A man shops at a medical marijuana dispensary, in Portland, Ore., shortly after recreational use became legal on Oct. 1, 2015. Until now, marijuana has legally available only from medical-use dispensaries.JOSH EDELSON/AFP / Getty Images
In a low-key press release last Friday, the Oregon Liquor Control Commission announced an important milestone in what is perhaps the state's most significant new economic endeavour – legalizing the sale of recreational marijuana.
After months of criminal background checks, land-use approvals and all manner of bureaucratic hoops, the commission handed out its first batch of recreational marijuana licences late last week. The licences allow businesses to grow and sell legal weed to anyone over the age of 21.
"These licensees reflect the pioneering spirit Oregon is known for," said Rob Patridge, chair of the OLCC. "They come from a variety of backgrounds and experiences and possess the entrepreneurial spirit of this industry."
Few industries in the U.S. are caught in a state of flux as great as that of the burgeoning recreational marijuana market. In states such as Washington, Colorado and Oregon, where weed is essentially legal, thousands of businesses have inundated the infant industry. They range in size from one-shop mom-and-pop operations to would-be Wal-Marts, drawn by the lure of a massive new revenue source – the same motivation driving many of the state governments that have opted to legalize sale of the drug.
But even as several states scramble to build a legal framework for the marijuana, the situation in Oregon illustrates the Wild West nature of a business no one is quite sure how to properly regulate. Even as the OLCC expects upwards of 2,000 licence applications this year, it has yet to finalize the set of rules by which those new businesses will operate. And even when it does, it's still unclear how well those rules will mesh with the federal government's regulations, which still put marijuana in the same class as drugs such as heroin.
In the past year, Oregon has become a sort of buyer's and seller's paradise. Even before the state decided to legalize recreational sale, Oregon's Pacific Northwest climate was the source of some of the most highly valued strains of weed in the nation. But since then, the state has also made it less costly to buy and sell marijuana than in many other parts of the country. Oregon currently imposes a 25 per cent tax on the drug, and that rate is expected to drop to between 17 and 20 per cent later this year. Washington, the state's northern neighbour, imposes a tax of 37 per cent.
When it comes to setting up a dealership, Oregon also has slightly looser residency requirements than other states. Even though the state is prioritizing applications from local businesses, it doesn't require all applicants to have lived in Oregon for years beforehand.
But the residency requirements – and the fact that many states have felt the need to impose them – illustrate just how dicey marijuana regulations can be. One of the main reasons states want their weed dealerships to remain local is because marijuana is still classified, federally, as a Schedule I drug. That class of drugs, which includes the likes of LSD and bath salts, is very heavily regulated – so much so that almost all large American banks will still refuse to work with marijuana dealerships, regardless of state law. That, in turn, means that the vast majority of weed stores are all-cash businesses.
Earlier this year, in the first full month of recreational sales, the Oregon Department of Revenue announced it collected almost $3.5-million (U.S.) in taxes from the new industry (some observers didn't expect the state to collect that much in all of 2016) – it's likely that much of that money was paid with rubber band-bound stacks of bills.
That burden doesn't just make it difficult to scale, it poses a serious security issue. When the city of Salem was trying to decide which parts of town to zone for marijuana businesses, several councillors worried about the cost in police resources necessary to keep an eye on such enticing targets for theft. In at least one instance in Portland, a group of nearby businesses balked when a startup dealership tried to move into the same commercial building.
And yet, the onslaught of new applications continues. The OLCC expects to issue about 850 licences this year, even though full recreational sale is still technically illegal in the state (until the floodgates finally open later this year, only medical marijuana dispensaries are currently allowed to sell recreational weed).
The reason why so many entrepreneurs are willing to jump head-first into so uncertain an industry was made clear in another announcement made last Friday. Around the same time the OLCC was announcing its first permits, the Confederated Tribes of Warm Springs broke ground on a facility that will soon become Oregon's first tribal-owned weed operation. Members of the tribe voted overwhelmingly in December to authorize the plan.
The primary impetus for those who voted in favour? The prospect of 50 new jobs and tens of millions of dollars in revenue. For a region hit hard by plant closures and the resulting unemployment, it was too good an opportunity to pass up, even if it'll be a long time before the regulatory kinks are finally worked out.