They’re now the first major political entities in the world with systems for regulating legal marijuana. Soon tokers in Washington and Colorado will be able to possess, use and transport weed without the threat of fines or jail time. But how do Colorado and Washington regulate their legal pot markets?
First, Colorado and Washington have more in common when it comes to cannabis than they have setting each other apart. Voters in both states approved legalization in last year’s election, and both states will allow adults over age 21 to possess up to an ounce of weed.
In both states, marijuana will be sold in regulated retail stores. Both states will levy taxes on the marijuana industry. And both require tight security and rigorous product testing while barring out-of-state investment and tracking the industry from seed to sale.
But there are plenty of differences, and, assuming one scheme works better than the other, the better could lay the groundwork for legalization in other states, from California and Nevada to Alaska and Oregon.
A notable split between Colorado and Washington is in how they deal with pot tourism. Colorado seeks to cut down on it by limiting purchases by out-of-staters to a quarter ounce each. Washington has no such limit, meaning visitors can possess and consume as much as anyone else.
Another key difference lies in how the two states approach cannabis taxation. Washington’s legal weed rules will tax each of the three links in the pot-production chain – grower to processor, processor to seller and seller to customer – at 25 percent. This would put the cost of legal pot at $12 a gram, or $43 an eighth, which is competitive with black market prices.
In Colorado, meanwhile, voters will choose next month whether to impose a 10 percent sales tax and 15 percent excise tax. Sam Kamin, a professor at the University of Denver and an advisor on the state’s weed regulations, said Colorado is trying to balance market forces against the need for tax revenue.
“We want this to be self-funding regulation that is robust, but we don’t want the price of legal marijuana so much higher than the black market that it becomes attractive again,” Kamin said.
Washington and Colorado will each issue licenses in different ways. Washington will limit each license to one part of the production chain: growing, processing or selling. Colorado, on the other hand, will require the opposite during the first few months of licensing (though the requirement will drop later): Applicants must handle all three roles.
And in Washington, officials have placed a limit on the total number of licenses, 334, with additional limits at the county level. In Colorado, they haven’t.
The states differ on how they’ll cut down on interstate trafficking, too. Washington has placed a statewide cap on marijuana production, while Colorado hasn’t. Washington will allow a total of 40 metric tons for usable pot and another 40 for other forms of marijuana, including hemp.
The limit is intended to keep excess weed from flowing into other states. The Obama administration has said preventing interstate trafficking is one of the federal priorities that, if enforced by states, will allow them to keep pot legal. Colorado officials have said they may consider a cap later, but some pot advocates say it could encourage the black market by limiting legitimate access.
Colorado and Washington do agree on one approach that has many cannabis entrepreneurs and advocates concerned: Both states have barred investments from outsiders. This could dramatically limit the industry’s ability to raise needed money, though officials say it will also keep dirty money from around the world out of legal weed.