The Hill

In Colorado, Medical Marijuana Sales Are Overtaken By Recreational Pot Revenues

marijuana in colorado
Many medical marijuana users in Colorado have begun to purchase on the recreational side despite a lower tax rate, business leaders report. Reuters

Though sales of recreational marijuana are increasing swiftly, medical marijuana sales in Colorado fell during 2014, GreenWave Advisors calculated, along with the number of new medical cardholders, CNBC reported. Many medical users in the state have begun to purchase on the recreational side despite a lower tax rate.

Medical professionals will write more prescriptions as a pipeline of more targeted cannabis medications become available, GreenWave's Matthew Karnes also suggested, and eventually the side-by-side legal markets of recreational pot and medical marijuana may recalibrate. Looking at the current trend line, the research and advisory firm predicts the average patient count will continue to decline — from approximately 114,000 in 2014 to 99,000 by 2020 — while the number of recreational users grows. Ultimately, this will boost legalized marijuana compound annual growth rate to 20 percent.

Colorado’s shifting balance of economic power between medical and recreational marijuana, many readers argue, is simply an indication that medical marijuana has always been largely about legalizing recreational pot. Others believe the conflicting federal and state laws are an issue for many pot purchasers.

“As long as Medpot is illegal on the federal level no one wants to register for a pot card for fear the feds now know who and where they are, knowing fully the feds could and would come bust them on a federal charge,” wrote Jeffrey Moab in a comment attached to the CNBC story. “People are willing to pay extra bucks to remain invisible to the feds.”

Despite the confusing legal status, some financial analysts, including Leslie Bocskor, a managing partner at a seed capital firm, predict cannabis will enter new markets soon enough. Bocskor told CNBC cannabis will transform into a curative product (not just palliative), while also entering the veterinary, pharmaceutical, and nutraceutical — supplements and other such products — marketplaces. Perhaps the two will even share most of the same tax and legal regulations, Karnes notes.

Meanwhile, the Denver Post touts the influx of tax revenues earmarked for public schools. In January 2015 alone, the Post reported, the state of Colorado received nearly $2.35 million in excise taxes on the sale of legal marijuana. While the tax dollars may be welcome the Internal Revenue Service has not made it easy on the newly legal businesses. For instance, the IRS had penalized Allgreens, a medical-marijuana dispensary in Denver for paying its taxes in cash — marijuana businesses cannot legally bank their profits with federal laws against them. Although the federal tax agency backed down when Allgreens sued, it also refused to apply this approach industry-wide.

Colorado itself also has not fully embraced either medical or recreational forms of the newly legalized drug. Despite the lure of tax revenues, a majority of Colorado’s jurisdictions don’t allow marijuana sales of any kind, according to a state report.  In 2014, 67 of the state’s total 321 jurisdictions allowed medical and recreational sales, 21 allowed medical-only sales, and five allowed recreational-only sales. The majority, 228 jurisdictions, prohibited all and any pot sales.

“Legalization in theory is different than legalization in practice,” Kevin Sabet, director of the Drug Policy Institute at the University of Florida, told The Cannabist. And so the cannabis landscape evolves.

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