Marijuana and Microsoft: Why This is Huge for Legalized Pot

marijuana

Marijuana | Photo by David McNew/Getty Images

Despite numerous states approving medical and recreational marijuana laws, and several more to potentially follow during the election season in 2016, the cannabis industry is still on shaky legs. Investors are still hesitant to jump in with both feet, since federal laws still prohibit weed in any form. However, a recent partnership announced with tech giant Microsoft could help change the tide.

In mid-June 2016, Microsoft announced it would partner with Kind Financial, a software company focused on the legal cannabis industry. By most accounts, this is the first time a company of such significant status has announced a partnership with the marijuana industry — even if that connection isn’t with growing the marijuana directly.

“Nobody has really come out of the closet, if you will,” Matthew A. Karnes, the founder of Green Wave Advisors, which provides data and analysis of the marijuana business, told The New York Times. “It’s very telling that a company of this caliber is taking the risk of coming out and engaging with a company that is focused on the cannabis business.”

Kind is in the seed-to-sale business, making it easier for marijuana distributors to track sales and stay in compliance with changing regulations. The company will use Microsoft’s Azure Government cloud system to help with establishing more structure for the cannabis industry. “No one can predict the future of cannabis legalization, however, it is clear that legalized cannabis will always be subject to strict oversight and regulations similar to alcohol and tobacco; and, KIND is proud to offer governments and regulatory agencies the tools and technology to monitor cannabis compliance,” said Kind Financial Founder and CEO David Dinenberg in a press release.

Microsoft and marijuana

Microsoft company logo

Microsoft | VESA MOILANEN/AFP/Getty Images

You won’t see a Microsoft-branded strain of marijuana anytime soon — the tech giant isn’t interested in getting close to the growth or distribution action. Instead, the company will be helping Kind in its “government solutions” arm, which offers software to state and local governments that are interested in building compliance systems.

Even so, the announcement made waves. For one, industry players are still in a waiting game of sorts, trying to figure out how to walk the tightrope of local laws while the drug is still outlawed on the federal level. On top of that, getting involved with marijuana can still have negative social consequences. The last time Gallup asked Americans about marijuana use, 58% of respondents favored legalization. But even though a majority don’t mind if epilepsy patients receive medicinal doses of marijuana, there can be a backlash for supporting the industry at large.

“[My company] has stayed away from investing in the cannabis industry because it’s like investing in the porn industry,” Zack Bogue, a venture capital investor, told The Washington Post. “I’m sure there’s a lot of money to be made, but it’s just not something we want to invest in.”

The future of marijuana investments

wallet full of money

Money | Source: iStock

With that in mind, it’s not surprising that companies have been hesitant to enter business deals with marijuana-related businesses in the past. However, Microsoft’s foray into the industry could be a turning point, offering much-need legitimacy to Kind and other firms like it. “Every business that works in the cannabis space, we all clamor for legitimacy,” Dinenberg of Kind told the Times. “I would like to think that this is the first of many dominoes to fall.”

It’s not a guarantee by any means, but Microsoft’s association with marijuana could also help legalization efforts on the national level. At the very least, it might shift bank attitudes about cooperating with the industry, Allen St. Pierre, executive director of National Organization for the Reform of Marijuana Laws, told The Washington Post. “Microsoft has a leviathan [lobbying] effort up here in Washington [D.C.],” St. Pierre explained. “One of the things that has been really interesting to see is how the focus is becoming not so much about legalization per say … but just focusing in on these commerce reforms, for example to allow banks to handle this trade.” If Microsoft were to add its name to the lobbying pool for those changes, it “can only buoy those efforts,” he added.

If cannabis legalization becomes the norm in the coming years, not the exception, Microsoft will have gotten into the industry at the ground level, accumulating experience in working with marijuana-focused companies before fighting for business with other major competitors. The industry is already expected to be worth $6.5 billion by the end of 2016, one analyst told the Times, up from $4.8 billion in 2015. If California approves the drug for recreational use, as is expected, that could balloon to $25 billion by 2020.

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