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Why Many Marijuana Industry Investors Were Thwarted in Colorado, Despite Legalization

Red tape abounds for outside investors in Colorado.
 
 
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Photo Credit: Shutterstock.com/Kovalchuk Oleksandr

 
 
 
 

When U.S. Attorney General Eric Holder announced the Justice Department’s decision to allow legal marijuana markets to move forward without a fight on August 29, it was not just news for pot shops, pot users and pot growers. In the last month the legalization of cannabis in Colorado and Washington has attracted attention from investors from around the world looking to cash in on the new and expanding industry.

The ArcView Angel Investor Network, a cannabis industry investing organization, gathered a group of more than 60 accredited investors and 20 companies in Denver, Colorado on September 24 in a daylong event to discuss investing options.

The ArcView Investor Network’s investors include billionaires, tech entrepreneurs, venture capital firms and real estate moguls, who attended the conference to hear companies present their cannabis startup business pitches. Those companies included “licensed dispensaries and cultivations, a Hollywood film from a well-known director about the industry, a handheld vaporizer company,  a company with a machine that creates hash oil and other cannabis concentrates, a security company for licensed  cannabis businesses, a company with new advancements in lighting technology,  and a popular online social network for cannabis consumers,” according to the press release.

Steve DeAngelo, cofounder of the ArcView Group and ArcView Investor Network, told the Atlantic that while 60 investors attended, all looking to buy into the “burgeoning industry,” 90 percent of those investors “won’t be able to invest.”

In addition to heading ArcView, DeAngelo is the executive director of the medical marijuana dispensary Harborside Health center in Oakland Calif., which has been called the world’s largest medical marijuana dispensary. He has been an activist in the cannabis legalization movement for more than three decades.

"The investors are here," DeAngelo told the Atlantic. "They want to do the deal. But the deal can’t be done because Colorado law won’t allow it,” due to a residency requirement put into place by the Colorado legislature to discourage out of state residents from moving to Colorado for the marijuana business.

The Atlantic points out that Colorado residents did not vote for the residency requirement when they passed Amendment 64 and legalized adult marijuana use in their state—it was added in later.

“The rule requires a person to have been a Colorado resident for two years before they can apply for a marijuana business license, and three years before they can invest in a marijuana grower or retailer. It also has to be the investor's primary residence. For comparison, Washington state has a three month residency requirement, and it doesn't have to be the investor's primary residence,” the Atlantic explains.

While the residency requirement poses questions over whether many will invest in growing and selling businesses in Colorado, other opportunities that do not require residency do exist. Mason Tvert of the Marijuana Policy Project—which headed the push for cannabis legalization in Colorado—pointed to the cannabis industry itself as well as the “ancillary market” that sells paraphernalia like vaporizers, as viable investment opportunities. He also told the Atlantic he “wouldn't be surprised to see interest grow in specialized gardening products and classes on cultivation.”

Most funding commitments to come out of the Denver event will be announced by DeAngelo at the Wednesday press conference. Some ArcView investors have already made investment commitments to a business specializing in marijuana concentrates, amarijuana packing company, a vaporizer manufacturer and the Denver-based company Canna Security America, which provides security for marijuana retailers and grow operations, according to the Atlantic.

April M. Short is an associate editor at AlterNet. Follow her on Twitter @AprilMShort.

 
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