Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Regulation of marijuana sales in Washington State – 1

I’ve been following the state-legal, federal-illegal sales of marijuana in Washington and Colorado. I’m looking at legalization in those two states as a natural experiment in the heavy hand of regulation.

So you know my perspective and can filter my comments accordingly, my hypothesis is the heavy regulation imposed in each state will severely restrain, if not cripple, the new industry of legally selling banned pot. The legal infrastructure for sales is developing as regulators outline what is required.

Update:  Full disclosure is a good thing. That should even apply to the opinions of journalists writing articles. That is the reason I just described my perspective. You know where I’m coming from so you can filter my comments and coverage accordingly. I sincerely recommend you do the same thing with every news article and opinion piece you ever read.

You can see my posts in the regulation experiment tag. My very first post on Washington was here.

I’ll look at three articles in this series.  The first, from The Seattle Times on 7/5/14: State’s retail pot gets rolling Tuesday, provides a summary of regulation in Washington State and some indicators of prices.

A few tidbits on regulation:

The Seattle Times article gives us some info on the regulatory structure.

It has taken longer to develop the rules in Washington than it did in Colorado. This is because Colorado had in place a regulatory structure for so-called medicinal use. Those rules could quickly be expanded to allow for recreational use.

Stores in Washington will be allowed a 3’ by 3’ sign outside the store. No advertising is allowed inside the store. Security cameras will be required.

Only marijuana related items can be sold.

The state will license only 334 stores. Since no one has applied for a license in 29 locations where the state will allow a store, maximum number of licenses may be only 305.

There are restrictions on where a store can be located. It has to be some distance away from a school, park, or library. The article says there is a pot district developing in the Seattle.

State officials say they will not track purchases of individual customers.

Stores may be open from 8 AM until midnight.

Only people 21 years of age or over will be allowed in a store. That means customers will have to be carded at the door. (Comment I read elsewhere said there are different sale limits for in-state and out-of-state customers, so seems to me it will be necessary to card customers at the register.)

State rules restrict individual sales to 1 ounce of dried marijuana. Initially the sales will be limited by retailers to 1 or 2 grams because of limited supply.

All products must be individually labeled and packaged for sale.

Marijuana in the supply chain must be tested by laboratories to make sure they do not have impurities such as mold.

That testing step implies to me there will be tracking of marijuana from plant to individual retail package. That’s a lot of paperwork and thus extra cost.

Edibles

Washington regulators put a stop to the sale of edibles. The article says this is because of concerns in Colorado about dosing. Consumers don’t understand one product may have many doses. Even those who understand dosing may have difficulty managing to take proper dose.

That is a reasonable concern. Maureen Dowd had a bad experience – Don’t Harsh Our Mellow, Dude. She ate a pot-laced candy bar. After a horrid night of uncontrollable paranoia and physical immobilization, she realized there were 16 doses in the candy.  Oops.

Another author, who based on my reading of one article appears to have operational familiarity with the effects of THC and proper dosing, also had a bad experience, taking two proper doses but at too close an interval. He was dizzy when he stood up and fell. Got a nasty bruise on his back. Which he treated a few days later with a massage using THC infused lotions.

So regulators are on notice that dosing of edibles is an issue.

Regulators in Washington state are sorting through how to structure rules to allow breaking an edible product into individual servings. They also want to assure that the active chemicals are spread evenly, and not concentrated inside an edible product.

Implication of that concern is there will eventually be rules on how long and how vigorously the dough must be mixed to make sure the chemicals are evenly distributed. That will increase cost.

Edibles will also have to be prepared in compliance with food-safety requirements. That will add another layer of costs.

The pot cannot be consumed in view of the general public. If you rent your home or apartment, your landlord can prohibit consumption. This may create a problem for visitors who take their good stuff back to their hotel room.

A few tidbits on prices:

The article says it remains to be seen how prices will shake out but does provide these initial indicators of prices:

  • $15 – $20 per gram – targeted price, including excise and sales tax, according to an entrepreneur who will be opening the first store in Seattle
  • $10 – $12 per gram – typical price in a Seattle medical marijuana dispensary
  • $9 – $17 per gram – reported price by a “prominent illegal delivery service”

I’m gathering tidbits on the pricing structure for the same reason I’m gathering tidbits on the cost to drill a horizontal well in the Bakken:  both are completely outside my experience and knowledge base.  I don’t have the foggiest idea about either.

The very preliminary indicators suggest the legal price will be higher than the dispensary or street price.

This is all new to me. I’ll be watching to see how regulations affect the industry. This will be a superb natural experiment.

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