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The Green Rush begins

First in a series on the legalization of recreational marijuana

The Green Rush begins

Employees of Medicine Man dispensary work among a forest of plants in one of the company’s grow rooms near Denver, Colo.

When the 1849ers heard of gold nuggets and dust in California hills and streams, they scrambled for mules, pickaxes, and mining pans. Now that California and Canada have legalized recreational cannabis use, and many states are rushing to do so, the 2018ers are scarfing marijuana domain names, hiring MBA grads, and staking claims for their special brew of THC-infused beer.

Sniffing the aroma of quick profit, companies like Molson Coors and Altria (formerly Philip Morris) are rushing in where angels fear to tread. Intoxicated by the prospect of tax dollars that could prop up public schools (as gambling revenues were supposed to), states are ignoring the risk of vending machines jammed with marijuana munchies—brownies, chocolate bars, gummy bears—damaging young brains.

Advertisers are framing a new generation of appeals. How about kicking back with a chilled, THC-laced, handcrafted beer with a lime garnish? (THC, tetrahydrocannabinol, is the chemical primarily responsible for marijuana’s psychological effects.) How about a glass of cannabis sauvignon blanc, or a snifter of hemp-infused whiskey? What about a “marijuana vacation”—to vape granulized THC by the pool, tour marijuana fields, relish “high dining” on THC-saturated sirloin, and return to your room where a cannabis flower lies on your pillow?

The future is so bright that pot users are wearing shades. The Cannabis Industry Annual Report projects annual sales growth at 16 percent. Former Microsoft executive Jamen Shively says he will create the “Starbucks of marijuana” and “mint more millionaires than Microsoft.” Business school professors and students at Yale, Cambridge, Stanford, and UCLA are studying the budding market. Why not, when BusinessStudent.com claims “Colorado’s licensing laws are so open that Denver boasts twice as many cannabis dispensaries as it does Starbucks.”

With recreational marijuana legalized in Canada starting Oct. 17, so many companies on the Canadian Securities Exchange are in the marijuana business that the trading center’s new nickname is the Cannabis Stock Exchange, with 83 of the 379 companies listed in pot-related businesses. Since U.S. cannabis companies are barred from Wall Street exchanges because of marijuana’s illegality on the federal level, shares of U.S. companies like California cannabis grower Prime Harvest, dispensary chain MedMen, and Body and Mind (maker of edibles like marijuana-infused gummy candies) trade in Toronto.

Let’s look at who’s leading the push for full U.S. legalization and who’s positioning to make money on pot use: Big Politics, Big Tobacco, Big Alcohol, and Big Banking. We’ll then look at some standing in the way, including Big Pharma, for reasons involving either principal or principle.

Former Facebook President Sean Parker is probably the biggest sugar daddy for weed activists. He and his associates in 2015 and 2016 gave $8.6 million to fund Proposition 64, which legalized recreational pot in California. Hedge fund billionaire George Soros, who funds many liberal and radical causes, gave $4 million: He also bankrolls and sits on the board of the Drug Policy Alliance, a large pro-marijuana lobbying group, and from 2004 to 2014 Soros donated about $200 million to groups challenging current drug policies, according to Forbes. Soros contends that legalization is an important step toward improving criminal justice.

Insurance interests are also potent pot funders. Peter B. Lewis, Progressive’s late CEO, spent more than $40 million on legalization efforts over three decades. (Fortune headlined a Lewis profile “Sex. Reefer? And Auto Insurance!”) His younger brother, Daniel R. Lewis, a former Progressive board member, donated $1.25 million to support Prop 64.

J.B. Woods of Greenpoint Insurance Advisors co-founded Big Marijuana’s umbrella group, the National Cannabis Industry Association (NCIA). Greenpoint claims nine years of experience providing “commercial insurance, risk identification, and solutions to hundreds of cannabis retailers, cultivators, and manufacturers within regulated markets.” NCIA now provides quarterly meetings, big conferences, and networking opportunities for its 1,500-plus members, including Bic, the ballpoint pen maker.

The Marijuana Policy Project (MPP) is another state and federal lobbying giant. In 2013, MPP’s ad on a NASCAR race jumbo screen called marijuana the “new beer” with “no calories, no hangovers, and no violence.” An MPP radio campaign surveyed pot use by national political leaders, then asked, “Is it fair to arrest three-quarters of a million people a year for doing what presidents and a Supreme Court justice have done?”

These lobbyists are finding bipartisan support in Congress. The “Cannabis Caucus” in the House includes Dana Rohrabacher, R-Calif., Don Young, R-Alaska, Earl Blumenauer, D-Ore., and Jared Polis, D-Colo. They authored an amendment that prohibits the Justice Department from spending funds interfering with the implementation of state medical cannabis laws.

Sens. Cory Gardner, R-Colo., and Elizabeth Warren, D-Mass., are pushing the “Strengthening the Tenth Amendment Through Entrusting States Act” forbidding federal prosecutions in states where pot is legalized—a bill President Donald Trump said he “probably will end up supporting.”

On the business side, Big Tobacco has been eyeing the market for decades. As early as the 1970s, consultants dreamed of the marijuana market: A report to Brown & Williamson (the American tobacco company depicted in the 1999 movie The Insider) said tobacco companies “have the land to grow it, the machines to roll it and package it, the distribution to market it.” In 2009 Altria, which now includes Philip Morris International, took legal action to obtain the domain names AltriaCannabis.com and AltriaMarijuana.com—and in 2010 also obtained MarlboroWeed.com, according to DomainNameWire.com. Philip Morris claimed it “has no plans to develop or commercialize cannabis products.”

The pace is now quickening. Last year Imperial Brands, the British maker of Winston and Kool, hired Simon Langelier, a 30-year Philip Morris veteran and chairman of a medical marijuana company. In January, Altria invested nearly $20 million in Syqe Medical, an Israeli manufacturer of metered-dose cannabis inhalers. This summer Imperial Brands purchased the British biotech firm Oxford Cannabinoid Technologies. Imperial’s website now bears the marketing slug, “From tobacco to something better.”

YouTube

The Marijuana Policy Project’s NASCAR ad (YouTube)

Big Alcohol is also sashaying into the marijuana market. Last November, the U.S. distributor of Corona beer, Constellation Brands, invested $191 million in Canada’s largest commercial marijuana business, Canopy Growth Corp. Meanwhile, Molson Coors is “engaging” with Aphria Inc. and Aurora Cannabis, two other major Canadian cannabis companies.

Some of the profits from Coors beer over the years went to fund the conservative Heritage Foundation, but Molson Coors CEO Mark Hunter recently told stock market analysts, “We have a team of people working on” the marijuana market. That’s natural, says High Times: “Cannabis and hops are in the same plant family, [Cannabaceae].” One of Hunter’s star innovators has now staked his own claim in the Green Rush: Keith Villa, who created Molson Coors’ popular orange-garnished Blue Moon beer, will soon launch his own “Ceria” line of THC-infused beers.

Big Alcohol once opposed the legalization of marijuana, seeing it as a rival for those seeking a buzz—but some research suggests cannabis may increase alcohol use. The prospect of creating double highs, combined with the sobering reality that pot seems on the fast track to legalization, has now converted the industry into a “can’t beat ’em, join ’em” mentality. A two-decade study published in 2015 by Forensic Science International showed only 2 percent of car drivers involved in fatal crashes in 1991 had both THC and alcohol in them—but that number jumped fivefold, to 10 percent, by 2008.

BIG BANKING IS STILL ON THE FENCE. The New York Times reported Wells Fargo was one of the first national financial institutions to “fish” for clients at marijuana industry conferences. It was also the “first to abandon the field” when Attorney General Jeff Sessions lifted Obama-era protections. Insurance carrier USAA exhaled after successfully arguing (on appeal in a Hawaii federal court) it need not pay for the loss of stolen marijuana plants grown for medical use, since the drug is still illegal under federal law.

But if President Trump greenlights the weed, banking institutions may no longer fear money laundering charges for accepting deposits from cannabusinesses. Some big insurers may soon be following the suit of small-time brokers who are charging ultra-high premiums for coverage. In 2014 Allstate’s Amy Allmon said the company would cover the loss of marijuana in Colorado, where cannabis is legal for both medicinal and recreational use. Still, studies on the long-term effects of marijuana use raise questions for underwriters assessing marijuana’s impact on life (potential lung cancer), auto (traffic fatalities), homeowners (fair market value of marijuana plant loss), and product liability (defective THC edibles) insurance.

Some companies within Big Pharma have already profited from marijuana’s legalization for medical use in 31 states—or 46 if counting those states allowing the medical use of CBD oils. (Only nine of those states authorize recreational use.) Medical marijuana can be used to reduce muscle spasms, improve appetite in people with HIV/AIDS, and reduce vomiting and nausea during chemotherapy. The FDA has approved three synthetic marijuana-related drugs for prescription use, and on June 25 it for the first time approved a plant-derived one, Epidiolex. That puts pressure on federal authorities to remove marijuana from their list of drugs with “no medical benefit.”

One of the synthetic drugs, Syndros (oral dronabinol), an anti-nausea solution and appetite stimulant, emerged from the laboratories of Insys Therapeutics. Insys, stating its concern for child safety, was the largest contributor ($500,000) to the defeat of a 2016 Arizona measure to legalize marijuana. But an Insys disclosure statement to the Securities and Exchange Commission stated: “If marijuana or non-synthetic cannabinoids were legalized in the United States, the market for dronabinol product sales would likely be significantly reduced and our ability to generate revenue and our business prospects would be materially adversely affected.”

Other pharmaceutical companies have also fought recreational use of pot. Purdue Pharma, the maker of the highly addictive opioid OxyContin, was a major contributor to the Partnership for Drug-Free Kids. Vicodin producer Abbott Laboratories was also a big partnership donor. Some within Big Pharma see marijuana as unwelcome competition—especially in states where legalized marijuana and reductions in opioid overdoses are correlated.

Whether moving quickly, slowly, overtly, or covertly, all players are jockeying and politicking for a piece of the pot pie—with eyes on the profits and costs in the periphery. According to the National Institute on Drug Abuse, about 30 percent of users will develop some sort of dependence on the drug, with 9 percent becoming addicted. The 2016 World Health Organization report and a 2017 National Academy of Sciences study depict marijuana as harmful and potentially addictive for up to 50 percent of users.

In 2015, 138,000 Americans voluntarily sought treatment for marijuana abuse. Online, a Reddit forum, “r/leaves,” is “a support and recovery community for practical discussions about how to quit pot … or whatever THC-related product you’re using, and support in staying stopped.” It has 66,000 subscribers.

Teenage abuse is perhaps the most worrisome—17 percent of adolescent users turn into addicts, and three-fourths of adolescent admissions to publicly funded addiction treatment centers are marijuana-related. One study of a Colorado children’s hospital found that cannabis-related emergency room admissions for youth ages 13-21 quadrupled between 2005 and 2014, the year the state legalized marijuana for recreational use. Studies show marijuana to be dangerous to the adolescent brain, in some cases leading to permanent reductions in IQ.

The benefits of marijuana in relieving pain are clear, but it’s usually not hard to find a doctor who liberally passes out prescriptions. CNN reported that only 3 percent of Colorado’s medical marijuana prescriptions were for people suffering from cancer or HIV/AIDS. Some 94 percent cited unspecified “pain.”

And, as the Green Rush escalates, some children’s advocates are reminding us of “Joe Camel,” Big Tobacco’s 1987-1997 advertising mascot that attracted children to smoking. THC concentrate is now infused in colorfully packaged sodas, gummy candy, lollipops, and cupcakes. The cannabis industry recently sued and blocked an attempt by Colorado Gov. John Hickenlooper, a Democrat, to have marijuana magazines containing cartoon ads and coupons for $1 joints placed behind counters and out of the reach of children. If government officials can’t withstand the Green Rush, can kids?

—Caleb team members: Charissa Crotts, Juliana Chan Erikson, Jim Long, Marvin and Susan Olasky, Harvest Prude. Our next article in this series will concentrate on Big Alcohol’s marijuana involvement.

Definitions

Canabis (Marijuana): A flowering plant containing 85-plus chemical compounds called cannabinoids that are unique to the plant.

Tetrahydrocannabinol (THC): The most abundant cannabinoid in marijuana gives users a psychoactive “high” effect.

Cannabidiol (CBD): The second-most-abundant cannabinoid, often used for medicine, does not produce a “high.”

Hashish (Hash): Concentrated cannabinoid in powder, resin, or oil form that typically contains a potent level of THC.

Hemp: A fiber and seed extract from cannabis used for rope, paper, or cosmetics. Because the extract is not derived from the flowering bud, it has no drug value.

Jim Long

Jim Long

Jim is a graduate of the World Journalism Institute's mid-career course.

Comments

  • Xion's picture
    Xion
    Posted: Thu, 07/19/2018 03:56 pm

    Remember the hysterical anti-smoking campaigns and the lawsuits and the shaming and the push to eliminate second hand smoke in public places?  Now the unfiltered smoking of a substance that smells like a skunk is being pushed as a healthy wonder drug even though it is still technically illegal at the Federal level.  

  • Peter Allen's picture
    Peter Allen
    Posted: Sun, 07/22/2018 11:47 pm

    Grew up working in a large family owned pharmacy.  Remember delivering cocaine (in solutiion) to cancer patients, and dad showing me a jar of cocaine crystals.  The fact is marijuana has several medicinal purposes, not just for pain. The Federal government NOT recognising facts openned the door for the pendulum to swing too far now in the other direction. Our youth will become the real guinea  pigs that the Federal government should have allowed the drug companies to experiment on years ago.  It will take another decade for the pendulum to come to center.