ACBG White Paper

Cannabis White Paper ACBG Policy and Market Research: January 2014

Authors Harley Lever, Washington Marijuana Businesses Chris Kelly, Chairman, Association of Cannabis Breeders and Growers Mike West, Cannabis Scientist and Expert www.acbg.org

CANNABIS WHITE PAPER 2

Table of Contents

CANNABIS INDUSTRY OVERVIEW 3

CANNABIS' THREE POWERFUL INDUSTRIES: COMPETING IN $11.5 TRILLION GLOBAL MARKETS 3 WA STATE CAN CREATE HUNDREDS OF THOUSANDS OF JOBS 4 CREATE CANNABIS ECONOMIC DEVELOPMENT COUNCIL (CEDC) 4 FORMATION OF HEMP, MEDICAL CANNABIS, AND RECREATIONAL CANNABIS SUB-‐COMMITTEES 5

INDUSTRIAL HEMP OVERVIEW 5

INDUSTRIAL HEMP INDUSTRY INSIGHTS 6 WASHINGTON STATE BENEFITS OF INDUSTRIAL HEMP PRODUCTION 6 SUPPORTS WSU RESEARCH & FACULTY AND BECOMES AS CONDUIT FOR BUSINESS DEVELOPMENT 6 STRONG ENVIRONMENTAL BENEFITS 6 REGULATE BY THE DEPARTMENT OF AGRICULTURE AND DEPARTMENT OF ENERGY 7

MEDICAL CANNABIS OVERVIEW 7

RECREATIONAL CANNABIS MARKET CANNOT SERVE MEDICAL CANNABIS MARKET 7 MEDICAL CANNABIS INDUSTRY INSIGHTS 8 SUPPORTS UW MEDICAL RESEARCH & FACULTY AND BECOMES AS CONDUIT FOR BUSINESS DEVELOPMENT 8 REGULATED BY THE DEPARTMENT OF HEALTH AND THE FDA 9

RECREATIONAL CANNABIS OVERVIEW 9

LET FREE MARKET DETERMINE THE WINNERS 9 SHORT-‐TERM BENEFITS TO FREE MARKET APPROACH 9 LONG-‐TERM BENEFITS TO FREE MARKET CAPITALISM APPROACH 10 OTHER MARKETS TO CONSIDER 10 CANNABIS NIGHT CLUBS, BARS, COFFEE SHOPS, AND RESTAURANTS 10 CANNABIS TOURISM 11 RECREATIONAL CANNABIS SHOULD BE REGULATED BY THE WSLCB, DEPARTMENT OF REVENUE, AND DEPARTMENT OF LICENSING 11

THE FUTURE AND NEXT STEPS FOR WA STATE 11

DEVELOP CANNABIS ECONOMIC DEVELOPMENT COUNCIL 11 DEVELOP PATHWAY TO LEGITIMACY 12 INCREASE PRODUCTION AND TAX REFORM 12 CONCLUSION: WA STATE, THE #1 LEADER IN CANNABIS INNOVATION 12


Cannabis Industry Overview Recognizing its unique position as one of the first to market in this global economy, Washington State has the unique ability to become the global hub, economic leader and center for cannabis innovation and legalized markets.

When we discuss the cannabis industry in Washington State, there are two overarching themes we must keep in mind:

1. Washington’s cannabis industry is comprised of 3 distinct segments and must be developed individually and governed distinctly:

• Industrial Hemp • Medical Cannabis • Recreational Cannabis

2. When we talk about the size of the cannabis market, we must solely think of the size in global market perspective.

We must act, as it is not a question of if cannabis will be legal, it is simply when. How the Washington State cannabis market is positioned and regulated will have trillion dollar implications for our state.

Cannabis’ Three Powerful Industries: Competing in $11.5 Trillion Global Markets Industrial Hemp, Medical Cannabis, and Recreational Cannabis combined will compete in global markets valued at over $11.5 trillion/year. Hemp alone competes in 10 distinct market segments, through 25,000 individual products, in industries valued at over $10 trillion/year. In several instances hemp is a better-‐suited crop, outperforming the current dominant crop/commodity in the specific industry for several metrics including: lower cost to produce, greater resistance to pests, higher yields/acre, and lesser environmental impacts.

The medical cannabis industry will see a rush of research and development money by pharmaceutical companies and biotechnology companies as they scramble to develop intellectual property rights and secure lucrative patents. In 2013, pharmaceutical and biotechnology Research and Development spending topped $136 billion in 2013 and revenues exceeded $300 billion and will rise to $400 billion in 3 years.

Finally, the recreational marijuana industry represents the smallest portion of the cannabis industry and has a total global value of $450 billion. However, Washington State has taken the approach of regulating industrial hemp and medical cannabis as if it were recreational cannabis, which is a mistake and will compromise the prosperity

In several instances hemp is a better-‐suited crop,

outperforming the current dominant crop/commodity in the specific industry for several metrics including:

lower cost to produce, greater resistance to pests,

higher yields/acre, and lesser environmental

impacts.


Washington is positioned for. In short, we are positioned for a global economic boom and if we develop these industries incorrectly we will squander this opportunity.

WA State Will Create Hundreds of Thousands of Jobs There have been numerous speculations about the number of jobs that will be created by the recreational cannabis industry. Without access to historical data, we must look at other industries for trends. There is no better industry to draw data from than the coffee industry. Like coffee, cannabis has a grower, processor and retailer system. When you look closer, the structures of the two industries are nearly identical. We can look at the coffee industry to tell us roughly how many employees/business type we will likely see. We turned to IBIS Global for the market information.

• Coffee Producers in the US are comprised of 270 businesses employing 11,982 people or 44 employees/business.

• Coffee Shops in the US are comprised of 40,144 businesses employing 562,954 people or 14 employees/business.

• Starbucks has 17,572 stores and employs 151,000 people averaging 8.5 employees/store.

Washington State has an opportunity to become the home of scores of companies who will be “global captains of the cannabis industry”, much like Boeing in the aerospace industry, but across the industrial hemp, medical cannabis, and recreational cannabis markets. Recreational cannabis alone has over 6,619 companies who want to start businesses here in Washington State.

If these businesses all open, WA State would see $8.2 million in license fees alone, 56,261 jobs, $256 million in sales tax and local sales taxes, $85 million in B.O. tax, $208 million in commercial property leases, and $1.18 billion in recreational marijuana taxes.

These figures do not take into account that Washington could easily dominate the $450 Billion global recreational cannabis market. When you consider Industrial Hemp and Medical Cannabis combined compete in markets 15 times larger than Recreational Cannabis, it becomes obvious Cannabis could change Washington State’s economic position positively for decades to come.

Create Cannabis Economic Development Council (CEDC) We strongly recommend the development of the Cannabis Economic Development Council comprised of business, government, academic, and healthcare stakeholders tasked with the development of the Hemp, Medical Cannabis, and Recreational Cannabis Markets. With the floodgates of the global hemp and cannabis industry about to open, Washington is uniquely positioned to benefit from being one of the first to market to compete in global markets likely to exceed $11.5 trillion per year. The immediate formation of a Cannabis Economic Development Council will ensure Washington businesses, educational institutions, local and state governments, as well as healthcare organizations can fully leverage this opportunity.

WA State would see $8.2 million in license fees

alone, 56,261 jobs, $256 million in sales tax, B.O.

tax, and local sales taxes, $250 million in

commercial property leases, and $1.29 billion in

recreational marijuana taxes.


The CEDC will act as a steering committee and proactively create a system which facilitates the development of cannabis-‐based innovations from our academic institutions and businesses, a business development platform to bring these innovations to market quickly, coupled with a common sense regulatory environment, with input and guidance from the department of Health for products requiring their input.

Formation of Hemp, Medical Cannabis, and Recreational Cannabis Sub-‐Committees The formation of Cannabis Economic Development Council will create a framework of innovation and business development in a manner that complies with a sensible regulatory framework and mitigates impacts to the health of our society. To be successful, we need to recognize the 3 distinct market segments and develop subcommittees comprised of the appropriate stakeholders.

The recommended Sub Committees and Stakeholders are as follows: Hemp Medical Cannabis Recreational Cannabis

Governing Agency

Dep. of Agriculture, Dep. Of Energy, FDA

Dep. Of Health WSLCB & Dep. Of Health, FDA

Business Industry

Agriculture, Energy, Textile,

Pharmaceutical, Biomedical, Holistic Medicines, Fred Hutchinson Medical Center, Amgen, etc.

Retail, Food, Restaurant & Night Club

Academic WSU Agriculture UW Medicine None

Industrial Hemp Overview Hemp is arguably the largest segment of the cannabis industry and will dwarf both the medical cannabis market and the recreational cannabis market combined. Industrial hemp is a strong competitor in markets with a total global annual production exceeding $10 Trillion Annually.

Industrial Hemp has an extremely low impact on the environment in part due to its ability to be grown in many environments, high carbon sequestration, low fertilizer and pesticide requirements, and the ability to balance soils while removing toxins.

The versatility of the plant combined with the ease and density of its growth, low production/input costs, natural resistance to pests, and positions hemp as a strong competitor in the 25,000 products in 10 vertical submarkets of which this commodity currently competes. Innovation will be a catalyst for explosive growth in these markets. In many cases, hemp is the absolute best choice from an economic and environmental perspective in these competing industries.

Industrial hemp is a strong competitor in markets with

a total global annual production exceeding $10

Trillion Annually.


Industrial Hemp Industry Insights Some estimate the global market for hemp consists of more than 25,000 products in 10

Submarkets valued at over $10 trillion:

• Agriculture -‐ $237 Billion Import/Export • Textiles -‐$578 Billion • Fuel -‐ $6 Trillion Global Market • Plastics -‐ $796 Billion • Automotive -‐ $29 Billion

• Furniture -‐ $86 Billion (US and China) • Food/nutrition/beverages -‐ $300 Billion • Paper -‐ $1.03.6 Trillion (Pulp + Cardboard) • Construction Materials -‐ $1.01 Trillion • Personal care -‐ $243 Billion

Washington State Benefits of Industrial Hemp Production Washington State is positioned to become a worldwide leader in hemp production. The hemp crop provides communities of Eastern Washington the largest opportunity as the area most proven to be a powerhouse of agricultural production. Hemp as a product will be the most competitive commodity throughout WA State due to enumerable applications and markets it can compete.

Fortuitously, hemp is less susceptible to market fluctuations due to its diversification of the industries. The abundance of markets, low production cost, durability, and few pests position the crop to need few if any government subsidies or crop insurance to support it, something no other commodity can boast. Best of all, due to the lack of the psychoactive ingredient THC, eastern Washington can welcome hemp farming with open arms without compromising their value system, which admittedly has been somewhat to resistant to recreational cannabis.

Supports WSU Research & Faculty and Becomes as Conduit for Business Development WSU is uniquely positioned to be a worldwide leader of research and development for cannabis production as well as be the academic thought leaders for the cannabis plant industry. As a leading agricultural school in our country, the academic and facilities foundation for cannabis research and development is already in place. All is needed is the vision and initiative realize the tremendous academic opportunity before us which has multi-‐generational implications into the schools future. Becoming an early adopter of cannabis research and development will position the school to be a world-‐wide leader of cannabis research, facts which are strongly beneficial to WSU students, faculty members, local businesses which can leverage and bring these innovations to market, as well as our state as a whole from a budgetary and employment perspective.

Strong Environmental Benefits Hemp has proven to be an environmental asset on several fronts. Hemp is carbon neutral and can be used to sequester carbon, absorbing four times the amount of carbon as trees. Hemp is relatively easy to grow and can be grown without the use of salmon-‐killing herbicides, pesticides, and fungicides. Hemp can also be used as a “mop crop” which can be used to remove toxins from soils as well as reduce human and animal waste from entering our waters helping mitigate nitrogen-‐induced “dead zones” which have devastated our states’ waters and threatened our fishing

Hemp is carbon neutral and can be used to sequester carbon,

absorbing 4 times the amount of carbon as trees.


industries.

Hemp will lessen and perhaps reverse deforestation, which increases the likelihood of property-‐destroying landslides that has cost our state millions. Hemp is also an efficient and affordable tool used to mitigate many of the environmental impacts caused by the production of other commodities.

Regulate by the Department of Agriculture and Department of Energy The Department of Agriculture and the Department of Energy are the most appropriate government bodies to regulate the hemp industry. Due to the lack of THC in hemp, hemp lies well outside the scope and mission of the WA State Liquor Control Board (WSLCB). The agency simply is not positioned, nor should be given tasks to develop or regulate an industry so far outside the agencies core competencies. The Departments of Agriculture and Education are agencies both well suited to manage these issues, and possess the core competencies needed to create and administer the appropriate regulations for the hemp industries.

Medical Cannabis Overview From an economic perspective, medical cannabis is positioned to receive heavy investment from the biomedical and pharmaceutical industries as the race to develop patentable intellectual property ignites. An abundance of science shows the unique potential of the cannabis plant to produce patentable research and global revenues easily nearing a trillion dollars and profits into the hundreds of millions. It should be noted, however, the US is currently at a distinct disadvantage as China has filed over 6,000 cannabis-‐related patents. Washington State is uniquely positioned to become the home to the next Pfizer, Merck & Co. or Amgen of cannabis. If leveraged properly, our state will attract hundreds of medical companies, tens of thousands of high-‐paying pharmaceutical jobs, and be the home to scores of “Captains of Global Industries” for decades to come.

Much of the focus around medical cannabis is targeted at Cannabinoids including CBG, CBD, CBA, and terpenes, active agents other than THC. While THC can be used to treat certain medical conditions, it is not the primary focus and should not be confused nor merged with the recreational market. Scientific research supports the efficacy of the unique CBD compounds found within cannabis.

PubMed, the leading medical publications database, cites cannabis in over 17,000 citations and scores of peer-‐reviewed medical studies on our own federal governments’ National Institute of Health website, NIH.gov. The science behind medical cannabis shows these compounds help with the treatment of cancer, Dravet’s syndrome, epilepsy, glaucoma, PTSD, nausea, and other diseases and conditions plaguing our society.

Recreational Cannabis Market Cannot Serve Medical Cannabis Market The recreational cannabis market cannot serve or support the medical cannabis market due to lack of economic incentive, a lack of support by academic institutions, and the lack of a supportive pharmaceutical or biomedical industry interested in developing the recreational cannabis industry. The

Washington State is uniquely positioned to

become the home to the next Pfizer, Merck & Co. or

Amgen of cannabis.


recreational cannabis market serves a market segment that is focused in large part on the levels of THC. There is little to no economic incentive for growers in the recreational market to develop strains low in THC and high in CBD. In addition, there are no academic institutions that would be motivated to develop a research and development program based on THC. The same holds true for the pharmaceutical and/or biomedical industry.

When the WSLCB attempts to raise prices and limit personal production, those who suffer are ultimately the patients, already with a disproportionate tax burden and healthcare costs. The freedom to choose their pathway to medical relief should be allowed and researched. Yet insurance paradigms and legal hurdles force some patients to go to a severely constrained, high-‐priced, and psychoactive alternative. These patients are denied the access to the medical cannabis strains they seek at a cost extremely prohibitive and counterproductive when considering the amount many of these patients consume.

For the above reasons, medical cannabis must be treated and regulated as a completely separate industry. Not treating this as a separate industry will hurt medical cannabis patients, severely hamper the proper development of an industry that competes in a $550 Billion US market, and deny Washingtonians high-‐paying jobs, the development of global companies, and diminish large tax revenues that come with the birth of a new industry.

Medical Cannabis Industry Insights The Medical Cannabis Industry shows great promise in the treatment of cancer, neurological disorders, as well as mood disorders. Hundreds of peer-‐reviewed scholarly papers support these findings as well as thousands of documented cases of the beneficial effects of cannabis when fighting these diseases.

Antiquated federal government policies have created a global repression of Cannabis-‐based medicines. Once these federal policies are removed, there will be a rush by pharmaceutical and biomedical companies to develop and secure intellectual property and patents. Washington State is positioned to be the biggest winner as we have the one of the leading medical schools in the country, a strong biomedical industry, and a leading cancer research organization with tremendous talent established within the state.

• Pharmaceutical Industry -‐ $962 Billion Global Market and to reach $400 Billion in US in 3 years • Cancer Treatment -‐ $125 Billion and to reach $158 Billion in 2020. (National Institute of Health)

Supports UW Medical Research & Faculty and Becomes as Conduit for Business Development University of Washington is one of our countries best research and development medical schools and is positioned to be at the forefront of medical cannabis research. The school currently produces some of the best minds supplying our thriving cancer research institutions, biomedical companies, and hospitals with some of the world’s leading talent. These facts position UW Medical as one of the leading beneficiaries of the Medical Cannabis Industry. UW Medical students and faculty members will benefit greatly from these new programs and new line of research. When federal regulations are removed, research grants in the hundreds of millions will likely flood the market and University of Washington is positioned to benefit greatly from this.

Antiquated federal government policies have

created a global repression of Cannabis-‐based

medicines.


Regulated by the Department of Health and the FDA Medical Cannabis Pharmaceutical Industry and Biomedical Industry should be regulated by the Department of Health, and when Federal Government becomes correctly positioned, the FDA. Holistic cannabis use as a dietary supplement should not be regulated any different than other food.

Recreational Cannabis Overview The Recreational Cannabis Market has already proven to be a windfall for Washington State and has completely shattered the most conservative of estimates. Currently 6,619 businesses have applied for applications to grow recreational cannabis. RAND Corporations has quintupled their early estimates of the recreational cannabis markets from 40 metric tons to upwards of 225 metric tons for Washington State alone. Despite the overwhelming evidence, the WSLCB has chosen to limit the production of legal recreational cannabis to 40 tons, leaving criminal enterprises to fill the gap. The WSLCB has taken further action to step out of the role they were tasked with, and go after the fledgling medical cannabis market, which will hurt legitimate business owners, and further help illegal black market enterprises. This approach simply creates another war on drugs, perpetuating the black market and likely force a portion of the 6,619 legitimate businesses into the black market to compete directly with very expensive state recreational cannabis market.

While we recognize the Federal Government is concerned about legitimate and taxed recreational cannabis going into other states, this begs a question; who loses if this does happen? Every gram of legal and taxed recreational cannabis replaces a gram produced by illegal black market enterprises. Furthermore, the only deaths caused by recreational cannabis are those attributed to illegal activities and the Federal Governments approach is both unfounded and most importantly, deadly. Recreational Cannabis Growers look forward to completely stomping out the black market, keeping our streets and children safe, and contributing to the overall well-‐being of our state and country.

Let Free Market Determine the Winners The over-‐regulation and missteps by the WSLCB will cost our states billions in lost tax revenues, $208 million in lost commercial real estate leases, and hundreds of millions to other industries including marketing, packaging, tradesmen, and our utilities. The WSLCB overstep in authority also risks severely disabling the Industrial Hemp and Medical Cannabis Industry as these are two industries in which this agency has no core competencies to regulate as they lie far outside their own industry. Free market capitalism will allow all these businesses a chance to compete and will be a huge boost to our state’s economy both in the short-‐term and long-‐term.

Short-‐term Benefits to Free Market Approach The short-‐term benefits to the free market capital approach are many. When looking at the numbers remember these are the state market only and for recreational cannabis only.

The WSLCB has taken further action to step out

of the role they were tasked with, and go after

the fledgling medical cannabis market, which

will hurt legitimate business owners, and

further help illegal black market enterprises.


• State licensing fees alone would generate $8,273,750.00 million (1) • 56,261 jobs would be created (2) • Development of full market estimate 225 metric tons would create

$2.69 Billion/year in revenue(3) • State would receive $1.18 Billion/year in Cannabis tax revenues. (4) • State Sales Taxes would exceed $175.5 Million/year in tax revenues (5) • Local governments would receive $80 Million/year in tax revenues (6) • Business and Opportunity Tax would be $85 Million (7,8,9) • Commercial real estate leases would be $208 Million/year (10)

Long-‐term Benefits to Free Market Capitalism Approach When the federal government repeals cannabis prohibition, Washington State will be positioned to be a World Wide leader and producer of Recreational Cannabis. Conservative estimates of the world market for recreational cannabis are $450 Billion. As a state we provide 75% of the United State Hops market 30% of the world’s hops market, and recreational cannabis can be the same. We are well positioned to be the global producer of recreational cannabis, the economy will forever be changed by the influx of new revenue. With proper planning, Washington State could easily produce a significant percentage of the global market and take in billions more in tax revenues.

Allowing the 6619 companies to compete, become stronger, and acquire market share is key to securing our economic future. The fact of the matter is Washington is a leader among several other states on the verge of legalization; the question becomes whether we will continue to strangle the industry and lose this opportunity, or will we allow sensible regulation, free market capitalism, and leverage the academic, entrepreneurship, and infrastructure which already contributes to our states success to flourish.

This reality will be one of the largest economic booms in our states history.

Other Markets to Consider

Cannabis Night Clubs, Bars, Coffee Shops, and Restaurants Recreational cannabis can be consumed safely and without negatively affecting others. Consumption through edibles, oil-‐based pens, and vaporizing systems allows for the consumption of cannabis without producing smoking-‐related particulates. In addition, cannabis can be used as a flavoring agent and its leaves can be juiced to produce vitamin-‐rich drinks.

Allowing cannabis to be consumed in these areas will meet market demand and support and entire new sector in the restaurant and nightclub industry. The WSLCB is well positioned to be able to regulate this industry and there are no viable reasons why cannabis should be treated any different than alcohol.

This new segment of the food and entertainment will be a huge asset to Washington State’s thriving food scene. As a state we currently produce some of the best seafood, locally sourced and organic produce and meats, some of the best wines, craft beers, and spirits, and have world-‐class chefs to highlight the bounty of our state. Cannabis is just another ingredient to our states pallet. There have already been several chefs interested in producing cannabis-‐paired dinners and restaurant concepts. Allowing the culinary

Conservative estimates of the world market for

recreational cannabis are $450 Billion.


innovators to produce these creations will make Washington as worldwide food destination and one of the only places to experience cannabis cuisine.

Cannabis Tourism Tourism is the world’s largest industry and cannabis tourism has already proven to be huge business for Colorado. Washington State is positioned to be the leader in cannabis tourism and could drive hundreds of millions of dollars to our state’s hotels, restaurant, gift shops, and tourist sites. Cannabis tours, cannabis dinner cruises, and restaurants providing cannabis dinners offer a unique experience where only 2 other places in the world can offer.

The economic impact from cannabis tourism and the jobs it creates is solely dependent on how we handle this opportunity. While we are positioned to succeed, we can easily squander this opportunity through regulatory missteps and political miscalculations.

Recreational Cannabis Should be Regulated by the WSLCB, Department of Revenue, and Department of Licensing Due to the presence of THC in recreational cannabis, we feel the WSLCB is positioned to regulate this segment of the Cannabis industry. However, we reject the proven failed approach the WSLCB has taken. Washington voters had already stripped the WSLCB of its power to be the sole source of alcohol in large part due to the agency’s inability to run the liquor industry efficiently or prosperously. Since stripping the liquor board of its power, Washington State has seen the development of hundreds of new businesses and thousands of jobs. We feel cannabis should not be treated any differently than beer, wine or spirits and can be responsibly grown, processed, and sold much in the same way of alcohol or coffee.

The Future and Next Steps for WA State Develop Cannabis Economic Development Council As stated earlier, the development of the Cannabis Economic Development Council will lay the groundwork to properly regulate and grow the cannabis industry insuring all stakeholders a voice in the development of this prosperous industry. Treating the industry to a one-‐size fits all mentality and having the WSLCB be in charge of developing this industry puts an unfair burden on the agency itself and squanders the opportunity Washington voter have handed us.

The formation of the CEDC will not only ensure we develop these industries properly, but it will insure the full realization of prosperity which industrial hemp, medical cannabis and recreational cannabis provide.

…The question becomes whether we will continue to strangle the industry

and lose this opportunity, or will we allow sensible regulation, free market capitalism, and leverage

the academic, entrepreneurship, and infrastructure which

already contributes to our states success to flourish.


Develop Pathway to Legitimacy Prohibition has caused the development of a black market that has thrived devoid of regulation and sound business practices while creating an environment of crime. Developing a pathway to legitimacy and providing business counseling, legal counseling and regulatory guidance will help facilitate the end of the black market and turn the individuals into legitimate business owners.

We believe the Pathway to Legitimacy provides a win-‐win scenario to all stakeholders and is the proper way of handling the challenges facing closing the black market while reducing cost to the government. Providing the individuals with the business skill set, a clear pathway to legitimate business development, and the legal and regulatory advice is a model in which other states in the future can follow.

Increase Production and Tax Reform WSLCB has set the production cap to 25% of their original estimate of 40 metric tons or 3 – 8% of the estimated market. It should be pointed out the state’s own consultants recently revised their estimates up by 600% to 225 Metric tons. Colorado is already predicting they will run out of recreational cannabis. This approach leaves the black market to make up the 92 – 97%. This is a grave mistake that will cost lives as the agency leaves the production to drug gangs and criminal enterprises.

The agency first goal should be to wipe out the black market. This can be done through increased production and less burdensome tax structure.

The agencies current approach will skyrocket recreational cannabis market to 2 – 3 times the prices of the black market. We have seen this already happening in Colorado where prices have doubled to cost of black market prices and they only have a 25% tax and not the 75% we have in Washington State. The only winners in this scenario are drug gangs and criminal enterprises.

We believe by increasing the production to the full 100% of the estimated value and decreasing the taxes to 25% will kill the black market and give Washington State more tax revenue and less criminal costs and create a win-‐win scenario for all stakeholders. Until then, the black market will thrive, legitimate recreational cannabis businesses will perish, and the entire industry as a whole is in jeopardy of collapse.

Conclusion: WA State, the Leader in Cannabis Innovation WA State is on the cusp of an incredible economic success story. Sadly, WA State and the WSLCB could stand in the way, producing propaganda-‐fueled legislation, managing with illogical oversight, and halting the profit potential of this incredible opportunity.

As elected leaders mull the issues, one should ask oneself:

• Does Washington State Highways and Infrastructure deserve repair? YES!

• Do the children of Washington State deserve secure and cutting-‐edge schools? YES!

The agency first goal should be to wipe out the black market. This can be done through increased

production and less burdensome tax structure.

Do we have enough money in the State Treasury to fund an endowment for

future generations, like the wildly successful Alaska

Permanent Fund?

The answer is YES, if we choose Cannabis Progress.


• Do we have enough money in the State Treasury to fund an endowment for future generations, like the wildly successful Alaska Permanent Fund?

THE ANSWER IS

YES, IF WE CHOOSE CANNABIS PROGRESS.

That potential is what will define WA State for centuries to come. The environmental solutions possible from pioneering industrial hemp innovation should be impetus alone for our legislators to act now on its momentum within this free marketplace.

We must expand our current concepts of barriers, and instead imagine the potential for how far this new state industry can truly help WA State safely prosper for centuries to come. WA State is and should retain its rightful title as the U.S. #1 Leader in Cannabis Innovation.

Assumptions 1. State Application Fee of $250 X 6619 applicants. State License Fee of $1000 X 6619 applicants = $8,273,750.00 2. Coffee has an identical grower, produce, and retailer model as cannabis. Starbucks Coffee averages 8.5 employees for every store.

Based on the 8.5 employee average multiplied by the 6619 stores = 56261 employees for the Recreational Cannabis Market. 3. RAND Corporation estimated the recreational cannabis market to be up to 225 Metric Tons. Washington State created a targeted retail

gram cost of $12/gram. 225 million grams X $12 = $2.7 Billion. 4. 225 Metric tons X .25 X (Washington State assumes $3.00/gram producer, $6/gram for processor, and $12/gram for retail) Producer

tax generation = $168 Million. Processor tax Generation = $337.5 Million. Retailer Tax = $675 Million. Total = $1.18 Billion in Cannabis Tax.

5. $2.7 Billion X .065 (States Sales Tax Rate) = $175.5 Million in State Taxes 6. $2.7 Billion X .03 (Assumed Sales Local Tax rate) -‐ $81 Million in Local Sales Taxes 7. BO Tax for Retailers $2.7 Billion X .018 = $48.6 million 8. BO Tax for Processors $1.35 Billion X .018 = $24.3 million 9. BO Tax for Grower $675 Million X .018 = $12.15 million 10. Commercial leases for growers: 11.25 million sqft. to grow 225 metric tons. Current industrial lease averages $6.25/sqft. =$70.3

Million in industrial leases. 11. Commercial leases for processors: 1918 processor applicants averaging 3000 sqft. of leased space at $11.75/sqft. = $67.6 Million in

Commercial leases. 12. Commercial leases for retailers: 2035 retail applicants averaging 2000 sqft. of leased space at $17.25/sqft. = $70.2 million in

Commercial leases.

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content/uploads/2013/07/RevisedJan12_GlobalOilSeedGrainTrade_2011.pdf RAND Corp: Est. Cannabis Market of 225 Metric Tons http://www.rand.org/pubs/research_reports/RR466.html I 502 Financial Assumptions http://lcb.wa.gov/marijuana/faqs_i-‐502 Nutrition Business Journal http://newhope360.com/site-‐files/newhope360.com/files/uploads/2013/04/TOC_Global_final.pdf Global Plastics Industry http://www.ibisworld.com/industry/global/global-‐plastic-‐product-‐packaging-‐manufacturing.html Global Textile Manufacturing http://www.ibisworld.com/industry/global/global-‐apparel-‐manufacturing.html Global Personal Care http://www.ibisworld.com/industry/global/global-‐cosmetics-‐manufacturing.html Global Cardboard http://www.ibisworld.com/industry/global/global-‐cardboard-‐box-‐container-‐manufacturing.html Global Paper Pulp http://www.ibisworld.com/industry/global/global-‐paper-‐pulp-‐mills.html


Global Construction Material http://www.reuters.com/article/2013/01/03/research-‐and-‐markets-‐idUSnBw6b29Tka+104+BSW20130103 US Office Furniture Manufacturing http://www.ibisworld.com/industry/default.aspx?indid=870 China Wood Furniture Manufacturing http://www.ibisworld.com/industry/china/wood-‐furniture-‐manufacturing.html

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