Many of the entrepreneurs, like Kelly, have had little previous experience with marijuana. “We’re not those Woodstock hippies who have had secret grows in the mountains for decades,” Kelly said. “We’re business people.”
This isn’t business as usual, however. The federal government has cautioned many banks against handling marijuana finances. Many smaller pot businesses have been unable to find a bank to take their money and must operate on a cash-only basis, creating vexing problems with security and accounting. Kelly said she lost four bank accounts last year as one institution after another said they could not risk doing business with her company.
“The people who are lucky enough to have bank accounts guard them with their lives,” she said.
In her Lakewood, Colo., store, a two-ton safe bolted to the floor behind the counter holds a dozen gallon jars full of cannabis. With a doctor’s prescription, you can buy marijuana in just about any form in this store: rolled into joints, filling an e-cigarette cartridge, baked into chocolates and cheesecake cupcakes, or concentrated in Cannacap pills, lemon drops, Cheeba Chews, hard candies and liquid tinctures with flavors such as orange and agave.
Kelly says she has to pay premium rent for her storefront because landlords are wary of marijuana businesses, considering them risky ventures that can attract an undesirable clientele. She has also spent thousands of dollars upgrading her operation’s security to guard against thieves who could be attracted to the copious amounts of cannabis and cash.
Making her financial situation even worse, distributing marijuana isn’t a legitimate business expense under the tax code, so her company can’t deduct most of its expenses. Kelly’s business lost money last year, she said, after paying income tax.
Nor can these retailers use many of the traditional means for promoting consumer goods, such as advertising. Denver bans outdoor ads for marijuana, and most mainstream media outlets won’t run them. Kelly recently tried to sponsor a radio public service announcement about safe driving, but had her money returned by the station management.
Complying with a thick and evolving book of state regulations is another challenge. The rules, for instance, require each marijuana plant to be placed under video surveillance and tracked from seed to sale, at times by carrying a bar code.
Many more regulations are coming. Under Amendment 64, the legislature must tax and oversee cannabis stores for the general public as well. A
task force appointed by the governor
this month issued recommendations for those laws, which must be finalized before the legislative session ends this spring.
Many medical marijuana business owners, including Kelly, opposed Amendment 64 over concern that it would upturn their growing businesses or prompt action from the federal government. But now she and many other owners see the legalization of pot as a great business opportunity.
And medical marijuana businesses are seeking to have the tight regulations they follow expanded to recreational use, deploying a bevy of lobbyists to work the task force and the legislature. That has led advocates for liberalization to complain that the industry is trying to limit competition. For the first year, only retailers that sell medical marijuana will be allowed to sell pot for recreational purposes.
Business owners counter that by tightly regulating their industry, Colorado has avoided the kind of federal scrutiny given to other states, such as California, which largely leave regulation of medical marijuana to local jurisdictions.
The U.S. Drug Enforcement Agency is watching Colorado, but has yet to intervene in a dramatic way. The agency sent letters to some Colorado dispensaries within 1,000 feet of schools, warning them to shut their doors. Some business owners took that as a tacit endorsement of the state’s approach.
Federal policy on marijuana businesses will likely be fluid for some time, and disruptions in the marketplace may yet come. For Kelly, it won’t be the first time.
“We’ve changed our business plan like five times,” she said.
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