Image copyright Alamy

Colorado's cannabis industry is growing fast, with armoured cars full of cash a common sight on Denver's streets. But businesses are stuck in a legal no-man's land - state laws allow the drug to be sold, but federal laws still prohibit it.

I am in a bed and breakfast, and it's Friday evening, Happy Hour. Drinks and nibbles are flowing freely, but there's something else - a sweet, sickly smell in the air. Yes I'm in Denver, the Mile High City, 1,600m in altitude, in Colorado, the first American state to legalise the consumption and sale of cannabis for recreational use, in 2014.

That move has created a new industry - growers, stores, dispensaries, manufacturers and all sorts of ancillary businesses. Until recently this was black market, a criminal activity. Now it's a billion-dollar-a-year industry, paying $135m (£90m) in state taxes.

Image copyright Alamy Image caption A worker at a cannabis dispensary in Denver, Colorado

It all began in the year 2000, after a state-wide referendum changed the Colorado constitution to legalise the use and supply of marijuana for medical purposes. This was not a move led by politicians; the current governor is still opposed. But the people spoke and the legislators had to turn the decision into fact.

Colorado was not the first state to legalise medical cannabis. It's claimed to have many physical and mental effects: easing pain, calming fits, energising or relaxing the body, depending on which particular strain of the drug you use (and which particular dosage).

Now, there is something very weird about cannabis in the US. Using it and growing it is still a federal crime. Though individual states have fiercely defended their own legal rights, marijuana is still officially classified as a schedule one drug, as fearsome to the federal authorities as heroin.

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In many other US states, growing the drug in the quantities I've been seeing would land the grower in prison for 20 years. Even legalised, the medical trade has been highly regulated.

And as Coloradans got used to the idea, there was another referendum in 2012 which made the recreational use of cannabis legal as well. The people voted, and the legislators had to write the rules. Indeed they are still writing and rewriting them.

The move released a torrent of free enterprise. Dispensaries opened in sober-fronted stores with little indication of what's inside. Through the door, though, there's nothing hole-in-corner about many of the operations.

Even the armed guards are friendly as they check your ID to see that recreational users are over 21. The stores are often quite elegant - dozens of different strains and strengths of cannabis buds displayed in tightly-sealed see-through plastic packs, with samples to sniff in pots on the counter, and so-called "bud tenders" as shop assistants.

There are displays of equipment, the bongs and vaporisers and dabs to use if you don't want to roll your own. Other counters display brand-named, cannabis-infused drinks and an array of edibles - mints and chocolates and other candies for users who don't like smoking.

And state-licensed companies are in a rush to create marijuana brands in the hope that at some stage many more states will make pot legal, and maybe even federal laws will change as well. After all, it looks as though the good neighbour to the north, Canada, is going to legalise cannabis fairly soon.

But there are still difficulties. Money is a big one. Banks and credit card companies are regulated by federal authorities - most of them are unwilling to deal with customers linked to the cannabis industry. Everyone I met had a story of having numerous bank accounts closed down when the bank caught on to the nature of their business.

This means that cannabis is a cash industry - armoured cars crisis-cross Denver laden with sacks of dollar notes. This new 21st Century business has to behave as if the city were still a frontier town in the 1800s.

My bed and breakfast still retains much of its original Victorian elegance. But it's now called by the trademarked name "Bud and Breakfast", a reference to the sticky bud on the cannabis plant which is where the potency lurks.

And even before breakfast the smoke is wafting up from out-of-towners, pot tourists who have flown into Denver to escape from being criminals in their own state because they use MaryJane. Smoking in hotels is still illegal, but a B&B is a private place. The cannabis users are free to light up, breathe in... and enjoy.

But no, I did not inhale, though when they're growing, the pot plants do smell enticing. I don't smoke anyway, and nibbling cannabis mint or a bit of marijuana chocolate still seems a little bit foolish.

From Our Own Correspondent has insight and analysis from BBC journalists, correspondents and writers from around the world. Listen on iPlayer, get the podcast or listen on the BBC World Service or on Radio 4 on Saturdays at 11:30.

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