Five Industries Set To Profit From Legal Marijuana


It’s the Wild West.

Businesses are popping up everyday. Shopkeepers report $20,000-a-day sales figures. Until recently forbidden by their superiors, off-duty police officers were making a little money on the side working as security personnel for large vehicles laden with cash. No one is sure what’s illegal or what’s allowed, but in the meantime, everyone wants their cut of the profits.

It’s the Wild West. It’s Colorado. And right now, all of America and much of the world is watching to see how the U.S.A.’s first experiment with legal marijuana is going to play out.

For sure, there’s a lot of money to be made. Legal marijuana vendors in Colorado are expected to bring in over $600 million in 2014 on just the sale of bud and edible product (THC infused food or drink). As Colorado’s tax rate on recreational marijuana is 27.9 per cent (much higher than the standard 2.9 per cent sales tax), the state stands to collect an estimated $100 million in taxes by year’s end, more than twice what the state collected for the sale and use of alcohol in 2013. Of that $100 million, $40 million of those tax dollars have been earmarked to build and maintain schools.

With only 35 of Colorado’s 348 approved licensed retailers currently in operation, early calculations have the state earning over $1 million in taxes between January 1st and January 27th alone. What’s more, there are profits to be realized from the wide array of businesses that support or compliment the sale of marijuana – everything from marijuana bars to private party planners, from smoking paraphernalia to child-proof storage containers – none of which factored into the initial sales estimates, all of which will make money for the State of Colorado and individual business owners.

But, despite the enthusiasm of the Colorado contingent, a tension underlies this great experiment. While both Colorado and Washington have legalized marijuana, the federal government continues to classify the drug a Schedule I narcotic. Banks won’t deal with pot vendors for fear of being labeled money launderers. Business owners aren’t entirely sure that they can’t be raided by the DEA, despite assurances from Attorney General Eric Holder that the federal government won’t prosecute marijuana retailers in states who have voted to legalize. And it’s in these grey areas that the truly lucrative industries have arisen.

While there’s no denying that small business owners are making good money from legalization, if the success of Colorado proves enticement enough for other states to follow suit and recreational use becomes widespread, these are the industries positioned to become the future foundation of Big Marijuana. You might want to invest now.

#5 Payment Solutions

“Too much money” is rarely listed as a liability for most business owners, but in the case of marijuana retailers, both medical and recreational, it’s a very real problem. Banks are subject to federal oversight and, as the federal government still considers cannabis an illegal substance, marijuana vendors have had problems with everything from depositing the cash they’ve taken in to maintaining a bank account in the first place. Getting traditional point-of-sale devices that will accept credit and debit cards? Don’t be silly. Many of these businesses have been operating as cash only ventures – a risky move when your sales sit at $20,000 a day.

While the Attorney General has made statements that banks should open themselves to marijuana operators, the banks themselves are wary of the Department of Justice’s repeated flip-flopping on the issue. It published the Ogden memo in 2009, stating that, while selling marijuana remained a federal offence, it wasn’t in the DoJ’s financial interest to pursue small-time retailers and growers in states that had authorized their activity. It then countermanded that in 2011, telling banks that they were required to enforce federal legislation and that the Ogden memo was never meant to shield vendors and cultivators in violation of federal law.

In response to this erratic federal push and pull and the uncertainty it’s creating, an industry of intermediary devices has arisen. For a fee, companies such as Guardian Data Systems, Mediswipe, and Medical Marijuana Merchant Systems can provide a marijuana retailer with an option: a cashless ATM or alternative sales platform. These allow customers to pay using credit and debit cards, cutting down on the amount of cash handled and stored on-site. Unlike a traditional debit or credit machine, however, the system doesn’t code the transaction with the business name or the product sold, instead logging the interaction as a cash withdrawal which is then electronically transferred into the business’ bank account.

These devices are an elegant solution to a legislative problem, letting vendors and consumers sell and shop in the manner to which they have become accustomed, whilst adding a layer of plausible deniability on the part of banks who, let’s be honest, really do want the money. If legalization becomes widespread and the federal government continues to twiddle its thumbs, these devices could become staples in pot shops across the country, and the companies who distribute will become extremely wealthy.