High Hopes and Blunt Truths for the $2.3 Billion Legal Marijuana Market

"The first week of sales in Colorado has been a resounding success from a business perspective," McGrath says. "But, because the business is so highly regulated on a state level and the threat of federal as well as state prosecution for violation remains, potential investors will want to take a long, hard look at the operations and the people involved in any investment opportunity."

No more regulated than alcohol
Although it's now legal to buy, hold and smoke pot recreationally in Colorado, it remains illegal to smoke it in public -- even where lighting up a cigarette is okay -- or to drive a car while high. It is also illegal to take pot purchased in Colorado across state lines. And only licensed dispensaries may sell the drug. Person-to-person selling is not allowed, nor is dealing to customers under the age of 21.

"There's somehow this notion that we can legalize it and eliminate the black market at the same time that we can control it and keep it small," Miron says scornfully.

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Anecdotal evidence suggests that increased access to the drug leads to increased demand. It would be naïve to think that people won't still attempt unlicensed grow operations in the hopes of profiting from a cash crop. On Jan. 4, sheriffs in Kiowa County, Colo. arrested two people after discovering a house filled with more than 1,000 plants. The sheriff's office has reportedly asked the federal Drug Enforcement Agency for help with the case.

It will take a lot for legal marijuana to win over law enforcement officials. "The industry needs to prove itself to be transparent, competent and dedicated to compliance with the laws," McGrath says. "If that happens, and that experience is replicated in other states, it would be difficult for a future administration to kill the market."

Even so, Miron recommends caution. "It's still a long way from actually being a legal product. There's all this extra silly regulation that may keep the market a gray area, underground. So while this is an important step because it brings attention to the issue, because it shows that nothing catastrophic will happen if you legalize marijuana, we're still a long way from the goal line."

"At minimum, it should be no more regulated than alcohol," Miron says. "No more than alcohol, tobacco, toaster ovens or Starbucks coffee. It should just be legal, period."

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Brian Patrick Eha is a freelance journalist and former assistant editor at Entrepreneur.com. He is writing a book about the global phenomenon of Bitcoin for Portfolio, an imprint of Penguin Random House. It will be published in 2015.

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