Subscribe to my mailing list and you'll get an email whenever I post something.
and hit return.

Big cannabis is coming

Just because there's a ton of momentum behind weed legalization doesn’t mean it’s inevitable. Yes, weed's already legal in 4 states, and ballot measures in 2016 might make it legal in several more, including California. Still, we’ve been down this road before—many states decriminalized in the 70s, only to get tough again in the Reagan 80s.

But one thing we have now that we didn’t have back then is something resembling a legitimate weed industry. There’s a publicly traded weed social network, a YC-backed weed delivery service, even a weed business incubator in Denver (and they’re opening another location in SF in early 2016). Big Tobacco's been trying to get into weed since the 70s, and now it might finally get its chance (imagine a world in which your local liquor store sells Marlboro spliffs).

This is why Willie Nelson's worried about pot getting too corporate. But here’s what’s weird about the weed industry: it’s not really about weed. So long as marijuana remains illegal at the federal level (and it remains very illegal—marijuana is a Schedule I drug, which means the federal government considers it as dangerous as heroin, and more dangerous than coke and meth), people who sell weed can’t get banking services, even if they’re operating in states where weed is legal. That’s because banks are terrified of running afoul of the feds by taking weed money: best-case scenario, they lose their federal deposit insurance; worst-case scenario, they get prosecuted on money laundering charges.

One consequence of this is that the “legit" weed business is about paraphernalia and services, not actual weed. CanopyBoulder, the Colorado-based weed biz incubator, says your company can’t apply if you “touch the plant.”

How sustainable is this? Imagine a tobacco industry that only consisted of companies that sold lighters and cigar-cutters. Pretty weird. But until the law changes at the federal level, which is unlikely anytime soon, it’s hard to see how the businesses actually selling weed can become fully mainstream. There might be temporary workarounds, like using Indian casinos as weed banks (brilliant), but selling something that the federal government considers as illegal as heroin makes it pretty hard to build a legitimate business.