Colorado and Washington became the first two states in the U.S. to legalize marijuana for recreational use on the same day in November 2012. Washington’s first shops will open this week and hundreds more have had their license applications accepted but aren’t yet ready to begin operations. Meanwhile, smokers in Colorado have been enjoying their legal market, and the state has been collecting tax money on sales, since the start of the year. The gap is due not only to differences between the initiatives in the two states, but also in the states’ differing implementations of the old medical marijuana laws dating back nearly two decades.
Washington was one of the first states in the country to legalize medical marijuana when Initiative 692 passed with 59 percent of the vote in November 1998. Oregon legalized in the same election, making those two states the second and third to legalize medical pot after California’s landmark 1996 Proposition 215 was passed. Colorado followed when Amendment 20 passed with 56 percent of the vote in November 2000, marking the state’s first chance in marijuana policy since it made the plant illegal in 1917. The medical laws in both Colorado and Washington provided patients with relief from state criminal penalties for possession and cultivation of different amounts of pot, provided that they have a serious, debilitating condition approved by the state and documentation from a doctor stating that marijuana can help with said condition.
As the medical markets in the two states matured, dispensary systems were planned out and the required bills passed by the legislatures. Colorado’s plan for legal dispensaries was signed into law in June 2010 by Gov. Bill Ritter. Washington’s plan was passed one year later but Gov. Christine Gregoire used her line-item veto power to strike 36 separate sections from the law relating to the establishment of state-licensed dispensaries and a voluntary patient registry. This left the Washington medical market in a murky state of legality, with dispensaries operating under what the 2011 dispensary bill’s sponsor described to Reason this April as a lot of innovative interpretation. A hands-off attitude at the state level makes prosecution unlikely but there are also no state licenses, making the medical industry reliant on tolerant local officials for its continued existence.
These differences in the medical systems came to the forefront when the recreational laws were passed in 2012. Colorado allowed medical shops to sell some of their supply for recreational use until the pot grown specifically for the recreational market was ready for sale a few months later, preventing prices from spiking too high and allowing for retail sales to begin on January 1st, the first day allowed under the law. Since then, Colorado has collected more than $24 million in taxes on the sale of marijuana.
Washington, meanwhile, had no medical industry to fall back on. And fewer than 100 growers have been approved by the state so far out of more than 2,400 applicants. Fewer than 20 of those growers had harvested in time for the start of retail sales, a situation expected to lead to supply shortages and high prices when legal sales begin today, July 8th. On top of that, only 24 recreational marijuana business licenses have been approved for the entire state during the initial phase of the process, and their locations have little do with market demand. (Only one is in Seattle, the state’s largest city.)
It’s only the beginning, but the muddled confusion in Washington makes it hard to see how the state will come close to raking in the $190 million in pot taxes over four years that it projected. With the taxes tied to the price of pot, which will drop as the supply shortages are filled by growers who aren’t yet ready to harvest, state revenues should decline as well. It’s a problem that Colorado is currently facing as medical sales, which are taxed at lower rates than the recreational market, have held strong in the face of the more highly taxed new competition. Some Colorado dispensary owners are actually suing the state to block the extra sales taxes on the recreational market. Denver Attorney Rob Corry, who filed the suit on behalf of six dispensary owners, says that they are concerned that the state’s open records requirements mean that business owners are in the position of admitting to a federal crime despite complying with all applicable state laws.
Whatever happens moving forward, some things will remain the same in both states. The contradiction between state and federal law will continue to create confusion and court showdowns. The risk of dealing in only cash will remain because banks don’t feel safe from federal prosecution. And beyond that, the current hands-off federal policy could change at any moment, particularly after the next president enters the White House in January 2017. Despite such challenges, these two pioneering states may soon have company in their rebellion against federal drug laws: Alaska’s ballot will feature a legalization initiative this fall, and bills in both Oregon and Washington, D.C., have support. It remains to be seen whether those laws will even be implemented if they’re passed, and how the different jurisdictions will move forward with structuring their tax systems given the economic lessons that are being learned from the nascent social laboratories in Colorado and Washington. Regardless, the marijuana legalization experiments are moving forward—and they look like they’ll continue to do for the foreseeable future.
