Pot Goes Legit, But Will It Sell Its Soul?

Like many college students, Billy Woolf left home this winter to travel to the opposite coast for school. Unlike most students, Woolf is a bespectacled 57-year-old—and his topic of study is marijuana.


One sunny December Saturday in Oakland, California, prior to a civics lecture on the legal rights and responsibilities of medical cannabis patients, Woolf sat across from me at a table inside of the world’s premier cannabis industry training school, Oaksterdam University. Since its founding in 2007, Oaksterdam has offered hands-on pot education via a faculty consisting of some of the biggest names in the history of the cannabis legalization movement. Its students learn the skills necessary for entering into marijuana trade jobs — everything from the history of drug policy reform, to in-classroom growing demonstrations, to the legal ins-and-outs of opening a dispensary storefront.

Emphatic and smiling often, Woolf relayed the many reasons he flew from his Pennsylvania home to Oakland, California to prep for entry into the burgeoning cannabis business.

When the construction firm he’d owned for 25 years was purchased last year, Woolf found himself with the unique opportunity to recast his career. While he admits cannabis wasn’t at the top of the list when he started to assess his options, researching the industry changed his mind. Woolf’s professional background ranges from chemistry, to biomedical engineering, project management, IT consulting, law school and business administration. He found that the cannabis industry allowed for a unique — and potentially prosperous — marriage of his various interests.

“What I’m finding is that this market is a growth industry for people who are not afraid, if that’s the right word, to step over the old line of conservatism,” he said. “I think there’s a lot of [professionalism] that this industry is begging for… I’m hoping to bring some of that here.”

He’s actually hoping to bring it all the way to Pennsylvania, where he plans to open shop as a licensed medical marijuana grower and processor. That is, depending on the state’s political climate this year. While 23 states and Washington, D.C. now have laws allowing certain patients to access cannabis medicine (and four states allow adult-use recreational cannabis), like many states, Pennsylvania still prohibits cannabis in all forms, medical or not. A medical marijuana bill was reintroduced in the state’s legislature at the beginning of this year, and if passed it will allow patients with specific, debilitating medical conditions to use cannabis. It will also make room for new medical marijuana cultivators, processors and dispensaries to open up in the region.

“I’m hoping to be able to really bring relief to many people who are suffering in Pennsylvania,” Woolf said. “And, to me, that’s more people than I could touch doing any one of the things I’ve done in the past. So I’m really optimistic about the possibility.”

Woolf says even if Pennsylvania doesn’t loosen its cannabis laws this year, his training in the industry will undoubtedly come in handy.

“There’s all kinds of accessory businesses that are going to be thrilled to have the opportunity to service a new market,” he said, noting that while the cannabis industry is widely accepted and welcomed in the Western part of the country, he notices more lingering skepticism back on the East Coast. “It’s still talked about in hushed tones and behind closed doors. And it’s like, ‘You guys aren’t going to be talking about it like that real soon when you realize how much money can be made. Let’s be honest about it… I like to think I’m ahead of the curve, wherever that curve is, with a little bit of luck politically.”

When he initially thought about entering the cannabis industry, Woolf was not without his own hesitations. He said it took him a while to overcome some of the stigma that still surrounds all things cannabis, especially in Pennsylvania.

“I am concerned a little bit about my reputation and about what less-knowing people… perceive about cannabis,” he said. “But while I don’t want to be the crusader [for cannabis in Pennsylvania], I recognize some crusading might be necessary, and I’m willing to do that.”

That said, as he’s been asking around for advice on his new endeavor over the last year, he’s been pleasantly surprised. Friends and family — even local politicians — have all been overwhelmingly supportive of his decision to work with weed. 

“I keep thinking someone’s gonna throw up their hands and say, ‘You’re an idiot’” he said. “But no one has said that… It took me a while to get over the stigma, but I’ve overcome it. I realize it’s legitimate. I have support from my family, I have support from my children. I know people out here [in California] take me seriously, but hope people back east will take me seriously, too. I’m excited about 2015. It could be a very interesting year for me.”

While some stereotypes persists — and the federal government still classifies the herb as a dangerous Schedule I drug — there is no arguing against the massive sea change in the public arena when it comes to cannabis.

Perhaps encouraged by the shift in public thinking, the  US Surgeon General admitted this month that cannabis is beneficial for certain medical conditions. In polls across the board, a solid majority of Americans think cannabis laws should change. According to research by NORML (National Organization for Reform of Marijuana Laws) eight out of ten people in the U.S. think medical use of cannabis should be federally allowed, and a WebMD poll last April showed the majority of American medical doctors support the legalizing cannabis for medical purposes. According to a poll by the Pew Research Center completed last February, the majority of Americans think adult-use marijuana should be legal. And, several polls show more than half of all Americans support full-blown adult-use cannabis.

Oaksterdam

As laws and attitudes shift, and the industry proves itself profitable, Oaksterdam has had an influx of interested students. These days there are consistently more than 100 people on the school’s waiting list, and their 14 week semesters are waitlisted four to six months in advance.  After Colorado and Washington passed their ballot measures to legalize adult-use cannabis in 2012, the school’s attendance numbers increased noticeably, and they continue to grow.

Dr. Aseem Sappal, Oaksterdam’s provost and dean of faculty, says there are several plans in the works to expand the school’s curriculum. They’re currently setting up online courses so that people who can’t attend physically can still graduate from the university. Dr. Sappal estimates that Oaksterdam will reach 250 to 500 new students per month via online courses, and “that number can easily grow to 2500 a month.”

Oaksterdam plans to open a second campus in Colorado, possibly by April and has  plans in the works to offer majors, so that once students complete the foundational coursework they can specialize in a topic of interest. Tentative majors will include medicine, business, law and horticulture.

Dr. Sappal says medical practitioners and attorneys are enrolled in every single one of Oaksterdam’s classes, so the school is implementing programs designed to specifically cater to those fields. They plan to offer CLE (continuing legal education) credits for attorneys who take their classes, and CME (continuing medical education) credits for medical professionals.

“Everybody’s looking for an opportunity to find a way to fit into [the cannabis industry], including the attorneys and physicians,” Dr. Sappal said. He explained that medical professionals are noticing patient demand for cannabis medicine, and attorneys are noticing a demand for cannabis law focus. Both fields are regularly reaching out to Oaksterdam for guidance, so the school decided to develop more programs to fill that educational gap.

“I get calls from people that run oncology departments, for example, saying, ‘Hey, come out here and teach us because we don’t know what to do,’” he said. “We’re passing all these laws, but there’s hardly anybody teaching people how to move forward in this industry. I take that very seriously. I want everybody in the nation to understand that our nation’s physicians and attorneys are going to Oaksterdam to receive that education.”

In addition to reaching out to doctors and attorneys, Oaksterdam has been taking its show on the road for pop-up seminars and expos across the country. They traveled to Rhode Island and Atlantic City last year.

“The response was great on East Coast,” he said. “Education is really, really lacking out there. On our final day in Atlantic City we had an elected official, an assemblyman attending, and his jaw just dropped when he saw the response of our students — just how thankful they were as they walked out the door.”

In addition to vocational training, Oaksterdam is helping students find jobs in the industry via a career placement program.

“The majority of our students are from throughout the country,” he says. (About 60 percent.) “As people are starting to open these [cannabis] businesses you can no longer just employ your friend and girlfriend and sister and brother, you need to really bring in people who are experts in this industry. We have a great opportunity to offer job placement.”

The school is working directly with employers in the cannabis industry to match them with Oaksterdam grads, and they’re hosting a cannabis job fair in Las Vegas later this year.

“Keep in mind that no other schools do this,” Dr. Sappal said. “When you get a degree from Stanford or Cal Berkeley they’re not helping you get a job.”

Woolf says he feels fortunate to have found Oaksterdam, as there aren’t many other hands-on cannabis training programs out there.

“Where I come from, education is the place to start,” he said. “That’s why I’m here at Oaksterdam. I’m also taking the opportunity to find online resources for education and I’m developing any accreditations I can gather, because the industry is begging for legitimacy.”

The Green Rush

Woolf’s story is in keeping with a trend many have dubbed the “green rush.” People from all over the world are making their way to states where the herb is legal, seeking to build a fortune — and for good reason. The cannabis industry’s whirlwind pace of growth in recent months makes it the fastest growing industry in the U.S. according to researchers from a cannabis industry investment and research firm called ArcView Group. Like Oaksterdam, the firm is based in Oakland, California. In a recent report, ArcView found that if legalization spreads to all 50 U.S. states, the cannabis industry will be bigger than organic food.

Over seven months in 2013 and 2014, ArcView surveyed hundreds of cannabis vendors, business operators and independent cultivators in states where sales are legal — either medically or recreationally. They also gathered statistics from state agencies, nonprofits and private companies in the cannabis field to compile their overview of the marketplace. They found that the legal cannabis market in the U.S. grew 74 percent between 2013 and 2014. In that time, the size of the market spiked from a $1.5 billion to $2.7 billion.

“No other industry grows at that rate,” said Troy Dayton, CEO and co-founder of ArcView. “It just doesn’t happen… Some of the evidence suggests that the wider investment world is really starting to notice the cannabis industry. Certainly Justin Kan becoming a new member of ArcView — he just sold his company for a billion dollars to Amazon and he’s the partner in Y Combinator — that’s real big.”

Kan founded Twitch.TV, which he sold to Amazon for $970 million in 2014.

In just over a year of legal sales, Colorado has already made $44 million in taxes — so much money that they might literally have to give some of it back to residents due to astrange mandate in their tax law. Washington and Oregon, which have also implemented legal adult-use cannabis programs, are on pace to match and potentially surpass Colorado’s revenues.

In states where recreational cannabis is legal, new business ventures like dispensaries, production facilities, grow houses and testing labs are just the tip of the iceberg when it comes to business possibilities. A myriad of related cottage industries are already developing around legalization, from cannabis massage and spas, tocannabis tourism. Pair all of that with the added economic benefit of significantly lowered arrest rates (less people in prison, and less tax dollars spent on throwing people in prison), and the economic benefits of legalization may just about double.

According to a report by the Colorado Center on Law and Policy (CCLP) at the end of 2013 — the first year of legalization in Colorado — removing criminal penalties had already saved the state between $12 million and $40 million dollars. As Drug Policy Alliance (DPA) reported, “others have estimated the state spends over $60 millionenforcing marijuana prohibition at the levels now legal, so the CCLP estimate is probably on the conservative side.”

Just about everyone interested in money seems to be thinking about cannabis lately. Snoop Dogg recently announced he’s looking to invest $25 million in marijuana startups and in January, Peter Theil’s venture capital firm (behind Facebook, SpaceX, Airbnb and others) became the first big time Silicon Valley investor in the industry. Just over one month later, hoards of tech investors are sprinting towards the industry, and ArcView Group is helping to lead the charge.

Investing In Green

In the grand ballroom of the extravagant Fairmont Hotel in San Francisco, investors worth multi-billions — from tech firms to old money interests — gathered at banquet tables to hear pitches from cannabis start-ups on January 26 and 27.  This was the invite-only, $2,500-ticket marijuana investment forum, organized by ArcView Group. The forum was designed in a similar format to the popular TV show Shark Tank (in the show businesses pitch their investment opportunities to a panel of investors), so much so that the running joke of the two-day event went something like, “Welcome to the Arc-Tank.”

Backlit by PowerPoint presentations on an enormous projector screen, more than 30 cannabis-related ventures ranging from edibles producers, to indoor LED light designers, to cannabis delivery phone apps and everything in-between took the stage.

At a table on the far left hand side of the room, a Washington Post reporter scribbled in a notepad as members of the vaporizing company VapeXhale delivered their pitch, explaining that many cannabis users are looking for healthy alternatives to smoke. The following morning, ArcView CEO and co-founder Troy Dayton would declare that every major media outlet in the country, and some beyond, had run something on the event.

It’s no wonder the industry is making headlines. For one, this is one of the only times in our modern era that we’ve watched a brand new American industry unfold. The only other was the internet and tech boom of the ‘90s (to which ArcView speakers drew plenty of parallels). And it’s possibly the first time in history that an industry has taken off so fast. It’s also a new kind of industry — one born of activists fighting to legitimize an illegal, highly contentious substance.

An Industry Born From Activism

There is friction between the parents of the drug policy reform movement — which has made this industry possible via successful legalization efforts in four U.S. states (and 23 medical marijuana states) — and the big money investors with dollar signs in their eyes.

The growing concern is over how to ensure that big, corporate interests don’t stomp out the smaller players in the cannabis industry.

Dayton of ArcView said he thinks that is an expected concern, and one that he shares, to some degree:

“I want to make sure that, as we’re building this industry, we’re not just building a new industry, but a new kind of industry,” he said. “That being said, I think there’s definitely going to be room for large corporate players in the cannabis market… Where the problem lies is when the system is setup to make it only for really large scale producers. I’m really committed to making sure that we have the type of regulation that makes it possible for smaller players to have a role in the above ground economy, but let’s not let the naysayers get in the way of the real truth here. Which is that cannabis prohibition benefits two people. Underground dealers, and police forces—the people who benefit from depriving people of liberty.”

There is no denying the fact that the people responsible for the cannabis industry’s existence have sacrificed their livelihoods, safety and freedom to make it possible. Many of those most dedicated to the movement are carrying around lifelong felony records, or are still serving prison sentences for fighting against prohibition. Meanwhile, the newcomers to the industry carry little-to-no personal risk, but stand to make huge profits from cannabis.

A subtle example of this discord came during the Arcview pitch forum. Dale Sky Jones, chancellor of Oaksterdam University and famed cannabis activist, took to the podium to pitch a different kind of investment opportunity. “Invest in the movement,” she urged the room, asking for donations in support of the 2016 legalization effort in California.

“With your help we can make the Golden State even more golden,” she told the crowd, noting that legalization in California would be a game-changer for the industry as a whole, as big trends tend to spread from West to East in this country. California was the first state to legalize medical marijuana and has thus far set the standard for the industry. It is responsible for almost half of the $2.7 billion national cannabis market, and many of Colorado and Washington’s new businesses have modeled themselves after those already operating in California.

The immediate response to Jones’ call to action was unenthusiastic. You could practically hear crickets when Dayton followed Jones on the stage asking people to raise their hands if they’d donate $100k to the cause. A single hand went up at $50k, and several more investors stepped up as the asking amount fell below $10k, but many of the tables ceased to stir at all.

The divide between the people making the industry possible and the people most likely to get rich from the industry is apparent — and worrisome for those who have worked for decades for the cause. But that’s not to say there aren’t overlaps.

ArcView president and co-founder Steve DeAngelo, for example, became an activist for cannabis legalization when he was 16. He hasn’t slowed down in 40 years, despite a cannabis-related felony conviction 15 years ago and continuing attacks by the federal government on his medical cannabis dispensary, Harborside Health Center. (U.S. Attorney Melinda is still trying to seize Harborside’s property in a tax battle that is currently before a Ninth Circuit Court of Appeals. When federal agents first tried to seize Harborside’s property, the City of Oakland stepped in to stop them. Oral arguments are scheduled for late February.)

“It hasn’t really been about the industry or about the money for me,” he said. “It’s always been about the plant for me. I fell in love with this plant at a very early age. My choices were either to be a criminal for the rest of my life, or to make it legal, or to stop using cannabis — and I certainly wasn’t going to stop using cannabis. I didn’t like being illegal and being hunted so it became a prerequisite. Legalization became a prerequisite for my own personal happiness, so I made it my mission.”

DeAngelo says the pioneers of the cannabis industry are activists, many of whom were there for what he calls the “birth of the industry” in the San Francisco Bay Area in the early ‘90s. Thus, many of the leading cannabis businesses in California have come out of that activist mentality.

“Now, of course that’s changing a lot,” DeAngelo said. “We’re beginning to see larger and larger numbers of people who are coming into the industry for the reason that most people get into most industries, which is to make money.”

DeAngelo said one “bone of contention” facing California’s legalization effort is whether or not people who have cannabis-related felonies should be excluded from the industry.

“I am one of those people,” he said, noting that he was already denied a license to operate a medical cannabis dispensary in Boston, Massachusetts because of his conviction record.
 DeAngelo calls cannabis policy reform “the lowest hanging fruit on the tree of social justice.”

“There’s probably not another single action that we could take that would have more positive repercussions in the area of racial justice, in the area of environmental responsibility, in the area of economic justice, community safety, public health,” he said. “The things that I really care about in life are all impacted by cannabis. That’s what keeps me going is the knowledge that by taking this one step we can have a massive positive impact on a whole number of other social issues.”

As Michelle Alexander, author of the book The New Jim Crow: Mass Incarceration in the Age of Colorblindness, has pointed out, there is a huge racial discrepancy developing when it comes to cannabis legalization. For 40 years, poor communities of color have experienced the wrath of the War on Drugs. While minorities use cannabis at the same rate as white people, they are disproportionately more likely to be arrested. But white men are largely the ones getting rich from legalization. As I reported in an AlterNet article about Alexander last year:

“When you flick on the TV to a segment about the flowering pot market in Colorado, you’ll find that the faces of the movement are primarily white and male. Meanwhile, many of the more than 210,000 people who were arrested for marijuana possession in Colorado between 1986 and 2010 according to a report from the Marijuana Arrest Research Project, remain behind bars. Thousands of black men and boys still sit in prisons for possession of the very plant that’s making those white guys on TV rich.”

DeAngelo — and many other speakers at the ArcView event — pointed out the importance of ensuring that cannabis is a new kind of industry, built with regulations in place to help afford opportunities to all.

“We have a fantastic opportunity in front of us,” he said. “When else have we had an opportunity in modern era to actually create a new industry from the ground up?”

DeAngelo said he thinks there’s room in the market for several different business models, but notes that he’s concerned about a trend toward “cronyism” as some states move towards legalization.

“If you take a look at the situation in Ohio right now, there’s an effort by a group there called Responsible Ohio, where they are trying to pass [legislation],” he said. “They’re being funded by the same folks who passed the gambling initiative there. They are using a model which is going to essentially grant a monopoly to 10 predetermined entities. Those entities are investing in the initiative process and they have lots of money and lots of political juice.”

DeAngelo said cannabis should be an industry that spreads the wealth more broadly than other industries in the U.S.

“We already have a problem with concentration of wealth in this country,” he said. “This industry should be an antidote to that. It should not worsen a situation that’s already bad. It should be a new industry that is environmentally responsible that looks at the way that it’s going to be producing cannabis and makes sure that it’s produced in a way that is acceptable to people who love a plant. It should be an industry that’s really engaged with the community that it’s a part of. An industry that returns benefits not just to shareholders, but to the entire community. It should be an industry that really celebrates and embraces diversity, not giving a grudging nod to diversity, but really celebrates diversity. It’s an industry that should be opened up to all kinds of people who have never had a chance to participate in growing a new industry.”

DeAngelo said he and Troy Dayton founded ArcView with that mentality in mind. As DeAngelo’s Harborside Health Center started to get more media attention over the last couple of years, both cannabis businesses in need of seed money and investors in need of guidance in the industry started to approach him for advice. Since most banks won’t do business with cannabis ventures, those in need of additional financing had to look elsewhere. And, people with money who wanted to get involved with cannabis were often at a loss for where to start.

“Cannabis has basically stayed the same ever since the beginning of prohibition, and in the meantime we’ve had a whole invention of modern technology and modern business techniques and procedures,” DeAngelo said. “It became very clear that we needed to have a good source of investment capital for small business. That kind of gets back to the spreading the wealth theme that I was talking about earlier. It’s very important to Troy and I that new and upcoming companies that didn’t have a whole lot of resources, but who are really passionate and are going to present cannabis in a good way, be able to get the resources that they need to realize their visions.”

Meanwhile, Dayton was working as a fundraiser for the Marijuana Policy Project (MPP) and noticing the same thing. The two compared notes, and developed ArcView. Now ArcView is one of the top 10 largest angel investment networks in the U.S.

DeAngelo was one of more than 30 speakers at the two-day International Cannabis Business Conference (ICBC) at San Francisco’s Hyatt Regency Hotel on February 15 and 16. The conference was organized around presentations from experts and politicians discussing the cannabis industry. Alex Rogers, CEO of  Northwest Alternative Health, designed the event as a networking opportunity for businesses and entrepreneurs looking to enter the cannabis market.

Rogers told the Weed Blog he had the idea for the event after the 2014 elections in which Oregon, Washington, Alaska and D.C. all passed cannabis legalization measures.

“Colorado and Washington State have already demonstrated the economic benefits of legalizing cannabis, and Oregon and Alaska will soon start seeing new jobs created and new revenue brought into the states’ coffers,” he told the Weed Blog. “California, with its economic power, will clearly be the worldwide leader in cannabis commerce if the state passes full legalization in 2016.”

If California legalizes in 2016 — along with Arizona, California, Delaware, Maine, Maryland, Massachusetts, Nevada, Rhode Island, and Vermont, which is ArcView’s prediction — it could change the game, potentially swaying the direction of federal drug policy. But nothing is certain.

A Future Unclear

There are also many question marks when it comes to the industry’s future. While the Obama administration has instituted a sort of “look the other way” policy as far as statewide cannabis laws go, what if the next presidential administration is not so blasé? What about the banking restrictions? Most major banks won’t work with cannabis businesses due to the federal policy on cannabis. What about safety — as more and more places see more and more legal cannabis, are there standards in place for safe cultivation, testing for pesticides contaminants, dosages, and so on?

While there haven’t been any studies or widespread indications of problems in the almost 20 years since California first allowed medical marijuana, any industry that goes mainstream — especially if it’s agriculture — tends to require increased regulation. How will that look if cannabis remains federally illegal, and the rules therefore segmented state-by-state.

For about seven years in California there has been an opt-in testing setup in which scientific labs will test cannabis for dispensaries, if those dispensaries so choose. Many do not. Colorado has rolled out new testing requirements, and Washington, Oregon and Alaska may choose to follow suit. However, without federal oversight it will be difficult if not impossible to standardize testing and ensure that so-called “pesticide-free” weed is actually pesticide free, an edible cannabis treat labeled “10mg THC” really contains just 10mg of THC, and so on. In most parts of the country with medical marijuana laws, testing labs are few and far between if they exist at all.

There are innumerable uncertainties about the cannabis industry, but the one guarantee is a consumer base. There is a clear demand for cannabis among the American people. As more and more states loosen their cannabis laws, and more and more scientific research disproves the claims of the outdated War on Drugs rhetoric, that consumer base is almost guaranteed to increase.

The obvious answer to most of the long-term concerns over the industry’s future lies in shifting federal policy. Even if the federal government didn’t decide to legalize cannabis or regulate it in a manner similar to alcohol or tobacco, it could easily change its classification from the most severely restricted Schedule I drug category to a lower scheduling. President Obama has the ability to reschedule drugs without the approval of Congress. Or, seeing as how cannabis is, in fact, just an herb, it could take it off of drug scheduling altogether and treat it instead like other herbal medicines (think echinacea, turmeric, etc.).

While it’s unclear how the industry will evolve in the long term, from education to business, the short term is looking mighty green. DeAngelo said in 40 years he has “never wavered” in his confidence that eventually cannabis would be legal.

“Because I know the science and I know the facts about this plant,” he said. “It is possibly the most valuable plant on the plane. Eventually when that truth is known, I’m 100 percent confident that cannabis will be legal everywhere.”

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