Marijuana regulatory capture in NC SB3: Worse than a revolving door

The bill legalizing medical marijuana in North Carolina, Senate Bill 3, says its Medical Cannabis Production Commission is to have two “industry representatives” among its eleven members.  Maybe the industry doesn’t need representatives on the Commission to regulate themselves. Marijuana sellers can lobby the Commission quite readily, just as they can present their views to the North Carolina House without being Representatives.

The industry naturally wants to maximize profits, and maximize sales.  That’s the American way.  But why should industry representatives vote about how to regulate themselves?  That’s regulatory capture.  The Commission needs to serve the general public interest.  We don’t mandate Duke Energy on the Utilities Commission.  We don’t mandate Jim Beam’s owners on the North Carolina Alcoholic Beverage Control Commission.  We don’t UNC mandate professors on the Board of Governors.  (Students, OK.). The way the bill is written now, the Commission is of the marijuana sellers, by the marijuana sellers, for the marijuana sellers.  

Wait.  Isn’t this like the revolving door?  Prosecutors resign and start representing criminal defendants.  All U.S. Attorneys General I know about practiced law privately before serving the government.  Alcohol regulators worked for liquor interests before working for the state.  

No, putting industry representatives on the Cannabis Commission is not like the revolving door.  It’s worse.  That was then and this is now.  Former prosecutors are rarely suspected of sabotaging their clients’ cases.  LeBron James doesn’t undermine the L.A. Lakers when they play one of his former teams from Cleveland or Miami, does he?  Letting industry representatives regulate their industry on behalf of the public?  No man can serve two masters.  Matthew 6:24.  Not at the same time.

Let’s not put any foxes on the Henhouse Commission.

Cite:  New N.C.G.S. section 90-113.118.


Medical marijuana in North Carolina — Background and sources for statement on SB3

As I hope to appear before the Health Committee of the North Carolina House on May 30, here are notes and links to sources.

Patient health and public health

Patient health

No patients will get legal medicine for years and years.  The Fiscal Note for SB3 says two to three years after enactment.  

But first, 3 people have to appoint a “Production Commission.”  (What if they drag their feet?)  

Second, That Commission decides on “qualifications and requirements for licensure of suppliers.” How do you decide on how to pick winners?  That’s hard.  That’s a can of worms that the bill kicks down the road.  

Third, people apply for licenses.

Fourth, HHS picks 20 semi-finalists.

Fifth, the Commission picks ten winners.

Sixth is when the trouble starts.

Georgia legalized medical cannabis oil in April 2015, with a seven-member commission to pick licensees.  Losers complained, and protested, and went to court.  After all that fighting, the first sale took place over 8 years after the Governor signed the bill.

Unrestricted licensing – where everyone can get a license – would speed time to market, but has proved disastrous in Oklahoma for law enforcement and industry.  

We can get medicine to patients faster if the state keeps control.

That’s about patient health.

Public health

I’m against arresting people for using marijuana, but marijuana makes people nervous.   It’s a slippery slope from medical to recreational.  The government can’t readily describe and limit medical use.  No one can.

Some people overdo marijuana.  Former California Gov. Jerry Brown worried, “how many people can get stoned and still have a great state or a great nation?”  

Baptist teetotaler and Republican prohibitionist John D. Rockefeller Jr., said about liquor: “only as the profit motive is eliminated is there any hope of controlling the liquor traffic in the interest of a decent society.”  That’s what he said as Prohibition ended, and he recommended what we did:  sell alcohol through state stores.  

Louisiana’s land grant universities have a monopoly on producing medical marijuana there (incidentally proving federal illegality a non-issue for state sales).

We can keep the noise down and promote public health better if the state keeps control of medical marijuana. 


For revenue, and to keep marijuana in North Carolina, state commerce is the better way. See

Federal illegality won’t stop state marijuana sales

People sometimes say that a state cannabis monopoly is impossible, because cannabis sales are federally illegal.  Well, some future administration could stop all cannabis sales, public and private, but the federal government we have today won’t shut down state sales.  Louisiana has been selling marijuana for years, through its land grant state universities, Southern U. and LSU.  The federal government hasn’t lifted a finger. Southern is “the only historically Black university in the nation to launch CBD and THC lines of medicinal marijuana products.”

Personal note — still working

Neither of the two  part-time jobs I’m taking on pays much, but it’s still nice to get paid.

One is consulting for a study for the State of California via UCLA and RAND:  “Assessing the feasibility and consequences of implementing a cannabis potency tax in California ($1,082,815); Ziva Cooper, UCLA Cannabis Research Initiative, and Beau Kilmer, RAND Corp., principal investigators.”

The other is co-teaching an in-person class at the University of Virginia with tenured full professor Kim Krawiec four Fridays this fall:  “Marijuana Legalization: Who Gets the Money?”

Marijuana and taxes

Marijuana thinking:

Let’s stop arresting people.

If you stop arresting people and make possession legal, commerce is sure to follow.  (Maybe illegal commerce, as in New York these days.)  Not everyone can grow at home.

Once there’s commerce, the population insists on taxation or revenue (in every jurisdiction so far, they have).

The 280E selling expense tax may be the best tax we can hope for.

It’s overbroad, for sure, but it hits advertising and marketing.

1.  Advertising and marketing appeal to kids – and irritate their parents Consumers don’t need the ads or glitz – or the celebrity endorsements.  The 280E Selling Expense Tax makes those kinds of thing non-tax-deductible. 

2.  Big Business advertises more than small business.  Mom & Pop – and social equity licensees – use word of mouth, not marketing budgets.

States aren’t paving the way for federal cannabis legalization

Here are some long-term predictions:  The federal government will not legalize without a tax plan.  The federal tax will not be ad valorem (percentage) at retail (look at tobacco and alcohol).  Federal legalization will come faster if there are significant state experiments (taxing product weight or THC) that make Congress feel comfortable that it knows how to tax cannabis.  

So state ad valorem taxes may be an impediment to federal legalization.  A small one. Non-ad valorem tax experiments (as in New York and New Jersey and several other states) might be helping.

But most marijuana-legalizing are states using ad valorem taxes.  The tax experts left and right say not to.;;

Are retail taxes just easier to collect, and ad valorem lends itself readily to retail collection?

No legalization without taxation seems a safe bet. At least at first, it would be better, I think, to just keep the 280E selling expense tax and NOT add a federal excise tax, but how many votes would that get?