It sounds like the plot of a classic action movie: “Robber gangs” hassling western state business owners, making off with huge piles of cash and merchandise. And yet the high stakes blockbuster unfolding today is exposing the “The Good, The Bad and The Ugly” of trying to run a legitimate marijuana store. So before you decide to get into the business, you might need to ask yourself, “Do I feel lucky?” Well, do you?
This next great action movie all started in 2012 when two states, Colorado and Washington, became the first to legalize the sale and recreational use of marijuana at the state level. At the time, Colorado Governor John Hickenlooper warned that the actual act of legalizing marijuana would be complicated, “so don’t break out the Cheetos or goldfish too quickly.” And he was right: the process took Colorado over a year to complete, finally allowing the first sale of recreational marijuana on January 1, 2014.
But even as the first 136 retail marijuana businesses in Colorado get off the ground, federal law is “harshing the buzz” of business owners and making it hard (and even dangerous) to legally sell pot.
The first thing to remember is that in this country (under the constitution), federal law is considered the “supreme law of the land.” This is another way of saying that in the U.S. any given state can legalize whatever it wants, but if the federal government says it’s still illegal, then it is—it doesn’t matter what the states legalize. And, sure enough, under the Controlled Substances Act of 1970, <href=”#cntlsbb” >Tetrahydrocannabinols (a.k.a marijuana—hard to imagine why that isn’t its street name) is a Schedule 1 drug (like heroin, LSD, and ecstasy), meaning that according to the Drug Enforcement Agency (DEA), it has “no currently accepted medical use and a high potential for abuse” and possession of marijuana can earn someone up to five years in prison and a fine of $250,000.
So herein lies the first complication for running a marijuana business—it’s still illegal under federal law. For the time being, U.S. Attorney General Eric Holder is permitting Colorado and Washington to legalize marijuana within their borders but will still prosecute individuals who, among other things, distribute to minors, move marijuana to other states, etc.
Although the Justice Department is allowing Colorado and Washington to regulate their new marijuana industries, the minor detail of marijuana’s continued illegality still complicates these businesses’ day-to-day operations. As the New York Times reported last month, banks are refusing to work with marijuana shops due to fears that federal prosecutors would come after them for money laundering or aiding and abetting drug trafficking. Federal rules also prohibit banks from “taking money from criminal enterprises” (which, as discussed above, marijuana businesses still are under federal law).
Since the nation’s financial institutions are keeping their distance, marijuana retailers are forced to run all-cash businesses. This wouldn’t be as big of a problem except for the fact that armored car companies (who would traditionally transport large amounts of cash for businesses) are also reluctant to work with marijuana retailers.
Not good. The logical next thought is that if you can’t have an armored car transport your money, you should arm your employees that do it for you. But this presents yet another challenge. Remember when I said there were still things the federal government will prosecute within the Colorado and Washington marijuana industries? It turns out that one of those things is “the use of firearms in the cultivation and distribution of marijuana.” The pot—I mean plot—thickens.
So now marijuana retailers have to deal in all cash, can’t hire an armored car to transport their money, and presumably can’t own guns to protect their stores. As a result, it’s not exactly surprising that NBC News reported last week that “robber gangs” are “terrorizing” Colorado retail marijuana shops. These “High Crimes” (have to give NBC credit for the excellent pun) are making it dangerous for these new businesses to operate. As Denver’s District Attorney Mitch Morrissey told NBC, there is a serious monetary incentive for criminals: “You hit a 7-Eleven, you’ll get 20 bucks. You hit a dispensary, you’ll get $300,000 on a good day.”
As a result of these crimes, officials are already looking for ways to help business owners navigate their complex legal environment. The WSJ reported earlier this year that the justice department is working on guidelines for banks, but some have said that might not be enough to reassure banks. However, as long as marijuana remains illegal at the federal level, there will likely be complications for the legal marijuana industry.
While retailers await more clarification, maybe it’s time to invest in a safe like the one at the Bellagio in Ocean’s 11. Although, maybe that’s not the best example.
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