Colorado’s Marijuana Legalization Rollout is a Success

I recently sat down with John Hudak who authored a new report “Colorado’s Rollout of Legal Marijuana is Succeeding: A Report on the State’s Implementation of Legalization.” I asked him a few questions about his research and findings and what implementation in Colorado means in the broader policy conversation.

You’ve just finished a detailed investigation of how Colorado has implemented its legalization of retail recreational marijuana. How would you say the state is doing?

Overall the state is doing well. It had a monumental task to perform. Amendment 64, the voter-approved constitutional amendment that legalized recreational marijuana, set up very quick and very strict deadlines. The state legislature, regulators, and industry came together with the law enforcement community and even many opponents of Amendment 64 to create a system that allows Colorado residents and visitors to purchase marijuana.

Marijuana stores opened just a few months ago. What’s the basis for judging the success of the rollout so soon?

Implementation is complex process. It doesn’t begin on the first day the policy goes into effect. It begins long before that. Although marijuana stores opened in January, this has been a multiyear process. That gives us a lot of time and a lot of experience to look at and judge. We can look at the decisions that have been made, the policies that have been established, and the system that has emerged. While we don’t yet know how the policy of legalization will work out, it’s not too early to say that implementation of the reform has been a success.

In making your assessment, what kind of people did you talk to, and what were you able to observe?

I cast a pretty broad net. I talked to people inside government who are dealing with this every day, and also to many people on the outside—including people in the law-enforcement and medical communities who had been opposed to Amendment 64 and in some cases continue to be. I was able to visit the Department of Revenue, which regulates legal marijuana, and see what that institution looks like from the inside. I was able to visit medical dispensaries and retail stores to see how business is conducted. I was able to visit a grow operation to see the cultivation side.

Did marijuana legalization pose special challenges for the state?

It truly did. Most reforms have roots in established policy. Even something as new and innovative as the Affordable Care Act had a model in Massachusetts. But setting up a legal retail marijuana industry was an unprecedented policy change. Whenever legislators, regulators, and industry actors are facing a big change with very little experience, it poses tremendous risks of failure. Moreover, marijuana is prohibited by federal law. It’s a real challenge for the state to implement legalization within that frame.

You found a number of key factors that account for Colorado’s strong launch. At the head of your list is leadership. What kind of leadership, and why was it so important?

Leadership on this issue came from multiple sources. Chief among them was Gov. John Hickenlooper. He opposed Amendment 64, but after it was approved he put aside his personal opposition and moved decisively to implement the voters’ will. Leadership also came from the Department of Revenue, which adopted the Hickenlooper approach. What shouldn’t be understated was leadership that opponents of the law showed in several contexts. They came to the table, they sat on the state’s Implementation Task Force, and they worked to make this policy as limited-risk as possible. They showed a type of maturity that we don’t often see at the federal level.

Tell us about the process Colorado used, which relied on multiple task forces and working groups. What difference did that make?

The Implementation Task Force played an essential role. This was a body tasked with making recommendations on legal issues, regulatory issues, health and safety issues, and more—with very little time. In a few short months, the task force and its five working groups produced a nearly 200-page report that guided regulation and legislation in the ensuing months. The task-force approach didn’t end there, however. As the state moved ahead and encountered challenges, it employed subsequent working groups to tackle them. This approach has been hailed as broadly successful by experts, by proponents of Amendment 64, and even by some of the amendment’s opponents.

Colorado was able to build on an existing regulatory structure for medical marijuana, but it did something pretty bold by totally overhauling that structure. Why was that important?

In early 2013, the state released the findings of an audit of its medical marijuana system, and the report was scathing. In response, the state addressed many of the audit’s concerns, proposing new medical marijuana rules alongside the new rules for recreational marijuana. So the state needed to fix medical marijuana anyway, and the introduction of retail facilitated a comprehensive, broad overhaul.

There’s a lot of cynicism in Washington, D.C., around policy “czars” and interagency meetings, but you say that just such arrangements made a crucial difference in Colorado. Why?

Policy czars at the federal level are frequently criticized, but in the case of legalization of marijuana in Colorado, there was a real need for a coordinator. Someone had to identify problems and help keep a multitude of agencies and stakeholders on the same page, and the state’s director of marijuana coordination did that. Also, the governor brings his cabinet together monthly, which helps make sure things don’t fall through the cracks. It’s good government practice—in fact, it’s also good business practice. Those coordination efforts, combined with the task-force and working-group model, facilitate communication in ways that often don’t happen in other governments across the United States.

You argue that part of what worked in Colorado wasn’t governmental so much as “cultural.” What do you mean by that?

For essentially everyone’s lifetime, marijuana has been illegal. Adjusting to that in the medical community, in the law-enforcement community, and in the public at large requires a real change from what you always knew to be true. While there remain staunch opponents to legalization, I found different groups in the state—particularly law enforcement and health care—retraining, rethinking, and gathering information on what legalization means for them. In a polarized political environment, oftentimes the immediate reaction to a controversial change is just outright opposition. Colorado has shown a real willingness to build the new reality into its own reality.

A major point you make is that Colorado can’t afford to rest on its laurels. In fact, some major challenges lie ahead. Why are so-called “edibles”—marijuana in ingestible forms—such a hard issue?

The problem with edibles is that people often have trouble understanding how much cannabis they’re consuming and thus how much is safe to eat. Labeling, potency, and serving sizes are inconsistent, as well. So edibles are easy for users, especially naïve ones, to overconsume. The state needs to address that issue. And it is responding. It has organized new working groups seeking ways to make edibles safer and more predictable

Colorado’s legalization, unlike Washington state’s, allows “homegrows”: noncommercial marijuana cultivation by private individuals. Why is that a big regulatory challenge?

Amendment 64 gives Coloradans a constitutional right to grow marijuana in their homes. That reduces revenues flowing to the state as homegrown marijuana is not taxed. More importantly, it limits the state’s ability to track and regulate homegrown product, which some worry will be diverted into the illegal market or lead to other problems. At the same time, home-growing also gives responsible users a legal way to obtain marijuana in certain cities and counties in Colorado that have chosen to opt out of the legal retail system. As data come in, we’ll get a better understanding of how problematic—or how responsible—the homegrow system is, but it’s likely to be an issue the state will need to revisit.

Smart regulators always worry about perverse incentives, and you’ve pointed to a couple of them. One involves rules that could steer “marijuana tourists” toward edibles. What’s the problem there?

Tourists can be driven to edibles in large part because the state bans smoking in most public areas and also many private areas. You can’t smoke outdoors. You can’t smoke in parks. You can’t smoke in hotel rooms. And visitors to Colorado cannot take it home. For tourists, particularly in Denver, there are not many legal places for you to smoke marijuana. As a result, edibles become an attractive alternative to smoking. So some of your riskiest users are being led to use your riskier product. That’s an incentive the state should work on changing. Stakeholders are already debating ways to define more clearly and effectively what “public” use means, and the state is also trying to regulate edibles so that they’re easier to use responsibly.

What about taxes that nudge people into the medical-marijuana system instead of the better-regulated retail system, another perverse incentive you identify?

For years it has been an open secret in Colorado that some people were using medical marijuana without a legitimate medical condition. One goal of creating the retail market was to draw those gray-market users away from medical and toward recreational. The problem is that taxes on retail marijuana are dramatically higher than they are on medical marijuana, so existing medical users have very little incentive to leave the medical market. In fact, the state has seen an increase in the number of registered medical marijuana users since legalization took effect. Rebalancing the incentives is likely to require regulatory changes in both markets.

Frequently in your report, you stress flexibility in Colorado’s approach: a learning-by-doing mentality and a willingness to adapt and adjust. Why is flexibility so important, and how—if at all—can Colorado preserve it over time?

I think what many Americans are fed up with in their government is stubbornness. In any job—in any context in life—being unwilling to learn from new information or from mistakes is a fast track to failure. In Colorado, regulators realize they won’t get everything right on the first try. And so they’ve embraced an approach that involves regulatory lookback, where they’re frequently trying to improve existing regulations and adjust their approach to enforcement. That’s an effective regulatory approach which the federal government could use more of.

As for preserving regulatory flexibility over time, that depends on the personnel in Colorado’s agencies, the leadership of its government, and the evolution of its political environment. Right now Colorado has all three going for it. But what’s ahead is an open question. Who’s coming up to the plate next might determine whether legal marijuana is a home run or a fast out.

Click to read: “Colorado’s Rollout of Legal Marijuana is Succeeding: A Report on the State’s Implementation of Legalization