Inside America’s Failing Pot Experiment

Last year’s bright future for cannabis is this year’s regulatory clown car, only more chaotic, dangerous, and risky for consumers and investors alike.

The headlines tell us that marijuana is now legal in one form or another in all but three states. Pot possession has been decriminalized in a dozen states and effectively so in nearly every major city. The convictions of tens of thousands are being expunged.

Marijuana — yesterday’s menace — is now cannabis, touted as medicine for all sorts of maladies from a sore shoulder to cancer. CBD oil refined from the plant is apparently just so darn good for us it’s showing up in everything from energy drinks to gummy bears.

By some estimates, the industry has generated the equivalent of more than 100,000 full-time jobs, attracted untold billions in investment capital, and the business is poised to explode — as soon as weed becomes federally legal in the U.S.

Sounds great … until you take a second, closer look. With real federal reform unlikely anytime before next year’s presidential election, the 50 states, thousands of counties, and tens of thousands of small towns and cities have been making up the rules up as they go. As a result, last year’s bright shining future for cannabis is starting to look like this year’s clown car—an engine of unequal justice; a regulatory swamp; a looming health crisis; and an investment minefield.

A Jamaican-American musician, Patrick Beadle, is currently sitting in a Mississippi state prison sweating out a three-year sentence for possession of marijuana that he legally purchased in Oregon and took with him when he drove cross-country for a gig in Florida. According to the American Civil Liberties Union, he was racially profiled for a traffic stop — “driving while black” — and his car searched. Beadle originally faced a 40-year sentence for drug dealing.

Another black man, this one from North Carolina, was stopped for speeding on Interstate 95 through Baltimore. The city’s chief prosecutor, Marilyn Mosby, has refused to prosecute any possession cases since February, but Baltimore City patrol officers have been defying her. A search of the speeding driver’s car turned up 18 pounds of pot. During my interview with her, the State’s Attorney said the officers had so bungled the search as to render the evidence inadmissible. So, after a month in jail, the very lucky driver was sent home with a speeding ticket and bus fare.

The Transportation Safety Administration recently posted on Instagram that “TSA officers DO NOT search for marijuana or other illegal drugs,” but have the discretion if they find pot to notify local police. Los Angeles International Airport’s policy, posted on its website, states that local law enforcement will not arrest passengers with an ounce of marijuana or 8 grams of concentrated marijuana for personal consumption, the legal limit in California.

Some black-market cartridges contain dangerous levels of pesticides. If you have one of these, throw it away and tell your friends.

As I reported recently in The Marijuana Times, a cannabis testing lab in Ukiah, California discovered in April that cannabis oil in a huge ($5 million) shipment of black market vape cartridges was contaminated with astronomically high levels of a fungicide which, when heated, breaks down into a deadly form of cyanide. Repeated attempts by the Mendocino County sheriff to alert state officials about this potential health crisis have been met with silence.

California’s system for granting permits to legally grow, process, track, and test cannabis is such a bureaucratic chokepoint that there isn’t enough product to meet demand, so the black market is booming and so is the potential spread of contaminated products.

Taxes, fees, and multiple layers of regulation make it impossible for legal dispensaries to compete with illegal marijuana. Hundreds of rogue, pop-up pot shops in Los Angeles alone can openly sell black market cannabis products because the city police force lacks the spare manpower necessary to shut them all down. You can even find those illegal pop-ups listed on a website: Weedmaps.com.

U.S. companies in the legal cannabis business still cannot put their cash in federally regulated banks because weed remains federally illegal. One rural Pennsylvania bank was so paranoid that it closed the accounts of the National Hemp Association, which neither sells nor even touches cannabis products, just because of the group’s name. Legit companies also cannot deduct business expenses related to cannabis activities on federal returns.

Instead of reducing the amount of illegally grown and distributed marijuana, legalization and decriminalization has encouraged outlaw growers to increase production to meet increased demand across the country. Weed is celebrity hot — Martha Stewart and Snoop — and luxury hot: Barney’s has opened a weed boutique in two of its stores. The price of a pound of premium California outlaw weed plunged last year to about $500 at the field. This spring it bounced back to about $1,200. Farm supply merchants in traditional outlaw grow zones told me they saw surging sales this spring of equipment, fertilizer, and other essentials to newbies hoping to cash in on the green rush.

Proponents of legal recreational use predicted billions in new state tax revenue as users migrated from the black market. But legal sales in California fell by about 20 percent between 2017 and 2018. State tax receipts for 2018 were about half the projected $643 million. Factoring in the bureaucratic, enforcement, and other regulatory expenses, some experts believe it may be costing taxpayers in some jurisdictions multiple dollars to collect one dollar in cannabis taxes.

This chart shows the three-year performance of a group of cannabis stocks traded on the Canadian Stock Exchange. You don’t have to be a stock analyst to detect the trend. [Source: NewCannabisVentures.com]

Billions of investment dollars — no one really knows how much — have poured into every nook and cranny, from land on which to grow the pot, to equipment makers, to testing labs, to vape pen makers. To the uninitiated investor and the wanna-preneur, cannabis must feel like a gusher that’s just about to come in. A big chunk of the investment capital has been through reverse mergers into shell companies listed on the second tier stock exchange in Canada, where marijuana is federally legal and regulated. To a former stock market columnist, much of this investment activity — accompanied by a great deal of hype — has a familiar fishy smell. A reliable cannabis stock index (above), already down a third from the peak in January 2018, looks wobbly, with lower highs and lower lows: a descending staircase.

It is impossible to describe in a single article just how big a mess, how tangled a ball of string, is America’s experiment with legalizing marijuana. It’s frustrating to write about because there are few standards; central authorities are scattered, disorganized, and understaffed; there is no comprehensive mechanism or agency responsible for protecting public health; it’s believed that more than 80 percent of what’s consumed in the U.S. is illegal and off the grid; and whether consuming it is legal or not depends on where you happen to be standing. Philadelphia police will ignore you if you smoke pot in public, but a few miles away in the suburbs you’ll be whisked away in handcuffs, on your way to a holding cell and a bail hearing.

These are the disunited states of cannabis.

The mainstream media has yet to catch up with what’s happening on the ground. To be fair, all news organizations today are operating with barebones staffs. Even the Los Angeles Times — the largest newspaper in the first state to legalize marijuana, and the state which produces most of the marijuana consumed in this country — seems to focus mostly on crime, criminal justice, and the pop-up dispensary wars. As a result of this news desert, stories about potentially poisonous vape pens that beg for widespread attention are relegated to niche websites like The Marijuana Times. The consuming public — mostly users of outlaw cannabis — is oblivious to what might be in their weed and vape cartridges. And we have no idea whether any of it is making people ill.

There are about three dozen small, specialty web sites and magazines, most of them aimed at the consumer market. Some feature fetish-like reviews of popular strains; offer advice on how to pass a drug test; or feature stories with quirky angles, like a report that bisexual women smoke more cannabis than lesbians, or, “California Rules Inmates Allowed To Possess Cannabis in Prison.” Clickbait, not news.

Some devote coverage to the twists and turns of developments in state legislatures, Congress, and the federal government — news that is speculative, biased, and of interest to a limited audience of industry insiders, lobbyists, and old soldiers of the movement. There are a few sites and magazines that cover the operational nuts and bolts of the industry but are supported by advertisers who are unlikely to embrace the sort of independent, investigative journalism that could shine a light on the regulatory chaos. Insiders tell me there is an awkward, guilty cone of silence muffling the legitimate industry from its inconvenient truths.

Unlike Canada, which set the bar high for thoughtful, methodical regulation, America may as well be trying to build an airplane while flying it. Cannabis expert and chemical researcher Dr. Jeffrey Raber, CEO of TheWercShop, which provides technical and other services to the industry, has been warning about issues like cannabis contamination for years. In a recent interview about the problem with vape cartridges, Raber told veteran cannabis writer Mitchell Colbert, “We are all in a running experiment, and we are the subject.”