New Rules in States Could Help Expand Marijuana Market; Further Block Federal Prohibition in Practice

Recently, several states have taken steps toward expanding their marijuana markets by removing restrictions on out of state investors, a move that will serve to further block federal prohibition in effect.

According to the LA Times, the Washington State Liquor and Cannabis Board amended its rule to allow out-of-state investors to finance recreational marijuana businesses. Prior to the change, a six month residency was required. Oregon has passed a similar rule as well, while Colorado is looking at eliminating its two-year residency requirement.

The Associated Press reports how difficult it can be for some marijuana businesses to flourish due to federal banking laws.

"The head of the Colorado Cannabis Chamber of Commerce was more blunt.

“We can’t go get a loan from the bank to grow our business to help us accelerate,” Tyler Henson said. “We are susceptible to falling behind other states.”'

Allowing people from other states to invest in marijuana businesses will open the door for more capital to flow into the industry. Opening up the business to more investors means the industry will grow as more money enters the market. The more the industry grows the more money flows to state coffers.

In Washington, marijuana tax revenue is expected to reach $362 million by the fiscal year 2019.

While some might see be less than thrilled at the idea of states collecting more taxes, the silver lining is that it provides them with financial resources in case the feds decide to withhold money they use to effectively bribe states into enforcing deplorable federal laws. In turn, this means the states will be even more determine to protect state revenue from federal intervention.

This will rip away the foundation of the prohibition on marijuana that is currently in place at the federal level.

One of the best means to stop reprehensible federal laws is by letting the market make it unenforceable. We’ve seen how thwarting federal prohibition works in the states that have legalized marijuana, and it’s even more effective when states put in place proper incentives to allow the industry to thrive and grow. The federal government has essentially conceded the battle over marijuana prohibition in states where it has been legalized as long as the industry is properly regulated.


State legalization partially removes one layer of law prohibiting the possession and use of marijuana, but federal prohibition would remain in place.

Of course, the federal government lacks any lawful authority to ban or regulate marijuana within the borders of a state, despite the opinion of the politically connected lawyers on the Supreme Court. If you doubt this, ask yourself why it took a constitutional amendment to institute federal alcohol prohibition.

Whilse state actions donot alter federal law, they take a step toward blocking in effect the federal ban. FBI statistics show that law enforcement makes approximately 99 of 100 marijuana arrests under state, not federal law. Easing the state laws removes some of the basis for 99 percent of marijuana arrests.

Furthermore, figures indicate it would take 40 percent of the DEA’s yearly-budget just to investigate and raid all of the dispensaries in Los Angeles – a single city in a single state. That doesn’t include the cost of prosecution. The lesson? The feds lack the resources to enforce marijuana prohibition without state assistance.

With nearly half the country legalizing marijuana, the feds find themselves in a position where they simply can’t enforce prohibition any more. The feds need state cooperation to fight the “drug war,” and that has rapidly evaporated in the last few years with state legalization, practically thwarting the ban.

“The lesson here is pretty straight forward. When enough people say, ‘No!’ to the federal government, and enough states pass laws backing those people up, there’s not much the feds can do to shove their so-called laws, regulations or mandates down our throats,” public policy analyst Michael Boldin said.