Trump Recreational Weed Policy Seen as Logistical Nightmare

(Bloomberg) -- When it comes to marijuana, medical is good, recreational is bad, according to White House Press Secretary Sean Spicer. At the Green Man Cannabis store in Denver, the difference is no wider than the space between cash registers.

“The markets here are nearly indistinguishable,” said Christian Hageseth, Green Man's chief executive officer, referring to Colorado. “There are a few people who are either just selling into the recreational market or a few selling medically, but most of us are selling both.”

If adopted, the distinction between medical and recreational cannabis, which Spicer made last week, could become a headache for regulators and a killer for businesses. Criminalizing the recreational market, legal in eight states and Washington, D.C., would mean the loss of about $33 billion over the next five years without accounting for possible gains in medical use, according to Bloomberg calculations based on Arcview Market Research data. In Colorado, with more than 25,000 people directly employed in the cannabis industry, making recreational pot illegal could cut jobs by as many as 18,000, Hageseth said.

The Bloomberg Intelligence Global Cannabis Index dropped 9.8 percent between Spicer's Feb. 23 comments and the close of trading Thursday.

‘Deep Misunderstanding'

“Mr. Spicer's comments really signaled a deep misunderstanding within the administration about how marijuana policy is regulated and implemented at the state level,” said John Hudak, a senior fellow at Brookings Institution. “There are dramatic regulatory differences from state to state. The comments from the podium were overly simplistic.”

President Donald Trump separated medical from recreational marijuana during his campaign. He said he was “100 percent” in favor of the former, while calling the latter a “bad” experiment. Regardless, he said, it should be decided by the states.

Cannabis is legal for both recreational and medical use in California, Oregon, Washington, Nevada, Colorado, Massachusetts, Maine, Alaska, and Washington, D.C., and approved in 20 additional states for medical purposes only, but marijuana is not legal for any purpose under federal law. And while Spicer's comments -- and Trump's campaign comments -- seem to show that the administration was open to medicinal marijuana, Attorney General Jeff Sessions may have different ideas.

Read more: A QuickTake explainer on pot's path from taboo to legit

Sessions, who has the power to crack down on the marijuana industry, indicated to a conference of attorneys general in Washington on Tuesday that he'd do away with the Obama administration's hands-off strategy on state legislation. Law-enforcement officers need to address growing illegal drug use, including heroin and marijuana, and the arguments that pot helps cure opiate abuse or has other medicinal properties are “desperate,” he said.

“Give me a break,” Sessions said. “I doubt that's true. Maybe science will prove I'm wrong.”

Cannabis has therapeutic effects to treat chronic pain, muscle spasms related to multiple sclerosis, and nausea from chemotherapy, according by a Jan. 12 report from the National Academies of Sciences, Engineering and Medicine that reviewed 10,000 scientific abstracts since 1999. The study also found potential respiratory and mental health risks.

Schedule 1 Drug

Cannabis is considered a Schedule 1 drug, meaning that the U.S. Drug Enforcement Administration sees no medicinal properties in the substance and classifies it as highly addictive. Pot industry participants and outside experts are questioning the logic behind a split that considers medical marijuana a states' rights issue and recreational a matter for federal regulation.

“I believe the product has hundreds of medical applications, positive ones, but this delineation is an artificial one given how Schedule 1 works,” said Adrian Sedlin, founder and CEO of Canndescent, a cannabis producer in Southern California. “There's no basis to allow medical, but not allow recreational, under current law.”

States where both types of weed are legal have parallel regulatory frameworks. Though there are separate licenses, many producers do both. So a crackdown on weed growers under Spicer's framework could mean wiping out half a company's inventory while leaving the other half untouched.

“It's just bizarre to think that the DEA could come to a place like in Aurora and raid one half of a store but not the other,” said Allen St. Pierre, board member of the National Organization for the Reform of Marijuana Laws, referring to the Denver suburb. “So this delineation that they put out there just adds a greater level of confusion.”

Different Missions

Some producers found comfort in Spicer's acceptance of medical marijuana. Nick Vita, CEO of Columbia Care, which is licensed to operate about 20 medical dispensaries in nine states, said that it's a good change and that the differentiation is warranted.

“It's very important because they are two very different missions and types of activities,” Vita said.

In Colorado, where both kinds of marijuana have been legal the longest, medical sales have fallen as recreational weed increased. At Hageseth's two stores, for example, medical business declined about 60 percent from this time last year. Since the same products are available, consumers are skipping the hassle of getting a prescription and simply using the recreational pot to soothe themselves, he said. If the Trump administration follows through, the trend could reverse -- boosting the medicinal market higher than anticipated.

Hageseth said he's building a marijuana growing facility and starting a franchise business. But Spicer's offhand comments already caused anxiety among some of Green Man Cannabis' investors.

“I've had two people say they're not moving forward until this is resolved,” he said. “We're all on a train together that's picking up speed and all of a sudden it's stopped and we're waiting to see what happens.”

--With assistance from Chris Strohm and Jack Kaskey

To contact the reporter on this story: Jennifer Kaplan in New York at jkaplan84@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Bob Ivry, Kevin Orland