Colorado's newly legal recreational marijuana industry is creating quite a buzz – particularly when it comes to visions of a new tax revenue stream for cash-strapped states. With the Centennial State's successful rollout, it seemed certain that others, in addition to Washington state, would follow.
But, there are major headwinds that may keep the budding industry from spreading across the nation – one of which is that state governors are coming out against recreational pot, despite its revenue-producing potential.
Shortly after Colorado's new law took effect on January 1, governors of other states began weighing in on the subject. Maryland Governor Martin O'Malley stated in a radio interview several weeks ago that he is "not much in favor of" legalizing pot for recreational use, citing concerns about drug abuse.
Similarly, New Hampshire Governor Maggie Hassan has said she would veto any bill making marijuana legal for that purpose, although she approved a bill making medical use legal last year. Also speaking out in early January was Alabama's Gov. Robert Bentley, who is against making pot legal for any purpose – even medicinal.
Just last weekend, as the National Governors Association met in Washington, D.C., the governors of Texas, Connecticut, Indiana, and Missouri all stated on CNN's State of the Union broadcast that they have no interest in legalizing pot for adult use, either.
Even Colorado's Gov. John Hickenlooper, when queried by several of his peers at the NGA, counseled against legalization, telling them to "...wait a couple of years."
Financial headaches remain, as well
For a burgeoning business that promises to bring Colorado at least $51 million in extra tax revenue by the end of June, it certainly seems to be gaining in unpopularity. The industry's inability to convince banks to allow pot-related business deposits and accounts doesn't seem to be abating, either.
Just recently, the federal government attempted to break down the financial barricades by issuing guidelines designed to make banks feel more at ease with the legal cannabis trade, though the overture seems to have fallen flat. Even before Colorado's new marijuana law took effect, Bank of America Corp. (BAC -0.61%), which has for several years been Washington state's official banker, noted that it would not balk at handling money generated from the state's soon-to-be-legal adult use marijuana industry. So far, other banks haven't been quite so forthcoming.
Likewise, after prohibiting the use of their cards for transactions involving medical marijuana in parts of California last fall, both Visa (V -0.84%) and MasterCard Inc. (MA -0.96%) now seem to have softened their stance, allowing partner banks to decide on whether or not they want to handle the transactions. While this may work swimmingly with cards issued by Bank of America, this policy could become problematic if other banks judge these transactions to be too risky.
It's clear that the legalization of recreational use marijuana will not spread like wildfire, but chances are good that attitudes will mellow with time. Meanwhile, states like Colorado and Washington will profit, as will B of A, Visa, and MasterCard – a situation that likely won't go unnoticed by current skeptics.