Potentially Huge Market for Nonprofits: “One Toke Over the Line” to Feds

 

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March 6, 2013; Source: Times Call

Think fast: the answer is marijuana and prostitution. What’s the question?

The question is, “What are the two activities that are legal at a state level but prohibited under federal law? For prostitution, we refer only to the state of Nevada, but when it comes to marijuana, 15 states that have either legalized or decriminalized marijuana are now dealing with this conundrum.

The two states that have outright legalized marijuana for recreational use are Colorado and Washington. These two states are now faced with the task of creating a regulatory framework for an industry that has largely operated underground. Nonprofits will likely get a corner on the market because the status is required in order to be involved in the industry – an artifact of the weird morality surrounding the whole endeavor.

But the market could be very, very big. Bloomberg estimates that if marijuana were completely legal nationwide, the market would likely be in the neighborhood of $35 billion to $45 billion but other estimates go as high as $120 billion. Bloomberg reports, “Tax collections from such sales could reach $9 billion to as much as $20 billion, according to Brad Barker, a Bloomberg Industries analyst, who cited projections by the Cato Institute, a nonprofit research group, and the Congressional Research Service in a March 1 report.”

We are embarrassed to admit that we were not paying attention to the potential boon this might be for our economy. Colorado’s legislature is now considering how it might impose a 15 percent tax on wholesale marijuana sales and in Washington, producers, processors and retailers will be required to pay a 25 percent sales tax to the state liquor board. However, there are some odd problems facing those who would seek to establish themselves in this new, confusing, and still risky realm of entrepreneurism.

There is the obvious risk of being raided by the feds, but there are other issues, too. Bloomberg notes that U.S. bank are not allowed to provide services, including business loans, to the industry. Robert Rowe, senior counsel at the American Bankers Association, a Washington, D.C.-based trade group, said many bankers “would welcome the opportunity to offer the services but they can’t because of the federal government…They’re afraid of what would happen if they tried to do something.”

But for now, some in Seattle are seeing the industry as a boon that will make the city a bigger tourist destination. Shy Sadis, who now runs a nonprofit dispensing medical marijuana in Seattle, plans to convert to a for-profit once able to sell marijuana for recreational purposes. “People are going to be coming here and when they come here they’re going to want to get off the plane and experience cannabis…It’s such a great feeling to be one of the pioneers of this industry and seeing where it’s going to go in the future.”

Sadis’s comment raises a fundamental question for us. Nonprofits were in on the ground floor, so to speak, in the legalization of marijuana for medical use. Now that some states have legalized marijuana for recreational use, is there a legitimate role for nonprofits to play? Or does the potential change to a much larger, more profitable and consumer-focused industry come with the implication that nonprofits might need to step aside in many cases? –Ruth McCambridge