Seattle’s Dispensaries Face Possible Closure

If you live in Seattle, your favorite dispensary might be subject to closure. Recently, the Seattle City Council sent out a cease and desist letter to over 300 marijuana dispensaries in the city demanding that they either acquire a state license or shut down; and if there is one thing markets hate, it is uncertainty.

The letter is meant to help enforce a rule voted in by the Seattle City Council last year that requires all dispensaries in operation before November 16, 2013, to acquire a state license by July 1, 2015; any dispensary in operation after that date must have a license before opening its doors. There is only one problem: The license doesn’t even exist yet.

The rules were approved by the city council in an effort to set some rules for Washington’s largely unregulated medical marijuana market. Efforts to regulate the medical marijuana market have been largely unsuccessful due to disagreement over how to cut down on “grey market” marijuana; e.g. marijuana grown under legal pretenses yet sold illegally.

By requiring dispensaries to get a non-existent license, Seattle’s City Council is gambling on the Washington legislature to get something done in time. This has entrepreneurs, investors and patients feeling a bit nervous. In a statement Karl Keich, owner of Seattle Medical Marijuana Association, said, “Countless patients who rely on my services will have nowhere to go if my shop is shut down.”

He went on to say that patients are not the only people that will suffer.  “I have paid more than $150,000 in taxes … . Not only will this revenue stream be cut off if the city’s plan is implemented, it will also put nine employees out of work.” Until the state legislature steps in and finally regulates the state medical marijuana market, Seattle’s cannabis will flounder in uncertainty.

Investors take note; this is what happens to states that fail to properly regulate their medical or recreational marijuana system. By failing to issue regulation before implementation of the system, it has become that much harder to reform, leaving cities like Seattle to try and cobble together some piecemeal legislation that only aggravates the situation. If you need another example, California is also a state facing such difficulties.

How is it that in the 16 years of Washington’s medical marijuana program, no one in the legislature has been able to pass some form of regulation or licensing system? It would seem like an obvious thing to require, but then again politicians do have a track record of screwing up even the simplest legislation.

If you are thinking of getting into the Washington medical marijuana business, now may not be the best time. Between legislative gridlock and poor regulatory efforts by Seattle’s City Council, there is a lot of uncertainty floating around in that state. This is not to say Washington is necessarily a bad place to invest, but rather there is an added layer of risk involved.

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