Recreational Marijuana’s Economic Advantages

As Seattle City Attorney Pete Holmes has famously touted, marijuana prohibition and the war on drugs has failed.[1] Evidence does not suggest that the War on Drugs reduced drug-use rates or drug dependency.[2] At any given time, there are at least 137,000 men or women locked in prison or held in jail on drug possession charges, according to the ACLU and Human Rights Watch.[3] Additionally, the ACLU and Human Rights Watch report, citing FBI data, suggests that police and local law enforcement nationwide make more arrests for marijuana possession alone than for all violent crimes combined.[4] The local evidence suggests the same; in the first two years, law enforcement saw a decrease in work load anecdotally attributed to lack of those possession arrests, and now the Washington State courts are seeing the same.

The Washington recreational marijuana market has now been in effect for three years, and while the law has changed rapidly during that time, the economic benefits have clearly proven themselves. As the Washington and Colorado markets expanded, being the first two states to legalize adult and recreational use of marijuana products, other states began to take notice of how lucrative the legalized marijuana market could be, as both Washington and Colorado generated nearly 70 million dollars in tax revenue alone in each their first complete fiscal years.[5] It is clear that recreational marijuana turned the tide of the War on Drugs, and forced it to become an economic benefit that is becoming increasingly enticing to the rest of the nation.

Washington State’s Weed Economy

While Initiative 502 was voted for in November of 2012, the first Washington state producer and processor licenses were not issued until March 5, 2014.[6] In the 2014 fiscal year[7], a total of 279 producer/processor licenses were issued, and the Washington State Liquor and Cannabis Board (WSLCB) only generated 1.78 million dollars in total marijuana related income, which is impressive for how small the industry was, and for only 3 months of revenue generated during that fiscal year.[8]

The 2015 fiscal year, however, as the first complete fiscal year after legalization, showed real promise for the legalized marijuana industry:  total shelf price[9] sales generated nearly $260 million dollars, and generated $64.63 million dollars in tax revenue alone, as well as $1.08 million in just licensing fees and other related costs while the state was operating at only a 25% excise tax.

The 2016 fiscal year for Washington compounded on industry success, nearing $1 billion dollars of total shelf price sales, and created a total tax obligation of almost $186 million.[10] Much of this increased tax revenue can be attributed to the implementation of Senate Bill 5052 and House Bill 2136 in July of 2015, which, among other things, changed the state excise tax from 25% to 37% at the point of sale, and merged the less regulated medical marijuana market with the regulatory system established by I-502.

As of October 12, 2016, the WSLCB has issued 172 producer licenses, 894 producer/processor licenses, 131 processor licenses, and 445 retail licenses, which have combined to generate nearly $500 million dollars of total sales in less than four months.[11] It stands to reason, then, that the Washington market will generate well more than $1 billion dollars in total sales, leaving the state with (if sales in Washington remain on this course for the rest of the year), with around $300 million dollars of tax revenue for this year alone.[12]

Washington is not the only state that has had incredible success with regulated marijuana. Colorado has seen similar sales numbers creeping on $1 billion dollars a year and generating around $70 million in tax revenue in 2015. With five states voting on recreational legalization and 4 voting on medicinal legalization this November, it is clear that the legalized marijuana market will be a multibillion dollar industry nationwide, and the lure of tax revenue in the hundreds of millions seems to be convincing even the most historically conservative states that legalization is not only valuable economically, but is a better system than prohibition.[13]

A Better Way

With the plethora of tax money created by the legalization market, grander steps toward reducing youth access to drugs, education, and crime have occurred in the last three years than the strategies implemented by the war on drugs. According to the I-502 Fiscal Note[14] produced by the state, over the five years from the implementation of I-502 in 2012 to 2017, only $5 million dollars will be used by the WSLCB for program administration, whereas $44 million is to be dedicated to marijuana public health education, $68 million on youth drug prevention, and a staggering $244 million on health care. In fact, the state estimates that the funds generated could provide for services for up to 600,000 patients per year, and could cover a five-year average for insurance for 83,000 enrollees.”[15]

Legalization has also had significant impacts on the reduction of crime: According to Washington State Administrative Office of the Courts, court filings for low level marijuana offenses for adults over 21 has dropped 98% since the approval of I-502.[16] Additionally, according to the Crime in Washington Report compiled by the Washington Association of Sheriffs and Police Chiefs, marijuana law violations decreased 63%, and the number of marijuana related convictions has dropped 81%.[17] Legalization of marijuana has not merely freed up police enforcement and the courts however; violent crime declined by 10% statewide, and the murder rate decreased by 13%.[18] [19] Youth access and use rates have also remained steady, despite legalization, and traffic fatalities involving marijuana reported by Washington Traffic Safety Commission have seen a 4% decrease.[20] [21]

As regulation in Washington becomes increasingly robust and license standard enforcement becomes more effective, these numbers should continue to decline and profits from the industry should continue to rise. While the market may eventually level out, the sky seems to be the limit, as the WSLCB plans to continue to accept applications for new businesses.

Washington’s first three years of legalized marijuana has certainly had its struggles (Washington remains the most highly regulated of all the states that have legalized recreational marijuana) but above all else, it seems that Washington voters may be right; legalization is a better way than prohibition, and the Washington economy proves that recreational marijuana has turned the War on Drugs into a very convincing economic equation.

Anne van Leynseele, founder of NWMJ Law, led the evolution of what legal services were needed in the newly formed cannabis industry and identified how to best use her business and legal abilities. A critical step was partnering with noted cannabis trial lawyer, Aaron Pelley. Their complimentary practices brought together the power of both litigation and transactional law experience and diversified what NWMJ Law now provides.  Anne shares the responsibility with a great team of lawyers, each of them skilled in their own practice areas.

 

[1] Pete Holmes has been recorded claiming that the war on drugs has failed, and that Seattle and Washington generally has shown that legalized marijuana is a better way, both at Hempfest 2011, and more recently at the King County Bar Association new attorney Swearing-in ceremony in 2016.
[2] Tess Borden of Human Rights Watch: Interview
[3] http://www.nola.com/crime/index.ssf/2016/10/police_arrest_more_people_for.html
[4] https://www.hrw.org/report/2016/10/12/every-25-seconds/human-toll-criminalizing-drug-use-united-states
[5] http://lcb.wa.gov/marj/dashboard; https://www.colorado.gov/revenue
[6] http://www.liq.wa.gov/publications/annual_report/2014-annual-report-final-web.pdf
[7] Please note that the WSLCB’s fiscal year runs from July 1 to June 30.
[8] http://www.liq.wa.gov/publications/annual_report/2014-annual-report-final-web.pdf
[9] The WLSCB considers shelf price as sales price and tax combined
[10] http://lcb.wa.gov/marj/dashboard
[11] http://lcb.wa.gov/marj/dashboard; accessed October 14, 2016.
[12] http://lcb.wa.gov/marj/dashboard
[13] California, Arizona, Maine, Massachusetts and Nevada are voting on recreational use, and Arkansas, Florida, Montana and North Dakota are voting on medicinal marijuana provisions.
[14] The I-502 Fiscal Note uses projected numbers and estimations based on the data available at the time to project budgets through 2017, so based on the success of the industry, these numbers could be even larger at present.
[15] http://vote.wa.gov/guides/2012/I-502-Fiscal-Impact.html
[16] https://www.drugpolicy.org/sites/default/files/Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf
[17] https://www.drugpolicy.org/sites/default/files/Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf
[18] https://www.drugpolicy.org/sites/default/files/Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf
[19] It is important to note, however, that the data does not establish causation, but it is significant evidence that legalization of marijuana did not increase crime rates, as opponents to legalization seemed to believe it would.
[20] https://www.drugpolicy.org/sites/default/files/Drug_Policy_Alliance_Status_Report_Marijuana_Legalization_in_Washington_July2015.pdf; http://www.ofm.wa.gov/reports/marijuana_impacts_2015.pdf

Anne van Leynseele

Anne van Leynseele

Founding Partner at Northwest Marijuana Law

Email: anne@nwmjlaw.com
Tel: +1 844 873 6965

Anne van Leynseele, with a JD and an International MBA, is the consummate corporate cannabis lawyer. Anne views legal issues through a commercial lens and becomes a trusted legal and business advisor to her clients.

Before founding NWMJ Law, Anne was an attorney advisor in Washington DC in another highly regulated industry, Health Care law focusing on adjudication review. Previously she was also a business management consultant specializing in commercial transactions and process efficiency.
Anne is passionate about helping cannabis businesses and organizations maximize productivity by assisting them in understanding and complying with the fast-paced changes happening in Federal and State laws, regulations, and policy. She spent four years as a federal attorney advisor of health care policy in Washington DC; upon her return to Washington State she jumped into passing a State law regarding patient record confidentiality. On a daily basis, Anne applies her business acumen and regulatory knowledge to encouraging best business practices in the burgeoning cannabis industry.

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About Anne van Leynseele

Email: anne@nwmjlaw.com Tel: +1 844 873 6965
Anne van Leynseele, with a JD and an International MBA, is the consummate corporate cannabis lawyer. Anne views legal issues through a commercial lens and becomes a trusted legal and business advisor to her clients. Before founding NWMJ Law, Anne was an attorney advisor in Washington DC in another highly regulated industry, Health Care law focusing on adjudication review. Previously she was also a business management consultant specializing in commercial transactions and process efficiency. Anne is passionate about helping cannabis businesses and organizations maximize productivity by assisting them in understanding and complying with the fast-paced changes happening in Federal and State laws, regulations, and policy. She spent four years as a federal attorney advisor of health care policy in Washington DC; upon her return to Washington State she jumped into passing a State law regarding patient record confidentiality. On a daily basis, Anne applies her business acumen and regulatory knowledge to encouraging best business practices in the burgeoning cannabis industry.