Author: patoglesby

Dear Members of the New Hampshire Commission to Study with the Purpose of Proposing Legislation, State-Controlled Sale of Cannabis and Cannabis Products:

Some of you support state retailing of cannabis, as I tend to do for my state of North Carolina. Some of you strike the balance differently and oppose state retailing.  (Louisiana’s owning and selling cannabis – through the state’s two land grant universities – makes me think that federal illegality is not a practical problem.  https://www.lsuagcenter.com/portals/administration/about-us/vice-president-dean-office/Medical%20Marijuana;http://www.suagcenter.com/news/4279.)

The Center for New Revenue, a North Carolina non-profit that I head up, is looking at how much revenue state sales might bring in for North Carolina – over and above taxes.  As a cannabis policy researcher interested in government retailing, I wonder if you can correct any mistakes I am making in thinking about revenue from that “public option.”

Continue reading “State marijuana retailing revenue and federal illegality – letter to New Hampshire Commission “

September 15, 2023

Sometimes, assets and privileges are up for grabs.

The University of Virginia Law School has an office for me as I co-teach a class on Cannabis Legalization with a focus on who gets the money.  Well, for now, I don’t have any use for the office.  I teach only three more Fridays.

Until I think of something, this office makes for a thought experiment. It’s in line with Virginia’s marijuana situation that our class is considering:  Who gets the privilege of using the room (the asset)?  Who gets the privilege of selling marijuana (the money asset)?

Continue reading “What to do with room 163?”

What do we call the drug?

Here’s the first jurisdiction to tax our subject:

British Indian colonizers used “hemp drugs” generally, ganja and bhang and more for different products, cannabis rarely, and only for the plant (marijuana not at all): 

https://digital.nls.uk/indiapapers/browse/archive/74574106

Continue reading “Marijuana or Cannabis”

Here’s a list of cannabis supply architecture models that say what private sellers can get licenses.  Maybe others have been used.  (Jurisdictions listed are just examples, not exhaustive.)

All comers (Oklahoma with $2,500 fee)

All comers with significant fees (Illinois, https://www.mpp.org/issues/legalization/breakdown-application-licensing-renewal-fees-adult-use-states/)

All comers at the state level with local license needed (Colorado, California)

First-come first-served (Los Angeles for retail; no state starts with this, but moratoria in Oklahoma and Oregon transmute “All comers” into FCFS when licensing stops)

Grandfather existing medical marijuana sellers (lots of states)

Lottery for all applicants who meet certain criteria (Washington, https://www.pbs.org/newshour/health/medical-marijuana-licensing-states)

Lottery for all comers (“Arizona doesn’t analyze business proposals the way other states do.  https://www.pbs.org/newshour/health/medical-marijuana-licensing-states)

Lottery for social equity applicants with post-drawing verification of status (Illinois, https://www.illinois.gov/news/press-release.26715.html; Connecticut, https://portal.ct.gov/cannabis/knowledge-base/articles/how-does-the-lottery-work?language=en_US)

Lottery for social equity applicants with pre-drawing verification of status (Maryland, I think, https://www.cannabisindustrylawyer.com/maryland-social-equity-cannabis-lottery-licenses/)

On the merits – competitive licensing (Georgia, Florida)

On the merits — social equity licensing (New York)

Auctions (British India) 

Kick the can down the road: Have a commission issue licenses with few or no criteria (Virginia-passed-once Senate Bill 1406 of 2021); or elect or appoint a single individual as cannabis czar to issue licenses (no jurisdiction I know of has tried a single person)

Rolling the Dice

https://www.carolinajournal.com/opinion/cpac-letter-to-nc-legislature-pass-tax-cuts-without-special-interest-giveaways/

They also oppose having some state body in charge of somehow choosing a handful of medical marijuana sellers that will cartelize the market.

North Carolina should learn from other places and try to do marijuana right

https://reason.org/commentary/north-carolina-house-medical-marijuana-bill/

University of Virginia Law School Professor Kim Krawiec, who had me talk to her class at when she taught at Duke, asked me to help her teach a class on cannabis legalization this fall.  I was delighted to sign up to in person in Charlottesville for four Fridays.

https://www.law.virginia.edu/courses/cannabis-legalization-sc-123820664

Cannabis Legalization (SC)

LAW7724

Section 1, Fall 23

Krawiec, Kimberly D. 

Oglesby, Pat 

SCHEDULE INFORMATION

Enrollment: 16/16

Credits: 1

Days	Date	Time	Room
Fri	09/08/2023	0900-1200	WB127
Fri	09/29/2023	0900-1200	WB127
Fri	10/20/2023	0900-1200	WB127
Fri	11/10/2023	0900-1200	WB127

COURSE DESCRIPTION

This short course will examine various cannabis legalization regimes, both domestically and internationally, with a focus on the market and financial aspects of legalization. Specifically, we will consider license allocation methods, taxation, racial equity, reparative justice for casualties of the war on drugs, and the continuing existence of illegal transactions after commercial legalization.

COURSE REQUIREMENTS

Continue reading “Cannabis Legalization at UVA Law School”

On May 30, 2023, at a meeting of the North Carolina House Health Committee on our medical marijuana legalization bill, SB3, around 20 people signed up to speak, but the Committee decided to hear from only three.

Reluctance to hear at length from all comers among the general public on marijuana is understandable.  Some of us who take an interest in the issue are vehement and emotional.  Some of us are “wacktivists.”

In the mid 2010s, I served as co-chair of the Regulatory and Tax Working Group of the California Blue Ribbon Commission on marijuana legalization to make recommendations for an eventual ballot initiative.  

That Commission held open hearings in various spots in California.  At a video-recorded forum at Fresno State University, a Commission co-chair, Abdi Soltani from the California ACLU, a big, muscular fellow, opened the floor up to the general public after panelists had spoken.

Now  Abdi carried around a wireless microphone, which he gripped firmly and held in front of recognized speakers from the public.  As impassioned speakers got carried away and tried to seize the microphone, Abdi held on.  When they started repeating themselves, he nodded politely and gently took the microphone away.  My recollection is that everyone who wanted to speak got to.

Without such safeguards, a public meeting on marijuana laws would probably get either heated or boring.  Or both.  So I don’t criticize the House Health Committee for not hearing out speakers – even me.  I can email in my comments.

(I’m at the left edge of that image, but I’m trying to dodge any blame for the troubles with marijuana legalization in California today. I’m just a technician who had very little if any influence, which I would pin on a huge overhang of illegal operators from decades of bootlegging, and especially on lack of law enforcement.  One Californian says, “California doesn’t arrest people for daylight robbery.  They’re not going to arrest anyone for pot.”)

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.

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. 

More

For revenue, and to keep marijuana in North Carolina, state commerce is the better way. See https://www.newsobserver.com/opinion/article272626684.html.

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.”

http://www.suagcenter.com/news/4279

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 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.

280E Is a Bastard. So What?

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.  https://newrevenue.org/2021/09/01/ad-valorem-excise-taxes-are-not-the-way-to-go-for-marijuana/;  https://itep.org/taxing-cannabis/;  https://taxfoundation.org/safe-banking-act-state-marijuana-revenues/

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?

Here’s the question I asked: What are the arguments for and against having the Dormant Commerce Clause apply to commerce in marijuana?

https://chat.openai.com/chat supplied this answer:

The Dormant Commerce Clause (also known as the Negative Commerce Clause) is a legal doctrine that prohibits states from passing legislation that unduly burdens or discriminates against interstate commerce. The application of the Dormant Commerce Clause to commerce in marijuana is a controversial issue with arguments for and against its application.

Arguments for the application of the Dormant Commerce Clause to commerce in marijuana include:

1. Marijuana is a product that can be easily transported across state lines, making it an item of interstate commerce. As such, any state law that regulates marijuana in a way that interferes with interstate commerce would be subject to scrutiny under the Dormant Commerce Clause.
2. Applying the Dormant Commerce Clause to marijuana would promote uniformity in the regulation of the product. This is because it would prevent states from enacting protectionist policies that favor their own marijuana industry at the expense of out-of-state businesses.
3. The application of the Dormant Commerce Clause would prevent a patchwork of inconsistent state laws from creating confusion and uncertainty for businesses operating in the marijuana industry.

Arguments against the application of the Dormant Commerce Clause to commerce in marijuana include:

1. Marijuana is still illegal at the federal level, and the federal government has not yet established a regulatory framework for the industry. As such, it is premature to apply the Dormant Commerce Clause to marijuana until the federal government has acted.
2. Applying the Dormant Commerce Clause to marijuana would infringe on state sovereignty and the states’ ability to regulate the drug as they see fit. States should have the right to regulate marijuana in a way that reflects the values and preferences of their citizens.
3. The marijuana industry is still in its infancy, and the application of the Dormant Commerce Clause could stifle innovation and experimentation by limiting the ability of states to try different regulatory approaches.

In summary, the application of the Dormant Commerce Clause to commerce in marijuana is a complex issue with valid arguments on both sides. Ultimately, the decision on whether to apply the Dormant Commerce Clause to marijuana will likely depend on how the federal government decides to regulate the industry in the future.

The website that contained the California Blue Ribbon Commission Report on Marijuana Legalization, safeandsmartpolicy.org, has disappeared, so I’m posting it here. My website is hardly official, but I was on the Commission, and was Co-chair with Sam Kamin of Regulatory and Tax Working Group.

The Raleigh, Durham, and Charlotte papers put this op-ed below in online and print editions, https://www.newsobserver.com/opinion/article272626684.html#storylink=hpdigest_opinion; it’s been mentioned favorably by Thomas Mills’s PoliticsNC, https://www.politicsnc.com/a-week-of-bipartisan-progress-for-nc/, and featured in depth by a NC Policy Watch, https://ncpolicywatch.com/2023/03/21/north-carolina-should-learn-from-other-places-and-try-to-do-marijuana-right/ (no paywalls).

Excerpts:

The Compassionate Care Act (Senate Bill 3) would unleash the profit motive on millions of dollars’ worth of medical marijuana commerce in our state. But it’s likely to let well-funded out-of-state corporations grab the lion’s share of that money. They would then want to legalize lucrative recreational use quickly and be first in line to sell it.

While state commerce violates free market principles, SB 3’s 10 permanent licenses make for oligopoly, not market freedom. Sure, state delivery and eventually stores would take time and money to set up, but awarding licenses to private sellers “on the merits” or by lottery, SB-3-style, is a recipe for delays and litigation. Four years elapsed between the passage of a medical marijuana law and the first legal sale of medicine in West Virginia and Delaware.

Who gets to sell marijuana?

If the government doesn’t monopolize marijuana sales, then individuals or corporations chosen in various ways, like by lot, on the merits, by willingness to pay fees, by periodic auction, or by voucher privatization will get to sell it.  Voucher privatization failed in Russia because permanent rights were given away all at once, but we can learn from that mistake.  And none of the other options is humming.

Dividing the right to sell up annually per capita among residents avoids licensing disputes and delays.  It spreads wealth, at least unless interstate commerce comes in.

Mechanics are primitive:  The state passes out transferable electronic vouchers to all voters or bright-line tested residents. This is like Alaska’s Permanent Dividend Fund, which sent $1,884 in oil dividends to each qualifying resident of the state for 2014, and keeps on humming.

Say every voter gets one transferable Quota Share. Each Quota Share is entitled to a transferable equal fraction of the year’s total production target, set by the state. 

While actual allocations would be done at the state level, national numbers are available to work with. The RAND Report for Vermont suggests that 19,000 acres could satisfy national demand. That’s 827,640,000 square feet to split among 320 million people. So each Voucher  would allocate a little over two square feet. Say the total crop is now worth $40 billion, as the RAND Report suggests.   Say half of the total consumer price eventually went to pay for legality. Then 320 million people would divide up $20 billion, so an Annual Voucher  would be worth some $62.50. If the 78 million voters in 2014 divided it up, the raw number would be a little over $250 each.

This plan would need a minimum amount of square feet to grow a plant. Maybe it needs to use pounds instead.

Say 300 acres in North Carolina for 5,000,000 voters.  Quota Shares don’t seem like they’re worth much, so only they bring only chump change the first year – and keep costs down for the struggling industry.  Probably a few players will control the industry the first year.

That’s where the Russian lesson comes in.  The only obvious way to keep private power down is not make licenses all and only annual licenses. Industry (the Big Money Boys) will want longer licenses, but they may not have the votes yet.

In later years, voucher prices will probably stabilize.