Health & Wellness Substance Abuse

Conflicting Federal and State Laws on Marijuana Causing Decline in Colorado’s Pot Dispensaries

The number of medical marijuana dispensaries in Colorado is shrinking and one of the reasons behind it is the way the industry is regulated under federal law.

The Denver Post found that while there were 1,131 medical-marijuana businesses in Colorado at the end of 2010, that number has dropped by more than 40 percent today at 675. Part of the decline is because the industry remains illegal under federal law even though the state has its own law that legitimizes medical marijuana dispensaries. Some stores operating near schools, for instance, closed after receiving warning letters from the state’s U.S. attorney telling them they could face prosecution if they didn’t move. Others drowned because of federal rules that make it impossible for marijuana businesses to get bank loans or take advantage of common tax deductions, the article notes.

Observers also note that in order to thrive in the industry, operators need to have sufficient funding to hire business-savvy managers who know and precisely follow all the rules governing marijuana, as well as to finance large growing facilities capable of producing marijuana that people buy.

Robert Frichtel, who runs the Medical Marijuana Business Exchange, said the industry is reaching its full growth and the “bigger players have done well with having adequate grow space to support patient demand.”

But although many small marijuana dispensaries are closing, the market itself doesn’t show any hint of slowing down. In fact, the number of Type 3 dispensaries — those serving more than 500 patients — has remained steady, and the number of Type 2 dispensaries — those serving between 300 and 500 patients — has increased.

“I don’t think it’s a decline in the market at all,” said Matt Cook, a former state official who oversaw the creation of Colorado’s medical-marijuana business rules and now works as a consultant. “From what I’m hearing, they’re selling 100 percent of what they’re able to grow. The reality is it’s not as simple as sticking a seed in the ground and watering it.”

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