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Amid 'gold rush' to legal pot sales, many questions remain
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Washington • Calling it a "gold rush mentality," Washington state's top marijuana consultant predicts that thousands of people will apply for licenses to sell and produce the drug for recreational use as the state prepares to open 334 pot stores by June 1, 2014.

All the privately run retail outlets will be in clear violation of the federal law that bans marijuana, but that's expected to do little to slow the number of applicants.

"There will be a ton. . And I think a lot of people are going to get badly burned because they're not going to succeed in business. There's going to be a lot of competition," said consultant Mark Kleiman, who's also a professor of public policy at the University of California, Los Angeles.

The state intends to begin accepting applications Nov. 18, after the Justice Department urged federal prosecutors last week to ignore the illegal activity in Washington state and Colorado, the first two states to legalize marijuana for all adults.

On Wednesday, the Washington State Liquor Control Board followed up by issuing revised rules for its pioneering marijuana system. While the board capped the number of stores at 334, including 21 in Seattle and eight in Tacoma, there'll be no limit on the number of producers and processors, said Brian Smith, a spokesman for the board.

As excitement builds in the industry, key questions remain unresolved, however. Among them:

Will the feds now go further and allow marijuana shops to accept credit cards, make deposits at banks and use armored trucks to haul their cash?

And what price will the U.S. pay if it's found in violation of international treaties aimed at cracking down on drug trafficking?

"This presents a lot of problems for U.S. diplomats abroad negotiating drug policy," said Kevin Sabet, a legalization opponent who served as an adviser on drug issues to President Barack Obama and former Presidents George W. Bush and Bill Clinton.

As Congress prepares to end its five-week summer break next week, the Senate Judiciary Committee is ready to search for answers on how to best govern one of the nation's hottest new industries.

On Tuesday, the panel plans to examine the clash between state and federal marijuana laws, marking the first hearing of the year on Capitol Hill devoted solely to pot issues.

As part of its deliberations, Congress is under growing pressure to pass a law providing legal cover to anyone licensed by a state.

While such a law is unlikely to pass, marijuana advocates say it's sorely needed.

"Washington and Colorado are in the process of issuing state licenses to commit federal felonies. That's sort of a problem," Kleiman said, though he predicted that the liquor board "is going to be surprised" by the high number of applicants.

"I think there's a huge gold rush mentality out there," he said.

Dave Kois, 39, of Olympia, Wash., said he planned to apply for a license to sell the marijuana "edibles" that he now provided to medical marijuana dispensaries. He predicted that at least 70 percent of those in the medical marijuana field in Washington state will try to make the jump to recreational sales.

"It just seems like a smart move, basically," Kois said. He said there was "no doubt" that the business still carried legal risks but he's happy that federal prosecutors are being urged to stay away: "It's good to see that they're coming around, at least, and trying to respect the state's law."

Without a change in federal law, Kleiman said, licensed sellers face a big legal risk. He noted that the Justice Department is only offering guidance to prosecutors and that U.S. attorneys still have the discretion on whether to file charges. He said the guidance did nothing to change the fact that marijuana remained illegal under the federal Controlled Substances Act.

Moreover, any guidance from the Justice Department could easily change when Obama leaves office in 2017.

As an alternative, Kleiman wanted the Justice Department to sign contractual agreements with Washington state and Colorado, allowing them to legally sell marijuana in exchange for their help in preventing interstate shipments of marijuana. He said the federal government didn't have enough agents to do the job on its own.

With the Obama administration and Congress spending billions each year to fight drug trafficking around the globe, Sabet said, the new policy is sure to prompt questions from other countries. Earlier this year, the International Narcotics Control Board warned that a decision by the U.S. to allow the two states to proceed with their plans would violate drug-control treaties.

"What does a country like Mexico - that is being told to reduce its supply - do when the federal government tells the states (they can) go ahead?" Sabet asked.

He said U.S. diplomats would be forced into the uncomfortable position of having to scold other countries for not doing enough to fight drugs while they "pretend that Colorado and Washington are not under their purview."

"That makes no sense to the international community," Sabet said.

Shortly after voters in Washington and Colorado legalized marijuana in their states, a group of Latin America leaders - representing Mexico, Belize, Honduras and Costa Rica - said it would be harder for them to enforce their marijuana bans if the new laws were permitted to stand.

Kleiman said individual states weren't bound by the terms of the drug-control treaties.

After getting the Justice Department to accept the state-run operations, marijuana backers now plan to lobby Obama's team to get the Treasury Department and Drug Enforcement Administration to jump on board. They complain that marijuana businesses now must run as cash-only operations, with banks required to report any deposits they receive from suspicious sources. And they say the businesses are an inviting target for robbers, as drug agents won't even allow them to use armored-car services.

When senators on the Judiciary Committee begin tackling the questions Tuesday, they'll do it without hearing from Attorney General Eric Holder. He declined an invitation from Democratic Sen. Patrick Leahy of Vermont, the committee's chairman, but he plans to send one of his top assistants, Deputy Attorney General James Cole.

Under its new policy, the Justice Department says it will allow Washington and Colorado to conduct full-scale marijuana operations as long as the states do a good job of policing themselves. Among the conditions: No pot may be sold to minors, marijuana must not cross the borders of another state, no revenue may go to criminal enterprises and no pot may be grown on public lands or allowed on federal property.

That doesn't go far enough for Sen. Charles Grassley of Iowa, the top Republican on the Judiciary Committee and a co-chairman of the Senate Caucus on International Narcotics Control. He said the move "sends the wrong message to both law enforcement and violators of federal law."

"Time and again, we have seen the Obama administration decline to enforce laws that it finds inconvenient or that it simply doesn't like," Grassley said in a statement.

But as polls find marijuana legalization rising in popularity this year, especially with young voters, most opponents in Congress have opted to stay out of the fight, with no bills introduced to try to stop either state from selling and taxing pot.

That's been a very pleasant surprise to many.

"Throughout the process in Washington and Colorado, the silence of the lambs has been astounding," Kleiman said. "They're not pounding on us about cannabis."

New industry • The law still murky on the protection for the sellers and buyers.
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