Regulatory Capture: Friend or Foe?

I wonder what free market conservatives think of the regulatory capture in North Carolina SB711:  New N.C.G.S. section 90-113.122 would say the Medical Cannabis Production Commission is to have two industry representatives among its 11 members. 

Is that bad, because regulatory capture is bad, or good, because regulation is bad, so weakening it is good?

Marijuana policy reading

Drafting a pamphlet: “What North Carolinians Need To Know About Marijuana Money.” Here’s what I’m thinking for background reading references:  

For marijuana issues generally, I don’t know a better place to start than Mark Kleiman’s Marijuana Legalization:  What Everyone Needs to Know (2d ed. 2016, with Caulkins and Kilmer, under $20), which inspired the title here.  A more technical 2015 analysis by Kleiman and others for the State of Vermont is in the public domain at

Kleiman’s work is a little dated; a recent multi-author issue of the B.U. Law Review provides a good update in the public domain.

For an ideological prohibitionist view, the group Smart Approaches to Marijuana,, provides online material and offers a book for sale.  

An anti-prohibition view is thought through in a free online book by the U.K. Transform Drugs Foundation:

Ad valorem excise taxes are not the way to go for marijuana. 

Ad valorem excise taxes are not the way to go for marijuana.  Ideological adversaries agree on that, if on little else!  The left-leaning Institute for Taxation and Economic Policy warned, in a detailed report, that ad valorem price-based “ad valorem” taxes on marijuana are a recipe for trouble when prices go down – as they do in every jurisdiction where legalization takes hold.  

More recently, the right-leaning Tax Foundation has joined the warning:  “states risk losing out on forecasted revenue if prices continue to go down.”

We needn’t use ad valorem taxes at all for marijuana.  The bill phases ad valorem taxes out, but keeps them too long, then compounds the error by de facto freezing them.  

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Tax on Intoxicating Liquor, Joint Hearings Before the Committee on Ways and Means, House of Representatives and the Committee on Finance, United States Senate, 73d Congress, Interim, 1st and 2d Sessions, Dec. 11-14, 1933

Hold Hearings before legalizaing marijuana federally

Here’s one of my messages to sponsors of federal marijuana legalization bill:

Dear Senators and Staffers,

On the joint Congressional Committee that devoted four full days of public hearings to liquor taxes alone in December 1933 were a future Supreme Court Justice (Vinson), a future Speaker of the House (McCormack), and a future Vice President (Barkley).  That kind of work might well help Congress today.  The 1933 hearings were hardly a political graveyard for those who took time to listen and study tricky issues.

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Technical tax comment on federal marijuana bill

Comment on the Cannabis Administration and Opportunity Act draft submitted to the Act’s authors:

I don’t understand what (B) is doing in new 26 U.S.C. 5902(a)(2).  


The term ‘THC-measurable cannabis product’ means any cannabis product—

‘‘(A) with respect to which the Secretary has made a determination that the amount of tetrahydrocannabinol in such product (or any particular category of products which includes such product) can be measured with a reasonable degree of accuracy—

 ‘‘(i) consistent with good commercial practice, and

 ‘‘(ii) sufficient to protect the revenue and the public, or

 ‘‘(B) which is not cannabis flower and the concentration of tetrahydrocannabinol in which
is significantly higher than the average such concentration in cannabis flower.

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Confusing definitions of cannabis and cannabis product in federal legalization bill

Definitions of cannabis and cannabis product — submitted to U.S. Senate Finance Committee, which accepts comment on a draft bill at


Something “derived” from the plant is a product taxable by THC content, while a “derivative” of the plant is not a cannabis product, but simply cannabis not taxable by THC content.  That confuses me.


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The profit motive and medical marijuana in North Carolina

Here are comments on North Carolina SB711 sent to Senators on the Health Committee.


John D. Rockefeller, Jr., was a Baptist teetotaler who opposed alcohol and a Republican businessman who liked the profit motive.  When prohibition was repealed in 1933, Rockefeller didn’t want profit-maximizers retailing liquor.  For health and temperance, he said, let the states themselves sell liquor—and that’s the North Carolina way.  

This bill would let just 10 big companies sell medical cannabis.  If the recreational kind is legalized, those companies will say, “Hooray,” and line up to control the recreational market.  That’s the profit motive.

There’s a more restrictive way than SB711, proven in Canada: Sell medical cannabis only through government retailers—online only, delivered to the patient’s door.  No glitzy storefronts, no marketing to tempt the weak.  No lawsuits claiming cartoons and advertising are protected free speech under the North Carolina Constitution.

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Improving the Medical Cannabis Production Commission in North Carolina

Draft statement of Pat Oglesby, Center for New Revenue, for the North Carolina Senate Judiciary Committee meeting August 18 at 2 p.m.

Medical marijuana is coming to North Carolina, like it or not.  Like most people, I’m for that.

But Senate Bill 711 could be improved in a lot of ways, I think.

Here’s one.

New N.C.G.S. section 90-113.122 would say the Medical Cannabis Production Commission is to have two industry representatives among its nine members.  The industry doesn’t need representatives on the Commission. Marijuana sellers can lobby the Commission quite readily, just as they can present their views to the North Carolina Senate without being Senators.

Continue reading “Improving the Medical Cannabis Production Commission in North Carolina”

Medical marijuana money in NC

Speaking to the North Carolina Senate Finance Committee on medical marijuana money, 19’26” mark on video:

And here’s a verbatim transcript, all too accurate, I’m afraid, in reporting my stream-of-consciousness delivery:

“I’m Pat Oglesby with the Center for New Revenue. I think you’re leaving a lot of money on the table here. $50,000 [for an intial license]. These folks would if you had an auction, I hesitate to think how many people, how much money people would pay for these licenses . . .  in Maryland last earlier this month, a medical marijuana license [sold] for $8 million dollars … there’s another way and Canada has done it. They have the provinces have, there have a monopoly on medical marijuana, That’s how it started delivery only. Online only. No glamour, no glitz. The patients just get the patients the medicine and the government gets the money.  In Louisiana. The government gets the money that the state of Louisiana has a monopoly on medical marijuana growing and it uses the L. S. U. And Southern University which correspond to our N. C. State and A. N. T. And they get that money. Now people say, well then the patient is not going to buy it from the government. They don’t trust the government and that may be true, but I trust the government and that’s why I’m here today and I really hope you all take a good look, getting some more revenue out of this thing. Thank you very much.”

Prepared remarks for NC Senate Finance Committee, July 22, 2021, on medical marijuana

Mr. Chairman and Members of the Committee:

Thank you for having me.  I’m Pat Oglesby.  I live in Senator Foushee’s district now, but I’m originally from the home of the Shad Festival, Grifton.  I’ve practiced tax law, been a staff lawyer for the Joint Congressional Committee on Taxation and the U.S. Senate Finance Committee, taught classes at the Kenan-Flagler Business School, and been a member of angel investment groups.  I’ve founded the Center for New Revenue, a non-profit that looks at marijuana revenue, and advised state governments on marijuana, pro bono and for pay.  

I’m an analyst, not an advocate.  There’s a lot of money on the table.  A billion dollars’ worth of medical marijuana was soldin the first 40 months of medical-only legalization in Maryland.  This month, a single medical marijuana license there sold for $8 million.

There’s another way.  In Canada, provinces started out having a government retail medical marijuana monopoly – online only, delivery only, no glitz.  In Louisiana, the 2 land grant universities, LSU and Southern, have had a monopoly on growing medical marijuana for years.  Federally illegal!  Yes, but the federal government knows that, and is winking – and not lifting a finger.

Continue reading “Prepared remarks for NC Senate Finance Committee, July 22, 2021, on medical marijuana”

Senate Marijuana Bill’s Taxes Are Old-Fashioned.

The new Schumer-Wyden-Booker marijuana legalization bill is available.

It’s disappointing that the sticks precisely to the early 2017 design of the Blumenauer-Wyden bill, with ad valorem taxes for five years before switching to “specific” (non-ad valorem) taxes, only at that late date taxing flower by weight and concentrates by THC.  See 2017 is a long time ago for a drug that was first legalized in 2012; we’ve come a long way in what we know since then.

That five-year delay may have had some possible justification in 2017, but not now.  But even then, ad valorem taxes were outdated.  Sure, no one was taxing anything by THC content – but several states had already worked out taxing raw plant matter by weight, the state of the art tax system in 2017.  In the intervening four years, Canada, legalizing in 2018, moved straight into taxing flower by weight immediately, and concentrates by THC content almost immediately.  No five-year delay!  The system up north seems to be humming.  Lots of states tax by weight already, and Canada has the gold standard using both bases, weight and THC.  I don’t know why we don’t just go ahead and copy it — now.

Continue reading “Senate Marijuana Bill’s Taxes Are Old-Fashioned.”

Medical Marijuana Money – Making Senate Bill 711 More Cautious

With medical marijuana, there’s a lot of money on the table.  In the first 40 months of medical-only legalization in Maryland, a billion dollars’ worth of medical marijuana has been sold.  Last week, a single medical marijuana license there sold for $8 million. In that light, SB711’s $10,000 annual fee for licenses in the out years seems awfully small.  

Unleashing the power of the free market to innovate — that’s almost always what we want.  But not when it comes to intoxicants.  John D. Rockefeller, Jr., a Baptist teetotaler and a leading prohibitionist, hated alcohol as much as some supporters of SB711 say they hate marijuana intoxication.  But in 1933, he knew prohibition was dying, and urged retail sale of alcohol by states as he warned, “the private profit motive . . . makes inevitable the stimulation of sales.”  

Marijuana sellers should meet demand – not stimulate it.  A state agency won’t use marketing gimmicks, or push the limits on advertising restrictions.  If for-profit sellers are licensed, they can argue that North Carolina’s Constitution allows advertising as commercial free speech – and sue to invalidate any regulation that stands in their way. 

Canada has shown the safest way to legalize medical marijuana – sales by government agencies, for delivery only.  If you want conservative and restrictive, that’s the gold standard.  

State sales produce the most long-run revenue for the state, and they are the only sure way to keep the money in North Carolina.  SB711 says only North Carolina residents can get licenses.  But on June 21, a U.S. District Court in Missouri blocked that state’s resident ownership requirement as unconstitutional.  So SB711 would create lawsuits by wealthy out-of-state interests saying it, too, is unconstitutional – plus lawsuits by disappointed North Carolina license applicants.  

States can sell cannabis even though the drug is federally illegal.  The proof is in the State of Louisiana, which has been openly growing and selling cannabis, via state land-grant universities LSU and HBCU Southern University, for years.  The federal government has looked the other way.  The worst imaginable outcome is that the federal government would say “Cease and Desist” – and even that won’t happen. 

Sure, state sales have actual downsides.  State sales take time and money to set up.  If the state isn’t nimble, the illegal market will step up.  State sales of medical marijuana may convey a seal of approval and give government a vested interest in selling more.  Long-time marijuana advocates don’t trust government to get anything right.  But a state seller can set prices to make medicine affordable – rather than seeking to maximize profits.

One thing’s for sure:  If profit-seekers start retailing marijuana in North Carolina, they’ll never stop.  And they’ll push for more.  

Pat Oglesby, MBA, JD; Founder, The Center for New Revenue, 1830 North Lakeshore Drive, Chapel Hill, NC, 27514;; 919-619-8838.  N.C. Bar License 7944.  Born Kinston, NC, 1947.  Bio at  Links at [here].   July 13, 2021

Picking marijuana licensees

Who can sell marijuana once it’s legalized? States have different ways of deciding. When states pick winners on the merits, here are some of the things disappointed license applicants do when government authorities pick others to sell marijuana, to the tune of Bob Dylan’s Rainy Day Women:

They’ll tell you that your process wasn’t fair.
They’ll say you didn’t take the proper care.
They’ll sue you over some small technicality.
They’ll sue you saying you showed partiality.
They’ll sue and say your interests conflict.
They’ll say the rules you’re writing are too strict.
They’ll say you didn’t hear their story straight.
They’ll sue and then the judge will make you wait.
They’ll tell you that you gave them a raw deal.
They’ll sue you.  If they lose, they will appeal.

So look ahead and try to think it through.
Lots of people want to sue.

Critique of NC medical marijuana bill, SB 711

I sent this message to the sponsors of North Carolina Senate Bill 711, which would legalize medical cannabis, and which I think needs work.

Dear Senators Rabon, Lee, Lowe, deViere, Harrington, Nickel, and Woodard:

Thank you for your leadership on medical cannabis.  I support the goal of your effort in general.  

I’m originally from Grifton in Pitt County, and am now a lawyer in Chapel Hill.  I served as a tax policy lawyer on the staffs of the Joint Committee on Taxation and the U.S. Senate Finance Committee in Washington many years ago, and have worked for Vermont and Washington as a paid marijuana revenue consultant, and for many other jurisdictions pro bono.  I’m the founder of the Center for New Revenue, a tax policy non-profit.  I have spoken and written widely on cannabis policy.  I have not worked for marijuana sellers.  (CV attached.)

Marijuana is a powerful drug that heals and helps people, but it intoxicates others, and a lot of money from medical marijuana sales will be on the table, so there’s controversy.

There are no easy answers.  But here are a few technical comments.

Continue reading “Critique of NC medical marijuana bill, SB 711”