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Bud Biz Barriers: Just Because Weed Is Legal, Doesn't Make the Weed Business Easy

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By Christopher Coble, Esq. on September 20, 2016 11:15 AM

If you haven't noticed, marijuana laws in this country are changing rapidly. Four states have already legalized recreational pot possession, and a slew of others now allow medical marijuana for those with a prescription. And for those with an entrepreneurial mind, changes in the law mean business opportunities.

But just because your state has legalized it today, doesn't mean your weed retailer can open its doors tomorrow. Several states have set up significant barriers to entry into the medical marijuana market, and if you ain't got the dough, you may be out of luck.

Prescription Restrictions

The states that have allowed medical marijuana (or are contemplating new medical marijuana laws) have included some strict statutes limiting who can grow and sell medical marijuana, the kinds of products they can sell, and the licensing requirements to even become a register grower or retailer. Florida has a Medical Marijuana Legalization Initiative on the ballot for November, but the Sunshine State is already rolling out draft regulations, the most striking of which is the hard cap of only five licensed dispensing organizations. In order to qualify to be one of the five, an agricultural nursery must have been in existence for at least the last thirty years, and even then the state required a $5 million performance bond.

Similar barriers exist in New York, where the state requires an up-front $200,000 refundable registration fee for every application in addition to the $10,000 non-refundable application fee. The Empire State also caps the number of dispensing organizations at five, and they are limited to 20 dispensaries in the state. Estimates place the start-up costs for a New York medical marijuana company in the neighborhood of $25 million.

Open Smoking Season?

If you happen to live in Colorado, Oregon, Washington, or one of the other states that has (or soon will) legalize recreational marijuana, the hurdles to starting a cannabiz may be lower, but they still exist. The biggest being finding a bank that will do business with marijuana growers and sellers. No matter what a state may say about recreational or medical marijuana, the feds still consider the drug illegal, and most banks are federally chartered.

And even if you get financing, navigating the red tape of state marijuana laws can be a nightmare. Your best bet before you jump into the bud business is to consult with an experienced commercial attorney familiar with the laws in your state.

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