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Cannabis goes corporate: Dot-bong boom explodes as Big Marijuana flexes its muscles
ABCBy Ben Knight and Suzanne Smith | ABC – Tue, Jun 17, 2014 7:00 AM AEST

https://au.finance.yahoo.com/news/cannabis-goes-corporate-dot-bong-210029805.html

There is a new gold rush in America's west.

Decades of marijuana prohibition are coming to an end, on the back of a sea change in public opinion.

Twenty states have now voted to make the drug legal in one form or another.

Next month, Washington State will be the second state to fully legalise cannabis.

New brands and products are flooding the market, for anyone over the age of 21 to buy and consume.

Legal cannabis markets are expected to grow by 64 per cent across the United States in the next year.

Now, Wall Street is moving in.

The $40 billion black market in cannabis is going mainstream.

Hundreds of new marijuana businesses - and 2,000 existing medical marijuana sellers - are gearing up for the recreational market to take off.

The big players aim to make this an industry to rival beer.

But while there is broad public support for marijuana legalisation, opponents are ramping up the campaign to swing the pendulum back, arguing that America is creating a new Big Tobacco.

And one of that argument's chief proponents is former congressman Patrick Kennedy, the nephew of John F Kennedy and the son of senator Ted Kennedy.

Mr Kennedy has had his own battle with drugs and addiction.

Now he has formed a new organisation called SAM - Smart Approaches to Marijuana - and he is taking on big business.

"It's not about your civil liberty and your ability to smoke a joint now and again," he said.

"This is about a commercial, for-profit behemoth coming in to prey on your kids, addict them [sic] and make money off them ...

and at your expense."
'Dot-bong' era begins as Big Marijuana moves into Seattle

Seattle is Washington State's biggest city and a big business town, home to corporate giants like Boeing, Starbucks, and amazon.com.

It is also becoming the headquarters for "Big Marijuana".

Already, the state has received 7,000 applications from businesses wanting to sell recreational cannabis, and the market is being flooded with new products.

Marijuana has been fully legal in Colorado since January this year, but Seattle is where cannabis is going corporate.

The big money is rushing in.

The dot-bong era has begun.

"Interestingly, I have never used cannabis,"Â says Michael Blue, a Yale MBA graduate and entrepreneur.

The son of a surgeon, from a conservative home in Arkansas, he is probably the last person you would expect to see going into this business.

The same goes for his two partners - Christian Groh and Brendan Kennedy, another Yale MBA graduate.

Four years ago they created Privateer Holdings, the first equity company dedicated to the marijuana industry.

Brendan Kennedy was working at a Silicon Valley bank when he came up with the idea.

"We were looking for holes in the marketplace," he said.

What he saw back then were opinion polls showing that for the first time, a majority of Americans were in favour of ending the prohibition of cannabis.

Support for medical marijuana was even higher.

Eight out of 10 Americans supported marijuana for medical use.

"When we first started going into this industry we asked ourselves, morally, 'Would we feel comfortable being in the cannabis industry?'" he said.

"I'm not sure I could work in the tobacco industry.

I'm not sure I could work in the alcohol industry.Â

"But having talked to so many patients and physicians, and talked to so many activists who are interested in individual civil liberties, or patient rights - you know, we feel there's some moral imperative to succeed."

As the failures of America's war on drugs became clearer, and stories spread of cancer and epilepsy patients being helped by cannabis, state after state began putting cannabis on the ballot and voters began passing it.

But it is still a risky business.

Marijuana might be legal in 20 states, but it is still illegal under federal law. The Obama administration has essentially told federal drug authorities to look the other way.

And business is thriving.

Selling marijuana has gone way beyond simply packing ziplock plastic bags with a gram or two of dried buds.
Marijuana product range expands with hi-tech options

The marijuana industry is now hi-tech and brand-aware with electronic joints, similar to e-cigarettes, coming pre-loaded with cannabis oil promising "150 puffs guaranteed!" Marijuana-infused food products range from lollipops to nut bars to carbonated drinks.Â

Then there are electronic marijuana pens you connect via a USB port.

The waxy substance inside is 90 per cent THC - the chemical that gets you high in cannabis - one puff on this is the equivalent of a whole joint.

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Patrick Kennedy has enlisted president Barack Obama's former drugs adviser Kevin Sabet to his cause.

Dr Sabet is concerned about the health risks of these new products.

"They don't understand that today's marijuana can often be upwards of 90 per cent THC ...

extracted in a wax that is combusted and inhaled," he said.

"And that can often lead to emergency room admissions.

I mean for the baby boomers, [the fact] people are going to the hospital for ingesting a marijuana cookie, or one of these wax things, is totally foreign.

And yet it is the reality for a lot of kids."

Privateer stays on the right side of federal law by not buying companies that directly deal with cannabis in the US.

Its flagship buy was a website which is now the go-to domain to search and review strains of marijuana.

It took them a year to raise their first $7.4 million from wary investors.

Now, they are about to close a fundraising round of $106 million. They will not even talk to investors who do not have a least $1 million to invest.

"If you look globally, it's a $US150 billion industry," said Mr Blue.

"It will only grow as further legalisation takes place."
Fears cannabis industry will target those who can't stop

The momentum for more states to legalise seems unstoppable.

Public support is trending up but most importantly, Wall Street is moving in.

And that is what worries former US congressman Patrick Kennedy.

"What's really behind this legalisation is money, plain and simple," he said.

Patrick Kennedy is no longer in Congress.

He pulled the pin on his career in 2010 to deal with a raging addiction to alcohol and prescription drugs that at one point, saw him crash his car into a barricade outside the Capitol Building.

"It's enormously humiliating," he said.

"I would never have willingly chosen to humiliate myself and bring shame on my family, not just once, twice, three, four, five times.Â

"I mean, I have lost count of the amount of times that I said, 'Oh my God, look at what I've done to my family'."

Now married and the father of two children, he has been in recovery for four years.

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"Just like the liquor industry.

They don't make money off average drinkers. They make money off people like me, because I couldn't stop," he said.

"The mentally ill, or those who have predisposition for addiction and alcoholism ... they are really the candidates that the Big Marijuana industry is targeting.

"You capture an addiction, you've got a customer."

He is out to spread the message that cannabis is more addictive than people realise, far more potent than it used to be, and a danger to people at risk of mental illness.

But he has a hell of a task in front of him.Â

The fact is, plenty of Americans enjoy using cannabis and while a certain proportion become addicted, many find it does not ruin their lives.Â

And they have years of their own experience of doing it illegally to draw on.
Cannabis retailer campaigns for end to prohibition

John Davis, who put the money he earned from his career in construction into shops selling cannabis to the public, says the drug is not harmful.Â

"This is not dangerous.

I have smoked this marijuana," he told the ABC at his dispensary in West Seattle.

"It didn't give me homicidal urges.

Right? It made me enjoy a movie."

Unlike the Ivy League crew at Privateer, Mr Davis deals directly in cannabis.

And under federal law, that means he is risking serious prison time, but he says somebody has to do it in order to end marijuana prohibition for good.

"Look, Patrick Kennedy had a severe drug problem.

That doesn't make him a policy expert," Mr Davis said.

"We have the highest prison population of any other civilisation in the history of civilisation.

"We jail people at an astonishing rate.

For what? For drugs. Does that help the drug problem? Because it doesn't make the drugs go away."
Lobbyist hired to push pot's cause on Capitol Hill

But the battle is not being played out in Mr Davis' marijuana dispensary in Seattle. It is in Washington DC.

Because cannabis is still illegal under federal law, the cannabis industry is locked out of the banking system. The entire multi-million-dollar business operates in cash.

So the industry has hired a lobbyist to try to convince federal lawmakers to change the regulations.

Patrick Kennedy says if that happens, the money spigot will be opened up, and it will be all but impossible to turn off again.

"When you have those kinds of profits, you can saturate the political system.

And most importantly, you can saturate the airwaves with your message," he said.

"It basically took 50 years before you got the political will to change our policy around allowing tobacco companies to market their product with impunity. So let's use that as a case study."

The US Congress - and the rest of the country â?? will be watching the Denver and Seattle experiments closely, but Mr Davis says there is no going back.

"The wall is falling, and everyone sees it," he said.

"And everyone's astonished.

But it doesn't stop."Â

"The end of prohibition is now, because prohibition is a bankrupt policy that doesn't work."

Patrick Kennedy says those who currently say they support legalisation have not been told what it means in practice.

"I think what's going to turn the American people off is less the notion of marijuana - although that's going to be a big factor - than the notion that you're going to have this big commercial, big money, corporation."

"There are definitely going to be consumers, and a good percentage of them are never going to leave you.Â

"Well, if you're an industry ...

I mean that's just like you've hit the jackpot."

Watch Foreign Correspondent's report Cannabis Inc on ABC 1 at 8:00pm.