As the Colorado General Assembly puts the finishing touches on legislation aimed at taxing and regulating the state-licensed marijuana stores that are supposed to start opening next year, creative interpreters of Amendment 64 are experimenting with a different approach to distributing cannabis. Their business model, although not quite as inscrutable as the strategy followed by South Park's underpants gnomes, neverthless raises a lot of questions. It goes something like this:
Phase 1: Grow marijuana.
Phase 2: Share marijuana.
Phase 3: Do not profit!
That last part is crucial, because under Amendment 64 only state-licensed outlets are allowed to sell marijuana. But in addition to letting people 21 or older possess up to an ounce of pot at a time, Amendment 64 lets them grow up to six plants for personal consumption and keep the produce of those plants (potentially a lot more than an ounce) on the premises where they are grown. The initiative, which is now part of the state constitution, also allows "assisting another person" in the cultivation or consumption of marijuana and transferring as much as an ounce to another person "without remuneration." If you put those provisions together, says Denver attorney Rob Corry, you've got permission for collectives that grow up to six plants on behalf of their members (not customers). The Denver Post reports that "an untold number" of such collectives "have formed in Colorado since Amendment 64's passage in November, hoping to meet consumer demand before retail pot stores' anticipated opening in 2014."
Corry's law firm has helped a dozen or so marijuana collectives get started. He argues that covering the cost of growing marijuana for you does not qualify as "remuneration," which usually refers to compensation for labor but in this case could be read to mean payment for the marijuana itself. Corry says it is clearly OK for a grower to seek reimbursement for costs directly related to cultivation, such as rent, electricity, and supplies. Even compensation for time should be permissible, he says, although it is harder to document and legally riskier. The line between paying a grower for his labor and paying for the marijuana he produces does seem pretty faint. Furthermore, while Amendment 64 on its face allows joint operations in which people share expenses while growing six plants each, the idea of assigning one's allotment to a collective seems like a stretch, although it is similar to the way that Colorado's for-profit medical marijuana centers operate, notionally growing up to six plants for each patient they serve.
Tom Gorman, director of the Rocky Mountain High Intensity Drug Trafficking Area, tells the Post he is skeptical of the collectives' nonprofit status. "Why would you do that if it's not for money?" Gorman asks. "Are they so thrilled with marijuana and think it's such a great thing that it's their responsibility to offer it as cheap as possible? Why would you go through all the trouble for no profit at all?"
It is not hard to imagine cannabis collectives similar to homebrew clubs, in which people share tips and swap their handiwork with a hobbyist's enthusiasm. But Gorman is right that collectives can look like businesses in disguise. MJ Proper, which is organized as a 501(c)(3) nonprofit, says it seeks to "foster the charitable [activity?], scientific investigation, and education necessary to safely grow and consume recreational cannabis responsibly." It promises "Superior Quality cannabis growing assistance and Superior Quality cannabis consumption assistance." Membership, which is open to anyone 21 or older who displays "personal responsibility with the highest moral standards," entitles you to "have recreational cannabis delivered to you safely and responsibly." MJ Proper's products include six-packs of cannabis-infused beer and eighth-ounce bags of Dark Star buds, both for $37.50 each.
Sam Kamin, a University of Denver law professor who served on the Amendment 64 Implemenation Task Force, tells the Post:
This loose association, not subject to regulatory oversight, is exactly what we were trying to avoid. The concern is if regulated marijuana is heavily taxed and these sort of cooperatives open up, not subject to tax, it will undercut the model the state is trying to put in place and raises the specter of federal enforcement.
But what Kamin sees as a bug looks like a feature to me. The provisions allowing home cultivation and sharing create an incentive for the state not to impose excessively high taxes or excessively strict regulations. If the state-licensed stores offer high-quality, diverse products at reasonable prices in a convenient manner, collectives and home cultivation by individuals will account for a tiny share of marijuana consumed in Colorado, just as homebrewing accounts for a tiny share of beer consumed in the U.S. But if taxes and regulations make buying marijuana too expensive or too much of a hassle, those alternative sources will become important. As Stuart Taylor argues in a recent Brookings Institution paper, that prospect should worry federal as well as state officials, since myriad alternative suppliers will be much harder to control than readily identified, state-licensed businesses. The most effective strategy for minimizing interstate diversion, an aim that state and federal officials share, is to minimize government interference with the legal market.