Will Marijuana Startups Be Hurt By Legalization?

Will Marijuana Startups Be Hurt By Legalization?

In the 2016 ballot, the United States will not only have a new president, maybe more states will also allow the medical and recreational use of marijuana. Nine states and counting, if the petitions and proposals pass legalization, they will be added to the existing 25 states that allow marijuana for medical use and the 4 states and the District of Columbia for cannabis’ recreational use.

Marijuana startups are anxious about the outcome. If the weed’s legalization becomes more widespread, how will it affect their business? These budding businesses that are cannabis-based include sellers of pot, delivery services, payment processing apps and marijuana-laden foods known as edibles.

With the passage of the use of marijuana, changes are expected. In Arizona for example, where Proposition 205 aims to allow its recreational use, adults can cultivate up to six plants and smoke pot in private places. Retail sales carry a 15 percent tax. Small marijuana entrepreneurs can expect less sales if users go to the trouble of planting the weed themselves. They will be constrained to reduce their prices to attract more clients and on top of that, they will have to pay taxes and the regulatory permits. More businesses in cannabis sales will crop up and competition will be tough.

Take SpeedWeed, a service that delivers your order of legal medicinal weed to your doorstep anywhere in California. Once recreational use gets approved, orders for purchase and deliveries will naturally increase. If Postmates and GrubHub, both nationwide app-based delivery services for food, electronics, groceries, etc. will add marijuana delivery to their services, startup delivery systems will find it hard to match the infrastructure of the big players. And California’s proposition will likely be passed, too. Tech billionaire Sean Parker of Napster and Facebook fame donated $1 million for the campaign to legalize recreational use of marijuana in the state, adding to the contributions from other donors.

Leafly, a review site on marijuana dispensaries and strains, isn’t as easy to topple. Yelp or TripAdvisor are mainstream online sources for checking out establishments and may not yet be open to reviews about cannabis-selling entities and the types of marijuana plants. Leafly is also known as an authority on the MJ topic, and reviews on other conventional websites may not be as credible.

As for marijuana edibles producers, if their state will legalize recreational use, they can branch out to supplying groceries or diners with their THC-infused cookies, brownies and gummies and will cease being confined to dispensaries only. But a drug attorney warns that before doing so, pot users and suppliers should avoid indiscriminate sale, use or possession of marijuana and its edibles. The legal complexities could get them into trouble with authorities and it will take a competent lawyer to defend them.

On the other hand, legalization of pot can be good for the marijuana startups, even if on the federal level, nothing has changed and it is still illegal. It is still a new industry and is in the infancy stage, much like the dotcom bubble a decade or so ago. A largely untapped market, research may come up with marijuana having more medicinal and health benefits than is currently known and the startups today could be the industry leaders tomorrow.

With the passage of petitions and propositions for adult recreational use, covert users (and there are many) can now buy the stuff in the open, leading to an increase in sales. The public’s opinion on pot has shifted favorably and its legalization is spreading across states. Whether this change is good or not for potential entrepreneurs deserves thorough study and analysis.

Category law