A Fort Collins, Colo., medical marijuana grower walks through her warehouse in 2010. (Chris Hondros/Getty Imag …
DENVER—A ballot initiative in Colorado that could make the state the first to effectively legalize marijuana has an unlikely bunch of people very nervous: owners of the state's medical marijuana dispensaries.
Despite an expected surge in demand, some fear passage of the initiative, called Amendment 64—which legalizes the buying and selling of up to one ounce of pot at a time for customers over the age of 21—could goad the federal government into a crackdown on the dispensaries, ending their industry's three-year miniboom.
If the amendment passes, the "best-case scenario [is] you get a million new customers," the owner of one medical marijuana store in downtown Denver told Yahoo News. "It would be wonderful." But he asked not to be named, spooked by the prospect of bringing attention to his store in case of increased federal action.
Both President Barack Obama and Republican presidential nominee Mitt Romney, who face off in their first debate on Wednesday night at the University of Denver—giving the state initiative the potential to reverberate nationwide—have signaled their opposition to states that flout the federal drug law with legalization measures. Because the practice is still illegal under federal law, the medical marijuana industry can survive only if the federal government turns a blind eye.
And if the amendment passes, Colorado—one of 17 states, plus the District of Columbia, that have legalized medical marijuana—would have the most liberal pot policy in the country, one that could bring in tens of millions of dollars in annual revenue for state and local governments. (Washington and Oregon have similar amendments on their November ballots, but Colorado's seems to have the most steam, with polls showing more Coloradans are for the amendment than against it.)
Pot has been good to Colorado. Since 2009, hundreds of medical marijuana dispensaries have cropped up in the state, the second-largest medical marijuana industry in the country after California, and the only state where entrepreneurs are allowed to profit on the sale of medical pot.
A stroll down busy Wazee Street in downtown Denver is proof of the industry's success. Three dispensaries, staffed by friendly "budtenders," can be found in the space of just a few blocks. They, and others, compete for the approximately 100,000 Coloradans who have state-regulated marijuana prescriptions from their doctors, informally called "red cards."
Each dispensary targets a specific slice of red card customer. Lotus Medical, nestled inside a straitlaced-looking corporate plaza and smelling ever so faintly of pot, could be mistaken for a fancy spa. Nearby, a "Cash Only" sign greets people at an openly marijuana-themed, new age-like dispensary called Rocky Mountain High, which also sells vintage clothing. Then there's LoDo, a casual dispensary underneath a nail salon guarded by a friendly black lab.
But the booming business belies some big problems. In January, the federal government abruptly began shutting down dozens of dispensaries by enforcing a federal law that bans the sale of controlled substances up to 1,000 feet from a school zone—this despite Denver and some other local governments allowing the dispensaries to locate closer. Instead of buying yet another pricey medical marijuana license and relocating, some dispensaries got out of the business altogether.
The crackdown sent a wave of panic through the industry and was a stark reminder that the federal government still classifies marijuana—alongside heroin, LSD and ecstasy—as a Schedule 1 controlled substance. There's no exception for medical use, though in 2009 the Justice Department released a memo saying the government should in general not prosecute "individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana."
The Justice Department, however, has also said "large-scale" marijuana growers, even those legal under state law, will still face prosecution.
This has left Colorado's medical marijuana businesspeople in a netherworld between legal activity and the black market. They're unable to use banking services because many banks won't touch their money for fear of federal laundering charges, and at least one local judge has refused to arbitrate a lawsuit between two Colorado pot outfits, ruling that the businesses are illegitimate under federal law and thus can't make legal contracts with each other.
Additionally, owners have been spooked by the hundreds of letters federal prosecutors sent this summer to landlords of medical pot businesses in California, threatening to use the Controlled Substances Act to seize any real estate that's involved in drug trafficking.
"I think they grabbed a little too far" with the amendment, said Kevin Fisher, who owns a medical marijuana store called Rocky Mountain Remedies in Steamboat Springs, Colo., which serves 1,000 patients and employees more than 60 people. "I don't want to have to make that decision between staying in business and possibly going to prison."
Fisher, who supports fully legalizing marijuana in principle, says he worries that if Amendment 64 passes, more reputable medical marijuana stores will be unwilling to take on the risk of federal prosecution by applying for a recreational license, leaving shadier outfits with closer ties to the black market to fill in the gap. Meanwhile, Fisher thinks that if he stays a medical marijuana-only facility should the amendment pass, he could be chased out of business by the recreational dispensaries, which wouldn't require red cards.
Two medical marijuana trade groups—the Medical Marijuana Industry Group and Denver's Cannabis Business Alliance—have remained neutral on the amendment.
Betty Aldworth, advocacy director for the Yes on 64 campaign, said many medical marijuana businesses do support the amendment and that she remains hopeful the federal government will butt out of local affairs if the amendment passes. "We hope that the federal government will recognize our right as a state to regulate marijuana," she said.
Chris Zacher, an MBA-carrying former general manager of a marijuana store also in downtown Denver, told Yahoo News that Amendment 64 might be necessary to keep the marijuana industry alive in Colorado. After all, hundreds of stores are competing for a limited number of patients, each of whom probably buys only an ounce or so a month. Plus, the number of people with red cards has fallen this year, as some applicants don't want to go through the trouble and expense of renewing their cards.
"Most people are in trouble financially because the market is not there," said Zacher, who recently left the industry after his store barely broke even a few years in a row.
Some hold out hope that Obama might change his mind about marijuana legalization if he wins a second term, but the president has given no indication so far that he would. His administration has taken the stance that users of medical marijuana should not be prosecuted, but that large-scale producers of it will be. Romney, meanwhile, has said he would fight medical marijuana legalization "tooth and nail," and opposes any legalization. His running mate, Paul Ryan, suggested in an interview in Colorado that he thinks states should be allowed to decide medical marijuana laws on their own, before a Ryan spokesperson quickly clarified that the candidate, like Romney, is opposed to any marijuana legalization.
Fisher, the Steamboat Springs medical marijuana store owner, says he still doesn't know how he'll vote this November on the initiative. "I'm torn," he said. "My heart wants to vote yes. ... But again, I have a responsibility to a lot of patients and a lot of employees."