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Unknown Speaker
Foreign.
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Cheryl Akison
Hi, everybody. Cheryl Ekison here.
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Unknown Speaker
Welcome to another edition of Full Measure.
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Cheryl Akison
After Hours Today, high hopes for legalized recreational marijuana are going up in smoke for some who were lured by the promise of a new green rush. We are in the middle in America of a major drug business and legal experiment. 24 states now and Washington, D.C. have legalized recreational marijuana. Even more states, 39 of them altogether, plus D.C. allow medical use. Pot has been legal for recreational use in Oregon longer than most anyplace else. And the story of how it's working out about 10 years in is complicated and depends on who's telling it. That's my cover story, Sunday, May 4 on full measure. I have visited numerous states, including most of the first ones that legalized recreational marijuana. We've been doing this on Full Measure for a couple of years to see how legalized pot is working out. And we are finding out time and again from interviewing pot advocates that there are a lot of disappointed people out there. There's the fact that the black market for illegal pot did not dissolve the way many people promised it would in states that legalized marijuana. Sometimes there have been new problems that have arisen over the fact that there's no great test for the sort of a DUI for people who are high on pot. And that's created a problem. These are problems I'm hearing from people who advocated for legalized pot. There's still a lot of confusion going on because marijuana is technically illegal. Still, even in all the states that say they've legalized it, it's illegal from a federal standpoint. It's just that the federal government has decided not to enforce the laws. But because of that, it largely has to be a cash only business because a lot of banks can't or won't do business with these pot businesses. In states that have legalized marijuana, there are tax issues and tax repercussions on a federal level. These deductions for business expenses on these marijuana businesses trying to make it, those aren't tax deductible under the IRS rules. So that's complicated. And then you're going to hear today how some business people who've tried to make a go of it have had such a difficult time. We will hear from two people in today's podcast. First, Mike Getlin, who helped start up the Cannabis Industry alliance of Oregon. He now does PR for Nectar Markets, which is the largest recreational cannabis dispensary chain in Oregon. Its expert joint Rolling team rolls about 5 million doobies a year. You can see video of that if you watch Full Measure on Sunday, May 4th and after you hear from him, we will also hear from a business owner in Oregon to find out why he was flying high at one point early on but decided to basically fold up shop first. Mike Getlin.
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Mike Getlin
So what's the history of legalized marijuana in Oregon?
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We had a medical, one of the first medical programs in the country. And then in 2016 we rolled out adult use across the state and have been growing ever since.
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If you had to give the whole effort statewide a grade in terms of success, whatever that means, what would you say it is at this point?
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You know, it's interesting. I think a better way to put it would be a grade point average because I think there's several areas that matter for the success or failure of a state system. I think we get an A for the amount of legal market adoption. The number of Oregonians that choose to get their cannabis products from legal sources is probably the highest in the country. We definitely get an A for the best products around. The diversity and quality of product development in Oregon has been uniquely good across the country. And I think we get an A for minimizing any public health or safety harms. We probably get about a C minus for the business climate and the ability of the regulatory infrastructure to modernize and adapt. And so I think we've done most of it very well, but it's certainly come at a high cost to people who've tried to make a run of it in this industry.
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What would you say if you had to kind of finish this sentence? The best part of adult use legal marijuana in Oregon is the best result has been what?
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The best result has been developing a genuine community that encompasses both the business operators, especially small farms and small processors and consumers. And we've created a world in which consumers feel safe. They have access to interesting and compelling products at price points that are unmatched in most of the rest of the country. And so I think the consumer experience in Oregon is definitely the best part and the industry and community's ability to support that consumer experience.
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And the worst part part or the most challenging part?
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Trying to make a profit. You know, as someone who's worked in the trade association world in Oregon for many years, I would say 90 plus percent of my friends businesses have failed. I have, my farm failed that I originally started and I was fortunate enough to be able to continue my work in the industry through, through nectar and through the trade associations. But the business failure rate and the type of economic damage that it has done to many of My friends and colleagues has been really tough to watch.
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Overall, would you say Oregon is a big success story?
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Yes, I think overall it's a big success story, but it's taken a lot to get there.
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When you look at other states and I know you know something of what's going on in places like Ohio and California, how does the Oregon experience compared to what other states have seen? We have covered, as I mentioned to you, in Colorado and California, where there's a great deal of disappointment, the illegal drug trade exploding rather than getting better and all kinds of problems they're having there. What are your thoughts on that?
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I think that Oregon provides a wonderful case study, as does Colorado and Washington. But I think the early adoption states provide a great roadmap. And I think that we now know the information is out there as to how to achieve the goals that a state regulatory or legislature wants to get to. And I think there's a huge diversity of opinions in terms of how well that's been used. You know, you can look at certain, certain states that have rolled out adult use and that have taken lessons from early adopter states and have done it pretty effectively. Ohio being a really good example of that. You know, Ohio's adult use program is in the process of rolling out now. We've got a few stores out there and we've been really pleased overall with the way that the regulators and the state officials have handled the program. Whereas in California, I think it's no mystery that the hopes and dreams of the people who designed the system have not really come true. These are tricky things to get right and they're especially challenging against the backdrop of a lack of federal movement on the issue and of federal allowance of hemp derived products that compete directly with us in a lot of these markets.
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I want to ask more about the federal role in just a moment, but if there's something, if you could say if I only knew then what I know now, Is there something that comes to mind from the beginning, if I.
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Only knew them what I know now, you know. Yeah, I think that. I think that people overestimate the build it and they will come thing. I think that many of us got into cannabis thinking it was a new exciting industry that would allow for, you know, creative business problem solving. It would allow us to run dynamic small craft businesses. And that's challenging to find an industry that isn't so well established that you can do that. But what ended up happening is we ran headlong into kind of a, a vice grip between federal taxation rates and 280 E, which doesn't allow us to write off our lease payment for this building, for example. It doesn't even allow us to write off the salary that we pay our Bud tenders. And so our federal tax burden is infinitely higher than any other industry in America right now. And because we don't have access to standardized banking, the cost of capital, if you want to expand or acquire other businesses or assets, is astronomically high. And so instead of getting into a business environment where we could use our creativity to come up with compelling craft offerings, we ran into a buzz saw that really chewed up and spat out a lot of really hardworking quality leaders in this industry.
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So you touched on it. It's a little bit complicated, I think, the federal relationship versus the states in very simple terms. Can you tell people who don't know what's going on between. I'll say, you tell me if this is right. Marijuana use is still illegal on a federal level, but many states are violating federal law and have legalized it. And the feds are looking the other way for the purposes of sales, but not in other arenas.
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Yes. And so, you know, marijuana, the products that we sell that are the intoxicating components of marijuana, are still federally illegal. They're still on the Schedule 1, same as heroin or cocaine. They're actually on a higher federally drug scheduled level than fentanyl, which is mind boggling to me. But that's still where it sits federally. And there is an effort in the DEA to reschedule it, but that is stalled out and we're unsure where that's going to end up. But in the meantime, you know, consumer demand and outrage over the ongoing prohibition at the state level has led, I think it's a total of 38 states now to adopt some sort of regulated marijuana program, whether it's adult use or medical. And so, yeah, the federal government has done nothing and has chosen to simply look the other way and not enforce its laws.
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But that means you can't use the banking system. Right. Your cash. Cash only businesses. Because it's illegal federally. Banks are not allowed to take your money.
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Yeah, they're not federally chartered. Banks will. Will not take cannabis money. So we have state banks and credit unions that we can have checking accounts through. So, you know, we can receive and write checks and deposit cash, but we don't have access to loans. There's no SBA loans, et cetera. So if you were going to go start a coffee shop, you know, you'd take out a small Business association loan backed by the Federal government banks at 6,7% interest. We have to take out a hard money loan at 20% interest with personal guarantees.
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And your business expenses are not tax deductible.
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Correct.
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From the federal government. Are they tax deductible at the state level?
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They are tax deductible at the state level. But then again, the states all put significant tax rates on, and Oregon's got a 20% overall tax rate which is, you know, significantly higher than similar products and beer and wine, et cetera, and we're one of the lower ones.
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In, in a nutshell, what do you think needs to happen in your view?
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I think that state level and federal regulators need to start looking at this like the business that it is, like a significant contributor to our economy, and start to do the same balancing work between consumer protection and creating a stable business environment that they do in every other industry. But there's still so much stigma attached to these products and so much hesitancy to, to do anything, frankly, at the federal level that it's very challenging to get those conversations started.
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What do you see happening in this landscape in the next five years?
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We're just going to keep making better products and getting them in people's hands at better prices. And at the end of the day, it's the consumers, it's the citizens of Oregon, the citizens of America that will make this policy whether the federal government gets off its butt or not.
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Two moral and social questions to end with. It's sort of a dilemma for parents who wonder what to tell their kids. They don't want their kids using hard drugs. We know we have fentanyl and opioid problems in this country, for example. But they also are dubious about saying, is marijuana okay? Still not legal. And even in these states for under age 21, it's this gray area. And I think a lot of people wonder and struggle with what they should tell their kids is okay.
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I mean, I talk for a living and it's hard for me to figure out what to tell my kids. Right? But I think at the end of the day, every kid's different and every parent's different. So all I can speak to is what I tell my kids, which is the truth, which is that, you know, many, if not most adults can responsibly consume cannabis. But just like alcohol or frankly, large amounts of caffeine or sugar or anything else that has the ability to have negative health effects on you, first of all, you can't do it as a kid because teenage brain development is significantly hampered by cannabis use. And we know that. But when you become an adult, you know, I hope that my kids can learn to make healthy decisions, decisions about cannabis consumption, just like they do about all other aspects of their lives.
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And then as someone who's lived in a lot of different places and traveled around, I noticed, you can tell me I'm all wet. But whenever marijuana stores come into a community, it seems like it's followed by that area becomes seedy, more homelessness, more mental illness, more crime. Am I wrong about that?
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Actually, what we. The data has actually shown the exact opposite. Oftentimes, because of federal banking restrictions, you don't see a lot of marijuana stores in large malls because they all have notes on them that are held by federal banks. So oftentimes, marijuana retail is concentrated into single unit commercial buildings, oftentimes in parts of town that haven't seen the kind of high scale development that nicer areas have. But these stores come in well capitalized. They come in with state of the art security systems that are state mandated and cameras and lighting, and they oftentimes have security guards that work there full time.
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And so, so maybe they're going into a more lower developed or seedier looking area, but bringing something better.
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And we have seen these stores anchor new economic development across the country. And multiple times a year, we are asked to use our store security resources to help solve crimes that are committed on neighboring properties. So when a cannabis store comes to town, it tends to be the safest place on the block because of all of the security requirements we have. And also, I mean, nobody, you don't hear a lot of stories about people smoking a joint and then go getting in a knockdown, drag out, bar fight with a bunch of bikers, right? It's not alcohol. It does not cause the sort of lack of inhibitions, the sort of violent behavior that consumption of alcohol does. And so quite frankly, I mean, you might go in front of one of these cannabis dispensaries and walk out and want to go find a donut, but you don't typically want to walk out and go get in a fight.
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Unknown Speaker
Next up, we'll hear from a small business operator who tried to make a go of it in Oregon, but it turned out to be a bummer. In 2015, Myron Chatowitz started Essential Farms, a small organic marijuana farming operation in Oregon about two hours south of Portland.
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Cheryl Akison
He had high hopes at first, but.
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Unknown Speaker
His dreams of the high life went up in smoke in March of 2023.
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Cheryl Akison
That's when Oregon started requiring growers to.
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Unknown Speaker
Test their pot for A certain type of mold. Well, it put him out of business before the state then decided just a few months later that the tests weren't necessary after all. Here's Myron Chadowitz.
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Myron Chatowitz
How many people did you have at your peak?
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Unknown Speaker
22 people. We were doing a million in sales. We were, were doing great. You know, were we making money? No, but we were seeing there's an avenue ahead. We were very well known. People knew who we were.
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Myron Chatowitz
And misplaced regulation, in your view, puts.
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Unknown Speaker
You out of business and the fear of future. So it was like, here we are, the law's gone, we have a good reputation, we still have active equipment. Key, can we do this again? And I looked and we calculated. We're like, okay, we're going to need this much money to get everything built up again because we really haven't been making any money. We're going to have to hire up a staff. We're going to do all that. That's going to take an investment. And do we want to go back into this grind? We're going to have to raise money for this. Do I, first of all see a way of paying that money back? And secondly, what's going to stop the state or federal throwing another regulation out of the blue that we're going to have to adapt to that maybe we won't be able to. And it's like, can I do this any longer? And as a businessman, I said, I'll take the loss. I'm, I'm done. My cousin, this is what he does. We said, let's go down to a one person operation. We reduced our license down to the small, second smallest you could get. And he's, you know, scraping by, doing what he loves.
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Myron Chatowitz
Do you think the future of this business is ultimately giant corporations come in that can afford the regulation burden and they take over everything.
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Unknown Speaker
Unfortunately, I think that's the end game. The big corporations have been already out there working to get the regulations put in place.
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Myron Chatowitz
Like, what kind of companies?
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Unknown Speaker
So when we were doing the research on what was going on with this Aspergillus case, this is just like a small case in point. We found who's behind these regulations and we found, oh, the guys who invented the test, the guys who found a genetic. They had figured out the genetic code of. I mean, I'm not saying it exactly right, but they'd figured out the genetics of a couple strains back in 2017. People thought that was the secret to making money. Patent a strain, make money on that, sell that, and there's no money in that because it's a plant, you can just breed it with something else. There's a million different strains. So then they figured, we know the code of, of cannabis. That means if we test it genetically, anything else in there we'll see. So we can now use a genetic test to test for any kind of thing out there. And they're like, well, Aspergillus is an easy one. We can test for it. We have a test. And they went around the country and talked to regulators and said, this is a real problem. Aspergillosis kills people. You should be testing for that. We have a test for it. And then other people said, hey, we have a machine that can clean the cannabis. We can sell this machine. We'll teach people how to keep people clean. And they went and pushed regulation. And so the question, natural question is, how do I know that? Because I led a group of farms in a way to work with this regulation. And I met with all these companies, and these companies told me, yes, we work with the regulators. We're the ones who know how to beat this because we helped write the rules. And I said, isn't that a conflict of interest? They said, well, no, we really care about the consumer. I'm like, boom, okay, you know, So I talked to some friends who are big investors, and they were able to get hold of the investment decks for these companies, and they called this testing a $3.4 billion opportunity. So in my eyes, how am I going to compete with a company that's raising money on a $3.4 billion opportunity? They'll come up with another test. I beat Aspergillus. They'll come up with something else. Cigarettes. They don't get tested for that. Alcohol. They don't get tested for that. Why not? Because they have very big lobbyist groups with lots of money that will prevent that. No one is going to touch the cigarette industry, but cannabis is not found. We don't have a good enough group. We have small groups. We can get together, we can fight rules, but there's no one really watching out for us. And I definitely agree that we need regulation. I don't believe in free, open, like, let anyone do whatever we want. You gotta protect the consumer, but you have to do it in a scientific manner that actually makes sense.
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Myron Chatowitz
Can you, in really simple terms, describe to people who aren't familiar with this, and I'm talking about a couple of paragraphs, the trajectory of legalized marijuana in Oregon from the viewpoint of someone trying to make a living at it.
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Unknown Speaker
So it all started with A lot of promise. We thought we had written a really good law, a really good rule when things went legal. And a lot of people who had been spending their lives growing cannabis saw this as an opportunity to come out from under the rug and really do something good and have a legitimate business. And everyone said, we're going to follow the regulations. They're decent regulations. And unfortunately, what happened is people jumped in. Too many people jumped in. And we went through these waves of just too many people growing, then people losing their shirt, then too many people growing, then people are losing their shirt. And this Oregon market has been going through these fits and starts of people trying to pivot to really figure out, how can we figure out this market? It's a new, brand new market. That always happens. But then we'd get hit with regulations, higher taxations, competition from people who will just spend millions and millions, 30, 300, $400 million and just throw it out there. And the only thing that I think has kept people going is this promise that one day it's going to open up nationwide. And it's almost like this, this. This carrot that's always there, that I can keep borrowing money, I can keep not making money, because one day it's going to open up and I'm going to make all this money. And I don't think it's going to open up nationwide anytime soon.
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Myron Chatowitz
We spoke to a businessman who's working with, you know, sort of part of an alliance of growers and business people who portrays Oregon as a success story, a big success story for legalization of marijuana. What would you say to that?
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Unknown Speaker
I know a lot of people who've lost a lot of money. I've lost money, but I know people who've lost tons and tons of money. And I know.
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Myron Chatowitz
How much money have you lost, Dina?
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Unknown Speaker
Half a million of my personal money. And that doesn't include my family that's given me money that doesn't include, you know, basically, I wouldn't go to outside investors. Our stance was, unless we know we can make money back for people, we'll only go to the first and family. But I know people who've lost hundreds of millions of dollars. I've known companies that did everything right and couldn't stay in business. The people I know who have successful businesses call it the biggest grind there is. They have debt they can't meet the balance on. I would. I can consider this a successful industry. I don't think so. I think there are people who are surviving, but not the way, if you're I've been in regular business my whole life. The business these people are doing 7, $800,000 a month. I know people doing 9 million a year and they're not making a penny. And they're constantly worried about cash flow. And it's not that they're bad businessmen. The market is driven people to the bottom. There's no profit. A dispensary can't deduct their normal expenses because of 280E. If a business cannot deduct normal expenses and they're paying taxes on basically their expenses, they have to buy things for very cheap. And that means that they're going to be getting their suppliers to lower their prices to below a profit status. And to me, that's not a successful business.
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Myron Chatowitz
What do you see happening in the next five, ten years in this industry?
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Unknown Speaker
I think there's going to be more consolidation. There's going to be more people coming with money and taking over. I think there is a recipe for success for very small people to stay very small. I have seen people staying very small and I think that we have an opportunity to continue providing as a very small business. But to keep that up, you need very good equipment. And is there enough money for that? I'm not sure. But in the next five, 10 years, I don't see national legalization and a lot of people do. I just don't think it's going to happen. I don't think there's a will out there for it to happen. And I think there'll be more people who will lose everything and there'll be more people who will work their butts off 90 hours a week or more not making any money to be able to pay their staff and keep doing what they love. And I think there'll be a lot of people who lose everything. And then I think there'll be some people who will make it through by continuing to put more and more money in. And I hope for those people's case that when things go national they're able to sell their companies and they're able to get out of the debt. But I think without changes in taxation, changes in regulation, I think it's going to be really tough.
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Myron Chatowitz
And lastly, you suspect the tobacco companies might be interested in coming into the field?
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Unknown Speaker
I think tobacco, I think alcohol, but I think and pharmaceutical, I think there's a lot of promise in medical. It needs a lot of money for research. I think there should be a separation personally between medical and recreational. I think there should be to grow for people who have immune deficiencies and cancers and things like that, which there is promise. I think you have to grow in a special way. And I think that needs pharmaceutical money, I think for recreational, yeah, I think it'll, I think it'll continue. But I think there's going to be the only people who have the money to really consolidate and buy up these businesses that everyone's helping are monstrous corporations. You know, there was promise of microbreweries years ago. Where's that promise now? That's what we all, we were like, oh, small wineries and microbreweries. That's how we're good. That's the recipe. And the microbreweries aren't doing well. They're all been bought up by the big guys or they're going out of business. So I am not as optimistic as my friends. I'm still part of that organization. I believe in that organization. I believe the only way forward is for people to get together and share ideas and not be scared of competitors, but work together with competitors and kind of weed out the bad guys. And that's what we tried to do. So is there a path forward? Possibly, but I don't want a part of it.
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If you'd like to see the final story that I put together that has a lot more information and some great video, you can watch full measure Sunday, May 4th. To find out where to see it near you, go to cherylakkisson.com and click the Full Measure tab for a list of stations and times. Or you can watch it on our YouTube Full Measure channel. We also stream it live at FullMeasure News online. That's FullMeasure News around 9:35am Eastern Time on Sunday mornings and then we post it there shortly thereafter. So fullmeasure News. In fact, you can go there and watch all of our past and recent cover stories or go to our YouTube full measure channel. I hope you enjoyed today's podcast and that you will consider leaving us a terrific review subscribing to this podcast and sharing it with your friends. And check out my other podcast, the Cheryl Akison Podcast. Now more than ever, you can benefit from the wealth of information in my five star bestseller, Follow the How Big Pharma Misleads, Obscures, and Prevails in that I address and answer a lot of questions about how our medical establishment became so corrupted from top to bottom, which in turn explains why America has exploded with a chronic disease epidemic right under the noses of our public health officials and our doctors, who almost seem not to notice. And as we have never spent more money on healthcare, insurance, hospitals, medicine and so on. Follow the science very eye opening with proceeds benefiting independent reporting and also benefiting independent reporting causes my store@cheryl axton.com Click the store tab for some exciting products with interesting slogans for independent thinkers like you, such as I need to find some new conspiracy theories. All my old ones came came true and do your own research, make up your own mind, think for yourself.