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Home | Mises Library | The Sky Is Not Falling: Legal Pot Turns One in Colorado

The Sky Is Not Falling: Legal Pot Turns One in Colorado

  • Marijuana seedlings
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Tags Financial MarketsHealthThe Police State

01/13/2015Mark Thornton

Legal recreational cannabis/marijuana/pot is almost one year old in Colorado. The Denver Business Journal recently published a retrospective containing several articles reviewing the experience. The general conclusion is that it has been a big success, not the tragedy some had predicted or claimed. The remarkable thing is that the report claims the biggest remaining problem for the industry is caused by the Federal Reserve!

Some of the big concerns prior to legalization have turned out to be trivial or failed to materialize at all. Expectations of overdose deaths, delinquency, and crime did not materialize to the extent that the newspaper barely reported on those issues. Crime in Denver actually declined in early reports.

Earlier this year, I examined the experience in Colorado and found that most reports were favorable to legalization. For example, the Business Insider reported that “Legalizing Weed in Colorado Is A Huge Success,” although they did report a “down side” as well. Jacob Sullum reported that such things as underage consumption and traffic fatalities declined, but not significantly within an already declining trend.

There was one early report that strongly called into question the legalization of marijuana in Colorado. It was put out by an outfit called the “Rocky Mountain High Intensity Drug Trafficking Area” program. It turns out that the program is part of the White House Office on Drug Policy, but that fact is not advertised in the report. Their lengthy report, “The Legalization of Marijuana in Colorado: The Impact,” appears to be very scientific and evidence based. However, I found it has more logical holes than a wheel of Swiss cheese gone wrong.

There certainly has been an increase in consumption and some diversion to minors. Colorado has historically been a high use and high abuse state, ranking above the national average in many categories. However, Colorado is close to the national average in the important category, the rate of drug overdose deaths, and the majority of deaths are the result of prescription painkillers, such as Vicodin and Oxycontin.

It is also true that there is anecdotal evidence of problems with legal weed in Colorado. There was the young man who consumed several times the recommended number of marijuana-infused cookies and jumped from a hotel to his death. There was a story of a dog that died after eating cookies left on the kitchen table. And there were several stories of children stealing cookies from their homes or their grandmothers and sharing them with their friends at school.

However, these events are still just newsworthy anecdotes, not trends or statewide calamities. They are also predictable. In transitioning from prohibition to legalization there are going to be such problems, but competition has its many ways of weeding out such problems over time. The marijuana dispensary industry has already been implementing new procedures and new ways of packaging edibles to improve their safe use.

Federal Regulations Prevent Financial Freedom in the Industry

The one remaining problem is that people in the growing and retail businesses have been denied access to the banking system. Without bank accounts, and being a largely cash business, the firms are more at risk of robbery. Without bank accounts it is more difficult to pay vendors and employees, and paying fees and taxes to local governments has created headaches for all. Everyone agrees that the simple solution would be to allow the use of credit cards and bank accounts.

Local banking officials seem to be cooperating. The Colorado Division of Financial Services issued a charter for a credit union designed to serve the industry. However, efforts are being blocked by a holdup on obtaining deposit insurance and by none other than the Federal Reserve nixing efforts for the credit union to obtain a “master account” from the Federal Reserve.

A master account provides banks and financial services companies with a primary nine-digit routing number, which is the nine digit number on the bottom left of your bank checks. Without the routing number a bank cannot participate in the Fed’s check clearing system and this would make the use of checking accounts prohibitively inconvenient.

Trouble in the Federal Courts?

An additional new hurdle for legal pot recently emerged when the states of Nebraska and Oklahoma sued Colorado over its legalization law in the US Supreme Court. Those states argued that Colorado's licensing of marijuana dispensary stores violates the US Constitution's Supremacy Clause. This clause says that when there is a conflict between federal and state law, the federal law trumps state law.

I am not a legal scholar, but it seems to me that Nebraska and Oklahoma have little or no “standing” in bringing such a lawsuit. I also believe that this Supreme Court can see the “writing on the wall” when it comes to things like legalizing pot and gay marriage. The writing on the wall comes from the people, and a large and growing majority of the people support medical and recreational marijuana legalization. Demographically, these majorities can be expected to grow into supermajorities in a fairly short time frame.

Colorado is only the cutting edge. Recreational marijuana has also passed in Washington, Alaska, Washington, DC, and in some local jurisdictions. More states are on their way to recreational marijuana and there are twenty states with legalized medical marijuana.

Including states that have decriminalized marijuana, the majority of Americans now cannot be put in jail for consuming small amounts of marijuana. Government officials have attempted to portray legalization as reckless and chaotic, but those who favor the limits on government should not attempt to derail these legalization efforts. Such efforts will only serve to enhance the cause of human liberty at the expense of political power in the long run.

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