Will We See the Starbucks of Pot as Corporations Eye the Lucrative Legal Pot Business?

A burgeoning class of weed elite is hoping to turn marijuana into the next great American industry. But at what cost?

Photo Credit: Shutterstock.com/Fotokon

Three fifths of Americans are okay with legalized weed, a high point reached after a precipitous rise in public approval over the last year. If pot sales continue without a hitch in Colorado, and later in Washington, that figure is likely to rise and lend more momentum to the seemingly inexorable march toward a regulated market for the plant: currently, 20 states plus DC permit either recreational or medical marijuana use, and cannabis industry experts predict that 14 more states will be added to that roster in the next five years.

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Marijuana prohibition has roots in neither healthcare consensus nor scientific consideration; rather, it was sparked by white Americans' xenophobic resentment of Mexicans living in the Southwest, who had grown the plant in the region since before the United States forcibly seized it from Mexico. Locking up Mexicans (whom the nation’s first drug czar, Harry Anslinger, called "ginger-colored niggers") was a convenient way to bar them from taking white jobs in Depression-era America, and the US government made marijuana possession and sale illegal in 1937. Over time, the justification for pot prohibition morphed into a moral argument tied up in the cultural wars of the 1960s, and then successive Republican presidents sold the public on the idea that marijuana was anathema to the industrious American way. By the end of the 1980s, 80 percent of Americans opposed its legalization.

There has never been a legitimate reason for outlawing cannabis. The shift in favor of legalization owes some of its momentum to generational change and expanded access to information. But if the sudden support for legalization still confuses our understanding of America as a nation steeped in Puritanical conservatism—a tradition that, at one point, helped elevate the criminality of marijuana possession higher than child sex abuse—then we can reconcile the apparent contradiction by identifying another tradition that even more profoundly captures the essence of America's ethos: big business capitalism. The United States has incubated more multinational corporations and enriched more moguls than any country in the history of the world, and a burgeoning class of weed elite is hoping to turn marijuana into the next great American industry.

The ArcView Group, a network of cannabis businesses and investors, estimates the current national legal marijuana market (including medicinal and recreational) at $1.44 billion, a figure that is projected to rise to $2.14 billion next year and soar to $10.2 billion over the next five years. Separate attempts at estimating the total market value of the combined lawful and underground business have clocked numbers as high as $100 billion (by comparison, Facebook's market capitalization reached the same value in August 2013). Entrepreneurs have rushed into the increasingly legitimate business of cannabis, some with steeled lucidity wrought from years spent working with medicinal marijuana, others more bumbling and fresh-faced. All are united not only by stratospheric expectations of success, but also by an idea of what it will take to get there.

Troy Dayton, CEO of the ArcView Group, believes that large-scale corporate ventures will be "absolutely" necessary to legitimize cannabis in the eyes of the law and sophisticate the consumer economics of pot.

"The market represents people's desire; the market is what leads to products," he told Truthout over the phone, and in the market for marijuana, "bigger companies with more mass appealed products will certainly get a big piece." In a May 2013 feature from Vice, Dayton was quoted as saying, it is "so much better to have large investors and corporations involved in this industry, because when you have big business behind something that creates jobs and tax dollars, it becomes completely untenable to keep putting people in prison for it."

Dayton is an overseer of a huge hyper-capitalist experiment in which investors and entrepreneurs are aggressively courting (and sometimes hustling) each other to claim their piece. As a recent article in the New Yorker pointed out, Colorado and Washington are the only places in the world to create legal cannabis markets overseen by the state. Uruguay passed a law in August that would legalize the purchase of marijuana at government-run dispensaries, but the American experiments necessitate much less public regulation, and the entrepreneurs leading the charge are near delirious with opportunism.

"We are in the process of building the number one global brand of cannabis," proclaimed Jamen Shively, spokesperson for the recreational marijuana retailer Diego Pellicer, in an interview with Truthout. The company, whose founders have labeled it "Big Marijuana" and "the Starbucks of pot," was launched in the hopes of becoming an enterprise worth tens of billions of dollars, and its founders held a hyped-up media conference this past summer, with special guest Vincente Fox Quesada, 55th president of Mexico, to drive home the point. If any company captures the sky-high hopes of those at the helm of the recreational revolution, it is Diego Pellicer. Although the business stumbled considerably after its boisterous debut in Washington State, it has nevertheless become a point of revulsion for marijuana enthusiasts who believe companies like Diego Pellicer want to tie up their precious plant with some of the worst features of capitalism.

"I understand why people are afraid of 'corporatization,' but really, it's the thing that's finally going to bring down the wall," John Davis, CEO of Northwest Patient Resource Center, a business partner of Diego, assured Truthout in a recent conversation. He spoke positively of "business" as the only force that has been able to successfully challenge draconian pot laws: "If [positive] things happen through the corporate vehicle, that's not a bad thing at all."

The short history of Diego Pellicer raises the question of how much public good can be rendered through the corporate vehicle. From its initiation until very recently, the company was led by two senior traders named Doug Anderson and Alan Valdes of the investment firm Wall Street Capital Partners. An October article in the Seattle Weekly exposed how Anderson, Diego cofounder, was once accused by an Illinois judge of defrauding investors through a Ponzi scheme; Valdes, the former board chairman of Diego, openly suggested selling the firm to undisclosed tobacco companies in three to five years. Both men are now nominally uninvolved with the company.

"Most people in the pot movement want a progressive pot industry that supports people in communities and that creates a lot of good-paying jobs," longtime marijuana journalist David Bienenstock told Truthout, "but there's the concern that's not how corporate America tends to view free enterprise."

While he believes that the proliferation of corporate cannabis would be a "massive improvement" over current oppressive prohibition laws, he believes it is fallacious to say that corporate America is the solution for which pot activists have been waiting: "The most dangerous thing is accepting this framing that big business will make marijuana legitimate and to rewrite history in a way that it was big business and capitalism that came in and created this wonderful industry."

Advertising is the primary means through which any big company expands its consumer base and grows. Though the novelty of legal weed hasn’t necessitated that new pot shops in Colorado spend much on ad sales yet, mass pot advertisement will intuitively become more common in the future, and will reflect a bottom-line ideology that sustains itself on hedonic excess. This will be a break from centuries in which marijuana was revered for centuries as an enhancer of physical and psychological well-being. The mainstream commodification of the plant will do to it what it has done to everything else: gut it of social meaning outside the confines of economic relationships. Anheuser-Busch reportedly has plans to join the pot-advertising blitz. Maybe it’s a little disingenuous to enshrine the distant past as a moral high point for marijuana use, but it’s true that few people crack open a can of watery beer without the intent to incubate drunken numbness.

Existing experiments with highly capitalized, publicly traded medical marijuana corporations have proven to be such fraudulent ventures that they've done anything but legitimize the industry. The first publicly traded marijuana company, Medical Marijuana Inc., is a "penny stock company run by criminals and alleged fraudsters," rails a report on Seeking Alpha, a stock market analysis web site. Among many damning allegations against the company, the report accuses MMJ of cooking its books by inflating its market value (peaking at $355.6 mm) and somehow ducking out of filing quarterly reports to the Securities and Exchanges Commission that would reveal the scam. Furthermore, as the report highlights, MMJ's now-former president and CEO Michael Llamas had a long history of blatant financial mischief that resulted in an indictment by the federal government for participating in a "multistate Ponzi scheme and related mortgage fraud scams."

The corporation has also been outed by whistleblowers for enabling its subsidiary companies to lie about the content of their products. A recent analysis published by Martin Lee of Project CBD found that the company Dixie X Elixirs & Edibles, MMJ's first foray into the $5 billion "cannabinoid and wellness industry," has routinely mislabeled its products as containing more medicinal value than they actually have. As Martin Lee put it to Truthout, "Medical marijuana is proof that corporate capitalism is not necessary [for legitimacy]."

Aaron Cantú is an investigator for the Marijuana Arrest Research Project and an independent journalist based in Brooklyn. Follow him on Twitter @aaronmiguel_