Is Colorado Gaining a First Mover Advantage in the Marijuana Industry?

While 16 US states have legalized medical marijuana, only Colorado has made it legal to run the distribution points as for-profit businesses, which is leading to a “green rush,” as Bloomberg’s Eric Spitznagel calls it. Between 2000 and 2008 Colorado issued just 2,000 medical marijuana cards. The number now stands at 127,000 with another 25,000 applications in process. With such an increase in demands, many are flooding into Colorado with aspirations of running their own marijuana businesses.

All of the attention that Colorado is attracting is turning previous advocates against the marijuana trade. Michelle LaMay, chairwoman for Willie Nelson’s Teapot Party, told Bloomberg, “I’ve never met so many greedy slugs in my whole life. I’ve taken calls from over 3,000 people who want to start their own cannabis business … all out-of-towners convinced there’s a fortune to be made here.”

Michael Bellingham, owner of one of Colorado’s oldest marijuana dispensaries, also refutes the belief that the marijuana business is a cash cow. He told Bloomberg that after two years, he had yet to turn a profit due to the $120,000 initial investment he had to put into his business venture. Bellingham also shed light on the fact that anyone looking to get into the marijuana business had better be ready to self-finance since banks are federally regulated and marijuana is still against federal law.

Trying to sell a federally illegal product is posing some interesting predicaments for marijuana business owners. The entrepreneurs have been advised to not blatantly advertise their trade by the legal community, but some have ignored the warning in attempts to break out from the competition. With a 68% male consumer base, the use of scantily clad women has become more frequent.

Marijuana advocates worry that unless the industry cleans up its image, it could be making itself a target for the federal government. Bloomberg quotes Thomas R. Raynes, executive director of the Colorado District Attorneys’ Council, who warns that “at any moment in time the federal government can exercise its power of preemption and do what they want.”

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