/Getty Images]

In 1996, California became the first state to legalize medical marijuana. Less than two decades later, in 2012, Colorado became the first state to legalize the recreational use of marijuana, opening the door – or at least the door for conversation –  of the legalization of cannabis on a Federal-level.

In 2015, the Colorado’s legal weed market saw a whopping $700 million in sales, generating $63 million in tax revenue. This figure doesn’t include the additional $13 million collected in licenses and fees. Washington, Alaska, and Oregon have similarly “reefed” the benefits of the legal weed market, which has proven to be handsomely profitable.

Cannabis advocates and fans now have high hopes that California will be the next state to (in the words of Sean Paul) “legalize it.” But while the weed market sounds economically promising for the State, there at least some negative and unintended consequences for select residents.

According to a recent Latino USA podcast segment “Smoked Out,” California currently allows residents to grow a certain amount of weed, so long as they have the necessary recommendation from a doctor.  But there’s a loophole – medical marijuana patients are permitted to “grow collectively” with other medical marijuana patients. This group collective, in turn, often sells the weed it has grown to medical marijuana dispensaries.  This practice is not technically legal (federally), but the government typically turns a blind eye to these minor offenses.

What many may not already know is that some of the growers in California rely on the income earned from these sales – it is their livelihood. The Latino USA segment poses an interesting question, but undeniable reality – if California does legalize recreational use, will these individual and group growers, most of whom are minorities, be edged out of the equation?

According to Latino USA, almost half of all drug arrests across the country are marijuana-related. Of the nearly 700,000 marijuana-related arrests in 2014, 88 percent were simply for possession. Minorities are disproportionately affected and make up the majority of these arrests – despite the fact that data has consistently shown that whites smoke weed at the same rates as nonwhites.

Colorado has seen a dramatic decline in arrests after legalizing the recreational use of weed, which is undeniably good news, and the same would surely happen in California. But for those looking to get into the business, state legalization also presents its own set of fiscal barriers.

Because banks are Federally-backed and weed is not legal on a Federal-level, the legal weed industry is a cash-based industry. In “Smoked Out,” an interview with a young man from San Francisco reveals that “it takes a lot of capital to start of a medical marijuana/cannabis dispensary” – about $60,000 just to prepare the application.

It is costly to get into the legal marijuana business, and because bank loans are out of the question, it is nearly impossible without funds or investors. That is good news for big businesses with a lot of capital to invest, but bad news for the aspiring businessman or the grower with a dream of opening up his or her own legitimate marijuana dispensary.

There is little debate that the State of California stands to gain millions in revenue should residents vote in favor of legalizing recreational marijuana use, but a number of individuals across the State become unintentional pawns and stand to lose. In the event that Californians favor the proposal, one can only hope that revenue generated will be reinvested into the communities – especially communities of color, which are disproportionately arrested for marijuana-related crimes.