MJ News for 08/13/2014


Jul 25, 2008
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Colorado aims to produce more legal pot

Seven months after Colorado legalized recreational pot, the state has an unexpected problem. It needs to grow more.

Because even though sales have surged, only about 60% of the marijuana sold is the legal variety. The rest is either illegal or grown unregulated in the so-called gray market, where unlicensed citizens can grow for their own use.

Colorado residents and visitors will consume an estimated 287,000 pounds of marijuana in 2014, but only about 170,000 pounds will come from legal medical or recreational outlets, according to a report commissioned by the state Marijuana Enforcement Division.

The rest, about 118,000 pounds, or 41%, is expected to be produced by people who can legally grow up to six pot plants for personal consumption, registered caregivers who provide marijuana to medical patients, and black market producers, including gangs, who operate outside the Colorado legal system.

As a result, Colorado state regulators are trying to increase the amount of marijuana produced and sold by legal retailers.

"Right now, we are pretty significantly under what should be produced," said Ron Kammerzell, deputy senior director of enforcement for the state Department of Revenue.

"What that does is, (it) raises the prices and if the price is too high, then we can't compete with the black market and that was our ultimate goal — we wanted to eliminate the black market," Kammerzell said.

However, new data comparing demand for marijuana in Colorado with the legal supply suggest that criminal enterprises could stay in business.

"Basically, the state is trying to ensure that the amount that is being grown in Colorado equals what the demand is," said Mike Elliot, executive director of Marijuana Industry Group, a trade association for the state's marijuana industry. "If there is too much, then people want to take it out of state or sell to kids (minors), and if there is too little, then the black market will fill in the gaps."

Reducing the black market is not only a state goal but also a federal priority.

U.S. Deputy Attorney General James Cole issued a memorandum last year that listed selling to minors, exporting marijuana out of state and enriching the black market as offenses to be avoided in order to keep the Justice Department on the sidelines in states where pot is legal.

Although the state, federal government and legal marijuana businesses all hope to undercut the black market, their ideas about how to do so vary dramatically.

Marijuana retailers say supply isn't the issue. The real problem is price.

"After the cost of producing each pound, I still have to pay a 15% excise tax, licensing fees, huge rent because landlords overcharge marijuana dispensaries, and when I pay federal income tax I can't deduct like a regular business," said Brian Ruden owner of Starbud, Altermeds and Tree of Wellness medical and recreational outlets in Denver, Colorado Springs and Louisville, Colo. "I am selling an eighth (of an ounce) for $60 when the street price is about $25."

On average, state, local and federal sales taxes on recreational marijuana are just over 21%, while the taxes on marijuana for medical uses are about 7.6%. The federal government still categorizes marijuana as a dangerous illegal drug, but it collects tax revenue on its legal sale in Colorado and Washington.

The black market benefits from the high taxes, too — because its products can be sold for much less.

"I have had locals come in here without their med cards, and ask what our recreational prices are and just turn around and leave," said Nelson Figueiredo, a "budtender" at Medicine Man dispensary in Denver. "They have friends who can sell them pot much cheaper."

As the Colorado industry continues to grow, regulators hope to allow steady growth of the legal market.

"We really want to do this in a very predictable and controlled way," Kammerzell said. "I think what we are seeing is that the biggest driver right now is supply, and that is what we intend to address."


Jul 25, 2008
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Banks are slowly welcoming legal marijuana dealers

A top federal official on Tuesday said that 105 banks and credit unions are doing business with legal marijuana sellers, suggesting that federal rules giving financial institutions the go-ahead to provide services to dealers are starting to work.

The Obama administration in February gave the banking industry the green light to offer financing and accounts to pot distributors who can legally conduct business in 20 states and the District.

Sellers hailed the decision as a step toward bringing marijuana commerce out of the shadows and into the mainstream financial system. But banking groups said the guidance did little to allay fears of doing business with companies whose products remain illegal under federal law.

At an anti-money-laundering conference Tuesday, Jennifer Shasky Calvery, director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), praised the success of the federal rules.

“From our perspective, the guidance is having the intended effect,” she said. “It is facilitating access to financial services, while ensuring that this activity is transparent and the funds are going into regulated financial institutions.”

Calvery said the 105 banks and credit unions doing business with marijuana sellers are located in states representing more than a third of the country, but she did not provide the names of the banks or the states where they are located.

Before the guidance, banks had to notify federal regulators of suspicious or illicit activity, such as moving money from drug dealing. To address that conflict, the new rules established three categories of marijuana-related reports.

Treasury said banks could file a “marijuana limited” report that says the dealer is following the government’s guidelines, including ensuring that sales revenue does not wind up in the hands of criminal enterprises. Calvery said banks have filed 502 of those reports since the guidance was issued.

If the bank believes the dealer’s revenue is not coming exclusively from legal sales, then it has to file a “marijuana priority” report to alert regulators. There have been 123 of those reports filed, she said.

When a bank ends its relationship with a pot seller, it has to file a “marijuana termination” report, which accounts for 475 of the reports FinCEN has received since February, Calvery said.

Don Childears, president of the Colorado Bankers Association, said, “Banks are still worried about doing anything to raise concerns among their regulators, which is why we need Congress” to intervene.

Credit unions and banks are wary of running afoul of money laundering statutes by accepting proceeds from an activity considered illegal under federal laws. That has made it difficult for legal marijuana dispensers who must operate exclusively in cash, placing them at greater risk of being robbed.

“Our members that are working with the banks are being told not to talk about it,” said Taylor West, a spokeswoman for the National Cannabis Industry Association.

West said the system created by the Obama administration is “so heavy on regulation . . . it has not led to a tidal wave of openings in a way that we had hoped.” Yet, she said, it is encouraging to see more institutions starting to work with the industry.

“We still need a long-term sustainable solution and that comes in the form of policy or congressional action,” West said.


Jul 25, 2008
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Colorado's Marijuana Black Market Is More Complicated Than It Looks

Depending on whom you ask, Colorado's marijuana black market has either vanished or expanded since weed was legalized in the state. Mexican pot farmers have anecdotally said they're taking a beating, but one illegal Colorado drug dealer told The Washington Post that his business was growing. So which is it?

Turns out that's a tough question to answer. A comprehensive market analysis, released by the Colorado Department of Revenue's Marijuana Enforcement Division in July, looked at supply and demand in the state's marijuana market, but the report did not offer granular detail about the supply side.

So The Huffington Post spoke exclusively with Adam Orens, one of the lead researchers on the analysis, who broke down the supply side numbers -- including the current best guess on the size of the black market.

he report released last month is likely the world's first post-legalization study of a marijuana marketplace. It was prepared by the Marijuana Policy Group, a collaborative effort of BBC Research & Consulting -- Orens' employer -- and the University of Colorado, Boulder, Business Research Division.

Researchers found a lot of demand: an estimated 130 metric tons a year, "much larger than previously estimated," the report notes. Of that 130 metric tons, the study indicates that 77 came through two regulated supply channels -- 55 metric tons, or 42 percent of the total, from medical marijuana shops and 22 metric tons, or 17 percent of the total, from recreational marijuana shops.

But the report describes the remaining 53 metric tons as supplied from outside the main regulated framework, without any additional information about those segments of the market.

Orens noted that all "these numbers are moving, these numbers are changing,” and that there is a preliminary nature to the data in the report, which tracked Colorado's marijuana marketplace for the first three months of 2014. Researchers used exact numbers when possible but also relied on some educated guesswork when clearer data were not available.

That 53 metric tons, Orens said, could be separated into three distinct suppliers: medical caregivers, home growers and the black market.

Medical caregivers who facilitate the use of marijuana and home cultivators of recreational pot constitute what the report calls the "gray market," because these supply channels, while legal, are less regulated. According to Orens, 34 metric tons, or 26 percent of the total demand met, was attributable to caregivers, and 12 metric tons, or 9 percent of the total, came from home growers.

"The caregiver and home grow market data is based on some assumptions," Orens said. Researchers made rough estimates of how many patients each caregiver facilitated, how many home growers there are in-state and how much yield home growers -- with their wildly varying cultivation skills -- can squeeze out of their plants, among other things.

Neither caregivers nor home growers are directly monitored by the Marijuana Enforcement Division. Caregivers fall under the regulatory purview of the Colorado Department of Public Health and Environment. Researchers weren't able to obtain exact data from the health department in time for the study, so they made their estimates based on public information. Home growers merely have to notify the Marijuana Enforcement Division that they are present and growing, but aren't otherwise regulated by the division, explained Natriece Bryant, communications specialist at the Department of Revenue. That means the level of detail available about the fully regulated market -- in large part due to the state's seed-to-sale Marijuana Enforcement Tracking, Reporting and Compliance (METRC) system for retailers and commercial growers -- just isn't there for the gray market.

To estimate the black market, the researchers then subtracted the total metric tons supplied legally -- through medical marijuana shops, retail stores, medical caregivers and home growers -- from the total amount supplied. According to Orens, the black market came to 7.5 metric tons, or 5.7 percent of Colorado's marijuana supply.

"We did not use our survey to ask individuals how they obtained marijuana," Orens said, adding, "We did not conduct a separate supply-side study nor did we target surveys to black market demand. If there was more time and resources, that type of surveying would be useful, but very difficult to obtain."

While this is just preliminary information on the first three months of legalization, far too little time to measure any emerging trends, the study suggests a small black market survives amid a huge regulated market.

The report concludes that it remains "unclear how large the black market is in Colorado and how the introduction of retail marijuana will affect its size." The authors speculate that if the price of unregulated pot remains as high as it was in early 2014, "the black-market production could continue" -- albeit only if that higher price remains competitive with the regulated market. But they argue that the regulated market is "likely to reduce market share held by the black market. If prices are similar, consumers would likely shift to the regulated market because the selection, quality, and product safety is generally much higher at a licensed retail provider."

There is some anecdotal evidence that supports the numbers supplied by Orens about the size of the black market in Colorado. Earlier this year, The Washington Post spoke to Mexican marijuana farmers who said that the wholesale price of marijuana is falling, due in part to rapidly changing laws in the U.S., and driving them out of the cannabis trade. News site Vice also recently spoke with retired federal agent Terry Nelson, who said that legalization is "hurting the cartels," which aren't "able to move as much cannabis inside the U.S. now."

A 2012 report by the Mexican Competitive Institute, a Mexican think tank, forecast that recreational marijuana legalization in Colorado, Washington state and Oregon might cut into drug cartels' profits by as much as 30 percent.

However, there have also been stories of Colorado marijuana being found in drug busts large and small in more than two dozen other states and of a thriving black market still in existence in Colorado. In other words, it's entirely possible that the black market is larger than the data from the Marijuana Enforcement Division report suggest.

Marijuana that is purchased legally and then diverted into the black market adds a complicating factor. And there is anecdotal evidence that out-of-staters are buying pot in Colorado and then heading home, where their personal-use stash is illegal.

Yet legal weed sold into the black market may also be undercutting illicit drug cultivators or the cartels from selling their product in Colorado. That may not reduce the size of the black market, but it certainly changes its composition.

Due to the difficulty of sizing up illicit drug sales, there's not even a clear picture of just how large Colorado's marijuana black market was before legalization -- making it all the harder to evaluate how legal sales have affected it.

"This is our best effort, but it’s not rocket science," Orens said of the data. "It’s some educated guesses, it is incomplete data, and some of the data is unknowable and untraceable."

A more detailed assessment will become possible in time, but Orens warned not to expect perfect knowledge.

"Once METRC has a full year under its belt, and even after a year it’ll probably take a second year for the data to get really good, then we'll have a clearer picture," said Orens. "We’ll know the medical and recreational markets with certainty. But the other channels, the gray and black markets, will still be a little bit murky."


Jul 25, 2008
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Hempfest 2014: Seattle’s marijuana megafest introducing adult ‘pot gardens’

The legal-weed revolution, televised and otherwise, has a long way to go before Seattle’s mega-marijuana-reform party known as Hempfest is obsolete, says longtime organizer Vivian McPeak.

But that doesn’t mean it can’t evolve.

“What’s really the newest thing is that we’re going to have two fenced-off, out-of-public-view, 21-and-over adult lounges to both introduce the concept of being I-502 compliant and more importantly give adults a place where they can imbibe out of the view of children and young teenagers,” McPeak said.

And, the ‘pot garden’ is in a city park …

“This will be, as far as I know,” McPeak said, “the only opportunity to legally smoke marijuana in a city park, free from the threat of city citation anywhere in America, maybe the world and that’s why it seems historic to us.”

Hempfest crews will be checking ID’s at the entrance to these cannabis gardens and so on, but will it work? Will the free-for-all, smoke ‘em in the open, civil disobedience culture of Hempfest be changed? After all, smoking marijuana on the rocks along the Puget Sound or in a circle on the grass is pretty much a visual icon of the event.

“We have mixed feelings about it obviously,” he said, “but … if we can make this work at Hempfest, we see it as a glimpse of the future, as the first step to every large public event having a place similar to a beer garden where adults can imbibe cannabis.

“Of course, the difference is that at a beer garden people are drinking beer right in view of children … and it’s one more of the relentless parade of double standards that pot smokers have to put up with.”

McPeak added that Hempfest organizers and many in the reform movement are against kids using cannabis, unless it’s medical and under direction of a medical care professional.

The big event is also seen as a perennial nuisance to the neighborhood, though the org. does a lot to limit the impact of many thousands of people wondering through the business and residential area. Hempfest is spending $50,000 this year on mitigating its impact on Bell Town and lower Queen Anne.

For the list of the more than 120 bands, similar number of speakers and more than 400 venders check out the Hempfest site.

And, for an insider’s view of this year’s Hempfest theme – “Time, Place and Manner — check out McPeak’s blog posts:

Marijuana and Time, Place, and Manner. The Hempfest 2014 Theme
How to Do Hempfest Information

And … we will see you there or you can read, watch and view our in-depth coverage of Hempfest here on The Pot Blog.


Jul 25, 2008
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Dirty Tricks: Cannabis Oil's Alleged Healing Powers Are Leading Desperate People to Buy Junk Cures

The mom from New Jersey was desperate. Desperate enough to try anything to help her son overcome Lyme disease, and vulnerable enough to buy a $125 jar of sludge over the internet.

Conventional medicine having failed her, she'd heard of an alternative cure: cannabis oil, a distillation of marijuana plants into a viscous potion with purported healing properties. But living on the East Coast, in a state where medical marijuana is legal but so strictly regulated that pot clubs have yet to appear, there was no way to get her hands on the essence of a banned plant aside from uprooting her life and moving west.

The "sludge," shipped from Colorado, promised to be the next best thing because it contains "CBD," or cannabidiol, which — according to information spread by CNN's Sanjay Gupta and a growing chorus of American lawmakers and media outlets — is the ingredient in marijuana that promotes healing.

Except the "cannabis paste," sold under the brand name "New Cure," isn't exactly marijuana. If it was, it would be illegal to ship. But if it was marijuana, the paste might also have had a shot at helping the sick kid.

Jon Marsh, an uprooted West Coaster and military veteran living in Boston who says he dealt with his Gulf War Syndrome thanks to marijuana, tells this story as a public service. He's out of the marijuana game entirely — "I'm not growing, I'm not selling, I'm not consulting," he says — aside from the eight hours a day he spends in front of a computer screen, touting the promise of cannabis oil.

On Marsh's Facebook page, "Cannabis Oil Success Stories," hundreds of people — with Lyme, epilepsy, cancer, and chronic pain — praise the healing power of cannabis when distilled into oil (the oil, and its supposed healing powers — still unverified by science — was the subject of an SF Weekly cover story last year).

Cannabis oil is deceptively simple to prepare: All you need is a pot, a bucket, and a solvent with which to separate the plant material from the psychoactive and alleged healing compounds.

But nothing is ever simple or easy in the marijuana world. Marsh is loathed by adherents of Canadian cannabis oil pioneer Rick Simpson, whose method of making "RSO oil" requires naphthalene (a toxic chemical that Marsh can't abide).

Marsh is also being targeted by the makers of "New Cure" and other products whose sellers swear are high in CBD, at least one of whom is trying to pressure Facebook to remove the success stories page. That's because Marsh is also using the platform to warn the hopeful and desperate about the prevalence of falsely advertised products, which, like the hustle that deceived the Jersey mom, relies on a combination of naivety, hucksterism, and federal drug laws.

Awareness of CBD is growing: A crew called "Realm of Caring" in Colorado has a proprietary high-CBD strain of cannabis, and is making its way around the United States pushing CBD-only "medical marijuana" laws. But sophisticated understanding of how it works — in concert with THC and the other myriad components of the pot plant, something Gupta called "the entourage effect" in his CNN special, "Weed" — is lacking.

Marijuana sold on the street has little CBD; marijuana sold in dispensaries has more. Either way it's federally illegal thanks to the THC content. But there's some CBD in hemp, which grows wild in the U.S. and is legal to import from Canada and China. Therefore, unscrupulous types are able to claim their jar of sludge has the all-important healing ingredient in it when they market hemp "paste."

This is how all the "legal cure" products get out there, with their less-than-straightforward promises. One, HempMeds, is a bit better than "New Cure" — or at least it's more honest about its bogus product.

Visitors to HempMeds' Web site, where tubes of "CBD-rich hemp oil" are on sale for $3,000 for a package of six, are greeted with a pop-up from a doctor who assures the needy that all medical claims made therein are accurate. Therein lies the rub: There are no medical claims, just plenty of mentions of the magic acronym CBD. HempMeds' FAQ states clearly that "Real Scientific Hemp Oil" (or "RSHO") is not medical cannabis, but hemp, with no THC and only some CBD.

That means it's legal, and possibly similar to Realm of Caring's proprietary strain. (UCSF researchers are also testing a similar, CBD-only pharmaceutical drug on children with severe epilepsy.) But if your ailment is cancer, CBD isn't going to be enough: a Spanish researcher found THC shrunk tumors in rats.

And either way, "possibly" isn't good enough for sick people.

Weed industry insiders have known about the CBD con game for a long time. "The atmosphere around marijuana in America right now is a perfect storm for fraud, corruption, and deception," wrote East Bay-based marijuana activist Mickey Martin in a blog post earlier this year.

But the housewives, the newcomers, the neophytes — they don't know. All they know is that someone is sick, and there's maybe a glimmer of hope with something called "CBD." That glimmer also inspires hucksters, who are making bucks off of vulnerable people in their time of need.

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