Politico.com

The Wrong Way to Legalize Marijuana?

2015-11-02

On the surface, Ian James sounds like any other idealistic marijuana advocate: He’s critical of the war on drugs, he touts the economic and tax benefits of legalization and uses the familiar rebuttal against the “think of the children!” argument by pointing out that dealers are currently selling pot to kids and dispensaries will be carding customers. But James, the man behind this Tuesday’s ballot measure to legalize marijuana in Ohio, is motivated by more than his political convictions. James’ controversial statewide ballot initiative, known as Issue 3, is designed to line the pockets of the investors he gathered to bankroll it—a brazen example of pay-to-play politics according to critics. But James is also unlike anyone in legalization who’s come before him. He’s the CEO of The Strategy Network, a political consultant group specializing in ballot measures. Unlike the marijuana activist color guard typically responsible for passing the country’s prior legalization initiatives, James is a 30-year political operative who cut his teeth working for Ohio Gov. Ted Strickland, not exactly an idealistic drug policy reformer. Even though James’ victory would mark a long list of marijuana legalization firsts—the first swing state to legalize, the first Midwestern state, the first privately organized legalization campaign—the Ohio measure’s profit-driven nature has provoked resistance from a growing coalition of marijuana enthusiasts, who insist that the movement has long been about expanding individual freedom, not making profits. James, for his part, makes no apologies for his profit-driven brainchild in political economy; big money is what it takes, he argues, to upgrade the legalization map—to move beyond the weed-friendly states out West and make legalization a reality in the purple states of America’s heartland. “It’s an incredibly daunting, detail-oriented process, and it requires funding,” he says, noting previous attempts at marijuana reform via ballot measure in Ohio being underfunded and falling dismally short of gathering enough signatures. But James’ bald-faced political calculations have left Issue 3 vulnerable to accusations of crony capitalism from his fellow legalization advocates. And from the usual anti-marijuana suspects.“The values of Woodstock have been eclipsed by the values of Wall Street,” says Kevin Sabet, president of Smart Approaches to Marijuana and former senior adviser to President Barack Obama’s Office of National Drug Control Policy. “This is the big industry nightmare that we’ve been worried about, and now it’s becoming a reality in Ohio. For anyone who thinks legalization is about pot anymore, they need to look at Ohio and see it’s not about pot, it’s about money.” The Ohio legalization effort has been a godsend to anti-marijuana groups like Sabet’s, fitting hand-in-glove into the Big Business narrative they’ve been crafting for years. Almost universal rejection of Ronald Reagan’s <a href="http://www.wkyc.com/story/news/local/ohio/2015/04/06/new-poll-shows-ohio-majority-favors-legal-marijuana/25360277/">claim</a> that marijuana is “probably the most dangerous drug in America” has forced those who remain critical of the plant to distance themselves from the after-school-specials of yesteryear. The new talking point against pot is that the cannabis industry is “Big Tobacco 2.0.” And James is their favorite new boogeyman.It’s easy to see why he has become a lightning rod. Issue 3 expressly states that commercial cultivation of marijuana in Ohio will be limited to 10 separate properties, whose addresses have already been determined. And just who owns the land that will be granted exclusive rights to what is projected to be a billion dollar industry? The same investment groups, organized by James, that are financing the ResponsibleOhio campaign to legalize marijuana in the state.The investment groups are set to spend around $25 million. (Colorado, by contrast, spent a mere $3 million legalizing in 2012.) Investors include familiar names like 32-year-old NFL star Frostee Rucker, NBA Hall of Famer Oscar Robertson and former singer of the boy-band 98 Degrees Nick Lachey, among others. Though these celebrities apparently have no problem being known to the public as weed tycoons, many of the other investors have chosen to remain anonymous and hide behind LLCs. As the man who gathered together the 10 Issue 3 investor groups—and as ResponsibleOhio’s executive director—James has been fending off accusations that he seeks to create a monopoly of the burgeoning weed market in the vein of Rockefeller with oil and Hearst with newspapers. (Technically “oligopoly” would be a more accurate accusation, since there will be 10 companies—but the popular board-game title rings a little clearer in campaign literature.)James dismisses these accusations by pointing to the fact that residents would be allowed to grow four of their own plants for personal use and to a provision in Issue 3 that says if the 10 cultivation centers cannot keep up with demand after four years time, more cultivation licenses will be issued to other companies. (Though any of the original 10 companies also have the right to solicit neighboring landowners to sell them their property, allowing the cultivation centers to expand and better meet demand.) Yet James has received tremendous pushback—from legalization proponents, many of whom now oppose Issue 3 with the fire-and-brimstone politics typically reserved for their Drug War nemeses. Many advocates in Ohio have openly argued voting against Issue 3, imploring fellow legalizers to wait a year for a more policy-oriented, less profit-minded ballot initiative. To a degree, their opposition is couched in economic policy: repulsed by the specter of monopoly, many longtime legalization activists say they want low barriers to entry, safeguards for medical patients, looser possession limits and more grow-your-own plants at home. But only part of this typology is economic: many legalizers’ opposition to this form of legalization speaks less to policy then it does to culture—and the tidal shift in a movement increasingly transforming tie-dye into suit and tie. As a result, many legalization advocates are finding themselves sleeping with the enemy in the prohibitionist camp. Sri Kavuru, president of the marijuana legalization group Ohioans to End Prohibition, is one legalization supporter who has found himself shoulder-to-shoulder with anti-pot groups in the No On Issue 3 campaign, “We know that we’re going to be going up against them next year,” says Kavuru regarding a ballot initiative his group has drafted for 2016 that would legalize cannabis in Ohio under a free-market system. (While marijuana measures often do better during presidential elections, James believes that this measure won’t be able to raise the necessary funds to even collect enough signatures to get it on the ballot.) Kavuru and his Ohioans to End Prohibition are enjoying support from other groups like <a href="http://www.cleveland.com/open/index.ssf/2015/05/libertarians_green_party_oppos.html">The Libertarian Party of Ohio and The Green Party of Ohio</a> (both of whom are typically in favor of legalization) in their fight against Issue 3. “This isn't a proposal to restore rights to Ohioans. It’s a crony scheme to line the pockets of a few wealthy investors,” Libertarian Party of Ohio Political Director Tricia Sprankle said in a statement. Yet two of the oldest and most powerful marijuana groups in the country, NORML and the Marijuana Policy Project, have both tepidly endorsed Issue 3, with strong qualifications and distancing language from the initiative wording and method of passage. “The Marijuana Policy Project supports the initiative to the extent that it would end the failed policy of marijuana prohibition and replace it with a system in which marijuana is regulated and taxed,” says Mason Tvert, communications director for the Marijuana Policy Project and co-author of Colorado’s legalization amendment. “Ultimately, marijuana laws are going to vary from state to state just like alcohol laws vary from state to state, and the people in each state decide what those laws should be. So it’s going to be up to Ohio voters to decide whether the proposed system is the best step forward for Ohio right now.” “The big national groups that have come out for it, all they’re saying is that they’re for it but they don’t like it,” says Kavuru. “These groups have no influence in Ohio, they’ve never done very much to legalize in Ohio. Most of the advocates in Ohio are against it, and those who are for it have a stake in it passing.”Kavuru claims that medical marijuana group, The Ohio Rights Group, retracted its statements denouncing Issue 3 after it was promised a percentage of one of the future cultivation centers. “Mr. Kavuru is without question wrong. There is not now, nor was there ever been such a promise made to any board member, from the president on down,” says Mary Jane Borden, president of the Ohio Rights Group. As for why she retracted her earlier criticism, Borden says, “We decided to set aside any differences we might have had with ResponsibleOhio and advocate for our real constituency, which are the sick, dying and disabled in Ohio.” “I can’t stand with the prohibitionists just to make political points to defeat this so-called monopoly,” she continues, criticizing Kavuru for joining forces with groups like The Fraternal Order of Police, Drug-Free Action Alliance, Ohio Prosecuting Attorneys Association and Dayton Regional Employers Against Marijuana, in the effort to defeat Issue 3. “Sri [Kavuru] stood next to doctors at a press conference as they spoke of cannabis being ‘a gateway drug’ and linking its use to ‘psychological problems … and an increased likelihood of drug dependence in adulthood’—classic D.A.R.E.-era scare tactics, here in the 21st century,” says Savannah Smith, executive director of Ohio Rights Group, in an email.Kavuru shrugs this off this criticism by saying this is simply “how politics works. Politics makes strange bedfellows, and I’m not certainly not sorry for it.” ***The confusion surrounding the fractured politics of legalization in Ohio escalated to chaos last month when Ohio state Rep. Michael Curtin spearheaded yet another ballot measure—this one called Issue 2, also known as the “Initiated Monopolies Amendment,” which has the potential to shut down Issue 3 if it passes. Curtin’s effort is a Hail Mary to halt legalization; the amendment language essentially bars any legalization attempt “elsewhere” on the ballot. If the two initiatives, literally side by side on the ballot, both pass, it’s unclear what exactly will happen.Curtin sees Issue 3 as just another example of corruption in the initiative process by big business, which he says has been a problem in America for some time. “An initiative industry has been cropping up, where sharp political operators see opportunities to use the initiative process to pursue a change that seems to be in the public interest,” says Curtin, who cites Washington Post reporter David Broder’s book Democracy Derailed: The Initiative Process and the Power of Money. “But they fashion the proposal in such a way as to create a financial windfall for a group of investors.” James history with past initiatives lends credence to this argument—at The Strategy Network, James’ previous successful ballot initiative legalized casino gambling in 2009 using precisely this method. Like ResponsibleOhio, it attempted to funnel the profits of the new industry to the groups that financed the campaign.Written in 2000, Broder’s book argues that the process of direct democracy stands in contrast to the system of checks and balances designed by our Founding Fathers, and has been hijacked by wealthy investors who “have learned that the initiative is a far more efficient way of achieving their ends than the cumbersome process of supporting candidates for public office and then lobbying them to pass or sign the measures they seek.” Broder notes that, from 1966 to 1997, the number of ballot initiatives in the United States doubled, allowing investors to roll back and cap property taxes, benefit from transportation funding and reduce the political power of unions—all through cleverly worded initiatives and misleading strategies in well-financed campaigns. “I don’t care about marijuana legalization one way or the other,” says Curtin. “To me, [Issue 3] represents a prostitution of the initiative process to benefit the wealthy few at the expense of the many.”Numerous Ohioans bring up the casino example. Since its passage and implementation, the casinos fell short of providing the tax revenue and jobs promised in the campaign—a shortfall that James conveniently attributes to the state Legislature allowing extra casinos to open instead of the limited amount proposed. “They lied about quite a bit during the casino campaign, and Issue 3 is a continuation of the same thing,” says Kavuru, who points to ResponsibleOhio’s projection that marijuana tax revenue will reach $500 million by 2020, which would require the market to more than double by that time. Kavuru says that will be impossible because the high prices caused by low supply will keep the black market alive (a challenge even for states with a free-market system). In the prospectus given to potential investors by James, the Ohio cannabis market is estimated to potentially exceed $1 billion dollars annually, which would make it comparable to Colorado’s marijuana industry. This isn’t necessarily realistic. Ohio faces obstacles in ramping up production that neither Washington nor Colorado encountered. Both states had a functioning medical marijuana program in place years before they legalized recreationally, which is widely recognized as a benefit to any marijuana industry’s infrastructure. Ohio has no medical marijuana program, and, if Issue 3 passes, would be the first state to skip that step in the process. And then there is the question of how 10 pot farms will be able to keep up with Ohio’s demand. To put that number of farms in perspective, consider that Colorado now has 1,258 marijuana cultivation centers. Tyler Henson of the Cannabis Chamber of Commerce in Colorado contributes his state’s robust marijuana industry to their free-market system, where anyone with the money and no criminal background can open a cultivation center.“If we limited the production ability in Colorado we wouldn’t see the economic boon that we are here. We’d see less entrepreneurship and less innovation and increase costs,” he explains. “We have a large number of manufacturers that offer a wide range of products to consumers, and that has helped keep costs down. Private enterprise is always faster than government bureaucracies.”Even with a free-market system, in the early days of legalization <a href="http://www.usatoday.com/story/news/nation/2014/08/12/colorado-marijuana-sales/13915859/">weed shortages </a>in Washington and Colorado led to increased prices (which strengthened the black market). Compound that with the fact that Ohio has more than twice the population of Colorado, and it’s difficult to imagine how only 10 facilities could meet the demand of consumers. This could be seen as evidence that Issue 3 is not a monopoly, since more licenses will be issued if demand is not met (and the original cultivators cannot persuade their neighbors to sell their land). On the other hand, the grow facilities James is proposing are far larger than anything seen in Colorado. ResponsibleOhio projects that there will be an estimated 300 employees per facility, which is astronomical when compared with Colorado commercial growers like Medicine Man, which operates one of the state’s largest cultivation centers—40,000 square feet—and needs only 32 employees to run it. James says that Ohio’s cultivation centers will be up to 300,000 square feet. The imagery of Smithsonian-size grow-houses and multibillion-dollar sales plays into the Big Cannabis narrative that marijuana prohibitionists (and now some legalizers) have rallied around. “The only way you make money in the addiction business is by promoting heavy use,” says Sabet. “And if that’s now the responsibility of a corporation of shareholders that want to see results, you’re going to see the targeting of kids to hook them early. In this business you don’t get heavy users if they start smoking at 21, you get them when they start younger.”The ResponsibleOhio campaign brought on such attacks when it unveiled its campaign mascot, Buddie, a 1950s style superhero who traveled around college campuses collecting signatures to get Issue 3 onto the ballot. “When my kid first saw it he asked me, ‘Dad, is he like Spiderman?’” says Tony Coder of the Drug Free Action Alliance, an Ohio educational group that opposes the commercial marijuana industry. “I thought Joe Camel was a thing of the past! It shows to me that they’re not in this for any kind of drug policy, it was a marketing move by people who are simply in it for the money.” James defends the Buddie mascot by explaining that he’s nothing more than a goofy character who was only interacting with adults. “Those prohibitionists, if they’re really worried about children, should be concerned about the drug dealer that sells kids drugs every day in Ohio,” he says. “They’re saying that kids are safer with moonshiners and gangsters than they are liquor stores.” Mascots aside, whether or not Issue 3 passes could have a monumental impact on how marijuana legalization campaigns are organized and funded in the future. In the prospectus given to potential investors in Issue 3, James boasts that “being on the front line of a projected $1+ billion annual sale potential is one thing. But being able to replicate this victory elsewhere places Principal Funders in a stronger position for [return on investment] in other ventures.”It isn’t difficult to imagine James using the ResponsibleOhio playbook in other states in 2016—which already is looking to be marijuana’s biggest election year yet. After all, it’s not like those benefiting from the arrangement have very strong ties to Ohio. In a forum on Issue 3 in Cincinnati, one owner of a future cultivation property <a href="http://www.cincinnati.com/story/news/2015/09/29/anne-answers-else-grow-crop/73052162/">admitted</a> that it was more than just 10 investors in ResponsibleOhio, but actually “there are hundreds of people who are involved,” she said. In an email with James, he said “approximately 20 of the investors are residents [of Ohio],” which echoes David Broder’s concerns that most ballot initiatives are funded by people who do not live in the state. Separate polls from <a href="http://nbc24.com/news/local/bgsu-poll-shows-marijuana-legalization-too-close-to-call-in-ohio?sslid=MzYzsTA1sTQws7AEAA&sseid=MzY0NDQ1MLU0AQA&jobid=747bef77-42f7-4347-88c5-d77ac3bdb29d">Bowling Green State University</a> and the <a href="http://www.ohio.com/news/break-news/university-of-akron-poll-shows-ohio-voters-are-evenly-divided-on-marijuana-issue-1.633823?sslid=MzYzsTA1sTQws7AEAA&sseid=MzY0NDAyMTMxAgA&jobid=caaf35b5-bb45-4a61-9a3a-adffaf25fcad">University of Akron</a> show an even split from voters on Issue 3. A <a href="http://www.wkyc.com/story/news/local/ohio/2015/04/06/new-poll-shows-ohio-majority-favors-legal-marijuana/25360277/">Quinnipiac Poll</a> from last February found that 84 percent of Ohio voters favored legalizing medical marijuana and 52 percent said they would vote in favor of legalizing recreational marijuana. It’s likely, however, that many of those legalization supporters have been turned off by Issue 3’s negative publicity. At the moment, it’s impossible to say whether the measure will pass.The passage of Issue 3 would make it all but inevitable that future efforts will feel some pressure from groups looking to secure a limited cultivation arrangement—which will likely lead to more splintering and infighting within the marijuana movement. No matter what happens, with recreational marijuana having already proved itself as an endeavor worthy of Big Business attention, it’s certain that we’re going to see large influxes of cash into future campaigns by investors looking for a stake in the coming green rush.