Lessons from California: Licensing and Compliance Issues

New Frontier Data/February 19, 2018/J.J. McCoy

In this article we recognize the haphazard dance between state regulators and their would-be suitors for licensure and legal compliance.

“Given how massive a task it was to transition this market into facilitating adult use with a fully regulated and licensed medical market, I am pretty impressed with how smoothly things have gone overall,” said Khurshid Khoja, founder and principal of Greenbridge Corporate Counsel in Sacramento.

Disconnect between local and state licensing

Before the end of January, the state’s regulatory California Bureau of Cannabis Control (BCC) reported issuing about 800 licenses, while its Department of Food and Agriculture overseeing cultivation had issued around 700, and the Department of Public Health overseeing manufacturing had issued 455.

Currently, licensees have a free, four-month permit to operate while they hope to receive a state license. The trouble, however, is that for operators to be granted a temporary license, they first need to have a local license, and respective jurisdictions have been varying considerably in terms of their efficiency. Most notably, in Los Angeles “the regulators seem completely underwater,” according to Khoja. “Even state licensing agencies cannot get answers.”

Unforeseen disruptions to established business practices

Prior to the market’s opening, many operators did not anticipate issues with specific regulations. For example, established practices in the medical market allowed producers to provide free samples for dispensaries to test before offering on their shelves, or for dispensaries to provide to indigent medical cannabis patients. Now, Khoja notes, “operators are still figuring out who collects the taxes, how they get transferred, and whether the retailer also has to pay the excise tax for giving an indigent patient that free sample.”

Balancing small or medium operators against big players

The California Growers Association (CGA), representing about 900 cannabis cultivators statewide, argues that Proposition 64 was passed with intent to support small and medium-sized cannabis businesses.

Yet, the CGA claims in a lawsuit, a loophole in the regulations has allowed large farming operations to jump into the space. About 250 cannabis operators have been awarded small cultivation licenses (with 1-acre caps for growing space), yet 10 of those businesses control approximately 30% of all the licenses awarded. Two such cultivators — Honeydew Farms and Central Coast Farmer’s Market Management — have been awarded about 30 licenses apiece.

The contention, Khoja explains, is whether each licensee is limited to a total of 1 acre of cultivation, period, or that companies can obtain small and/or cottage licenses which can be stacked for an extensive canopy in overall terms of cultivation throughout the space.


“We went from zero to 60 [mph] in terms of regulations that people had to comply with,” Khoja said. “Lori Ajax (chief of the state’s Bureau of Medical Marijuana Regulation) said ‘we won’t bust people for being noncompliant before they can even get compliant,’ and [they] know it’s their job not just to regulate the legal market, but to help eliminate the illicit market. That serves the public, the industry, and the taxing authorities alike. It’s not an easy mandate, but they are aware of it, and that’s half the battle.”

Berkeley Declares It’s a Sanctuary City for Marijuana Users

Associated Press/February 16, 2018

BERKELEY, Calif. (AP) — Berkeley has declared itself a sanctuary city for marijuana users, a largely symbolic move that cements a policy prohibiting city employees from assisting federal officials in the enforcement of federal marijuana laws.

The Berkeley City Council voted unanimously Tuesday in favor of the resolution proposed by Mayor Jesse Arreguin and two city councilmembers.

“I believe we can balance public safety and resisting the Trump administration,” Arreguin said.

In a tweet after the vote, Arreguin said the move was a direct response to U.S. Attorney General Jeff Sessions’ “misguided crackdown on our democratic decision to legalize recreational cannabis.”

Sessions said last month it would be up to U.S. prosecutors in states where pot is legal to decide which marijuana cases they pursue. And while federal prosecutors have not acted against legal marijuana businesses, several states are considering so-called sanctuary status to protect them.

The measure in the famously liberal city does not prevent local officials from assisting federal agents in other drug-related crimes, Arreguin said.

Californians voted in November 2016 to legalize recreational marijuana and abolish a host of pot-related crimes, but using or possessing marijuana remains illegal under federal law.

California, Alaska, Massachusetts and Washington are considering bills that would bar using state resources in any federal efforts against businesses that are in compliance with state marijuana states.

LA licensing fees for marijuana businesses exceeding expectations

Los Angeles Daily News/February 16, 2018

LOS ANGELES >> The city of Los Angeles has issued a total of 101 temporary authorizations to marijuana businesses since the drug became legal for recreational use and sales in the beginning of January, a Los Angeles City Council committee was told Friday.

Cat Packer, head of the city’s Department of Cannabis Regulation, also told the Rules, Elections, and Intergovernmental Relations Committee that her office has so far taken in far more revenue than was anticipated.

“Originally the department was given a budget of $1.3 million, and to date we have collected over $2.2 million in licensing fees, and we have around about $800,000 in outstanding invoices, so it is likely that our revenue projections through June will be $3.5 million,” Packer said.

California voters approved the legalization of recreational marijuana in 2016, effective Jan. 1 of this year. In March 2017, Los Angeles voters approved Measure M, which set up regulatory measures for the cannabis industry, which could generate more than $100 million annually in revenue through licensing fees, sales taxes and other sources for a city with a budget that topped $9 billion last fiscal year.

The committee’s meeting focused on several outstanding issues that were not completed when the City Council approved several new ordinances in late 2017 to regulate recreational marijuana, including potential restrictions on advertising.

A proposed ordinance, forwarded by the committee to the full council for consideration, would prohibit marijuana advertising within 800 feet of sensitive locations such as schools, limit a cannabis business to one on-site sign that has a maximum size of 75 square feet, and prohibit portable signs or sandwich signs located in the public right-of-way.

The committee also approved a motion that explores expanding the city’s social equity program into parts of the San Fernando Valley. The program aims to help people convicted of some low-level marijuana-related crimes and residents in some low-income communities impacted by the war on drugs to open a cannabis-related business.

The committee also approved a report about on-site cannabis consumption. Currently, California law allows for on-site consumption of cannabis at businesses, but only if the local jurisdiction specifically allows it.

The City Council did not allow for on-site consumption in the ordinances it approved last year, but is exploring the option. The committee approved a city staff report that detailed the rules in place for jurisdictions that do allow on-site consumption or are in the process of allowing it, including San Francisco, Oakland, West Hollywood, although the report did not contain any recommendations or potential rules for Los Angeles.

Marijuana Business Leaders Sue Sessions Over Schedule I Designation

Small Business trends/February 17, 2018/Annie Pilon

Business leaders from the legal cannabis industry have filed a lawsuit against U.S. Attorney General Jeff Sessions in an effort to reverse the decision to have cannabis classified as a Schedule 1 controlled substance.

Cannabis Schedule 1 Lawsuit

The lawsuit, which was originally filed over the summer, aims to prove that this classification is unconstitutional in an effort to get cannabis descheduled. This move would allow states to set and enforce their own laws in regards to cannabis without fear of the federal government getting involved. This week, the court heard the Justice Department’s motion to dismiss the case. However, attorneys for the plaintiffs are optimistic they’ll be able to continue presenting their case.

One of the lead attorneys, Lauren Rudick, recently spoke with Small Business Trends in a phone interview to explain a bit about the case and how it could impact businesses in the cannabis industry.

She explained, “We’re arguing that the classification of cannabis as a Schedule 1 substance under the Controlled Substances Act is unconstitutional on a number of fronts.”

That includes arguing that the classification violates the equal protection clause, freedom of speech and the right to seek medical treatment, among others. Currently, attorneys are arguing the constitutionality of the classification on all of these fronts. However, Rudick notes that a partial appeal would not be an option in this case. So if, for instance, the judge rules they can only argue it’s unconstitutional based on the equal protection clause but not freedom of speech or other areas, the team will have to continue its argument using only that part of the law.

The ultimate goal is to get cannabis descheduled, which would leave the legality of marijuana use and sales up to the states. Currently, the federal government does not recognize the legality of marijuana even where states have voted to legalize. So many believe that a ruling to deschedule the substance would lead to more potential for investors and outside support, as well as the possibility for innovations in medical research.

If the judge at some point rules against the plaintiffs in all of their arguments, Rudick says they would appeal. However, in the meantime, such a ruling wouldn’t lead to any tangible negative changes for cannabis businesses. They could continue to operate in states where medical marijuana or recreational marijuana have been legalized, but without the backing of the federal government.

Rudick says, “For businesses, it wouldn’t necessarily lead to any changes from how things currently are.”

The case has been granted expedited status. So Rudick is optimistic there will be some kind of resolution in the near future, though the actual timetable will depend on whether or not appeals are needed.

She also stressed the importance of cannabis businesses advocating for change and staying up-to-date with the ever-changing regulations and landscape of the industry.

Rudick adds, “If you’re in this industry, you’re also in the industry of being an advocate. So it’s important for small businesses whose futures depend on legalization to stay abreast of the changes in laws and the regulatory landscape.”

Will Massachusetts be the first state to allow social marijuana use?

Associated Press/February 19, 2018/Bob Salsberg

BOSTON — Could Massachusetts become the first U.S. state where adults can gather and use legal recreational marijuana at so-called “cannabis cafes?”

The Cannabis Control Commission, the five-member panel set up to regulate the state’s marijuana industry, is expected to decide later this month whether to approve draft regulations that would allow for the licensing of social consumption establishments.

The idea has received strong opposition from Republican Gov. Charlie Baker’s administration and from law enforcement officials who warn of public safety and public health risks if such facilities were to open.

Baker has suggested the Commission at the very least hold off on licensing social operations until after the commercial pot industry is up and running later this year.

Some questions and answers about the controversy:


Simply put, it would be a place (other than a private residence) where adults could gather to buy and use marijuana legally.

While the voter-approved law legalized the sale and possession of recreational marijuana, it remains illegal to use pot in public places. That’s why any social consumption sites would have to be licensed by Massachusetts and adhere to guidelines.

Under the proposed regulations, the locations could not serve alcohol and must have rules to keep marijuana away from minors. They must also have a plan for transporting intoxicated patrons home safely.


The Cannabis Control Commission’s draft regulations propose two types of social consumption licenses.

A primary use license would be required of any business that would derive more than half of its business from the sale of marijuana products. The term “cannabis cafe” is sometimes used to describe such an establishment: Think a coffee shop but one where you would order weed instead of a fresh brew.

Still unresolved, though, is whether smoking could be allowed at such establishments.

A mixed use license would be for a business that wants to sell marijuana as a sideline to its principle business.

Examples could include restaurants wishing to add a marijuana-infused dish to its menu, movie theaters and even yoga studios.


Baker argues that marijuana regulators already have their hands full in implementing the recreational pot law and should be focused on the licensing of retail pot shops and cultivation facilities by July 1.

Any of the more exotic, specialty licenses can wait until later, he contends.

“People should crawl before they walk and walk before they run,” Baker told reporters last week.

Democratic House Speaker Robert DeLeo echoed the governor’s sentiments, but stopped well short of suggesting the

Legislature would step in to prevent social consumption sites from opening.

Law enforcement officials, including the Massachusetts Association of District Attorneys, argue that social consumption sites would inevitably lead to more stoned drivers on the road and increase the chances of theft and diversion of the drug to the black market.


Proponents of cannabis cafes contend there is nothing extraordinary about the concept.

“Social sites will simply give cannabis users the same options available to alcohol users — and I have not heard Baker or DeLeo issue similar criticisms of those establishments,” said Jim Borghesani, spokesman for the Massachusetts chapter of the Marijuana Policy Project.

Shaleen Title, an associate commissioner of the CCC, argued that such establishments would provide options for people who would rather not bring marijuana home because they have children, or non-approving family members or roommates.


Social consumption has been a matter of discussion in nearly every U.S. state that has legalized recreational marijuana, but the proposed regulations in Massachusetts would go further than what any state has allowed so far.

In 2016, voters in Denver approved clubs where marijuana can be consumed on the premises. But a major difference is that such clubs — if and when they open — could not legally sell marijuana. Patrons would have to bring their own pot.

To find a global model for cannabis cafes, try Amsterdam, which has dozens of legal “coffeeshops” where patrons can buy and use marijuana.

California’s Plan for Changes in Federal CBD Law

Canna Law Group/January 27, 2018/Alison Malsbury

Earlier this month, the California Legislature introduced Assembly Bill 710, which will amend certain sections of the Business and Professions Code and the Health and Safety Code to account for any future changes in federal law regarding cannabidiol (CBD). The purpose of this bill is to ensure that patients are able to obtain access to CBD as a medical treatment as soon as federal law makes it available.

Under existing California state law, and pursuant to the California Uniform Controlled Substances Act, controlled substances are placed into one of five designated schedules, with the most restrictive limitations placed on controlled substances in Schedule I, and the least restrictive limitations placed on controlled substances in Schedule V. Cannabis, despite the passage of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), is still on Schedule I in California. Because CBD is a compound contained in cannabis, it is likewise designated as Schedule I.

Because of this designation, the prescription, furnishing, possession, sale, and use of CBD is restricted by existing law. AB 710 would, if one of certain specified changes in federal law regarding CBD occurs, deem a physician, pharmacist, or other authorized healing arts licensee who prescribes, furnishes, or dispenses a product composed of CBD in accordance with federal law, to be in compliance with state law governing those acts. And upon the effective date of a change in federal law regarding CBD, the prescription, furnishing, dispensing, transfer, transportation, possession, or use of CBD products in accordance with federal law would be for a legitimate medical purpose, and therefore authorized pursuant to state law.

Currently, the cultivation, processing, and sale of medicinal and adult-use cannabis in California, including CBD, is regulated by the MAUCRSA. AB 710 would expressly exclude from regulation under the MAUCRSA any medicinal product composed of CBD that has been approved by the federal Food and Drug Administration (FDA) and either placed on a schedule of the federal Controlled Substances Act (CSA) other than Schedule I, or exempted from one or more provisions of the MAUCRSA.

AB 710 is short and sweet:

SECTION 1. The Legislature finds and declares that both children and adults with epilepsy are in desperate need of new treatment options and that cannabidiol has shown potential as an effective treatments option. If federal laws prohibiting the prescription of medications composed of cannabidiol are repealed or if an exception from the general prohibition is enacted permitting the prescription of drugs composed of cannabidiol, patients should have rapid access to this treatment option. The availability of this new prescription medication is intended to augment, not to restrict or otherwise amend, other cannabinoid treatment modalities currently available under state law.”

The legislation will add the following Section 26002 to the Business and Professions Code:

“This division shall not apply to any product containing cannabidiol that has been approved by the federal Food and Drug Administration that has either been placed on a schedule of the federal Controlled Substances Act other than Schedule I or has been exempted from one or more provisions of that act, and that is intended for prescribed use for the treatment of a medical condition.”

And the following Section 11150.2 will be added to the Health and Safety Code:

“(a) Notwithstanding any other law, if cannabidiol is excluded from Schedule I of the federal Controlled Substances Act and placed on a schedule of the act other than Schedule I, or if a product composed of cannabidiol is approved by the federal Food and Drug Administration and either placed on a schedule of the act other than Schedule I, or exempted from one or more provisions of the act, so as to permit a physician, pharmacist, or other authorized healing arts licensee acting within his or her scope of practice, to prescribe, furnish, or dispense that product, the physician, pharmacist, or other authorized healing arts licensee who prescribes, furnishes, or dispenses that product in accordance with federal law shall be deemed to be in compliance with state law governing those acts.

(b) For purposes of this chapter, upon the effective date of one of the changes in federal law described in subdivision (a), notwithstanding any other state law, a product composed of cannabidiol may be prescribed, furnished, dispensed, transferred, transported, possessed, or used in accordance with federal law and is authorized pursuant to state law.”

This legislation obviously won’t mean much unless and until federal law regarding CBD changes. But AB 710 signals that the California legislature is taking this issue seriously and is prepared to pivot on a moment’s notice to ensure that patients have unfettered access to CBD once those federal laws do finally change.

Marijuana Legalization is a Win-Win for All States

Weedmaps/January 24, 2018/Monterey Bud

Marijuana legalization is a fiscally responsible option for every state in the union, according to a report released Monday.

The new report, published by the Drug Policy Alliance (DPA), indicates marijuana legalization is more effective than prohibition at stopping crime, creating jobs, increasing state revenue, and wiping away the stain of racially charged policy.

As Vermont moves to join the enlightened club of states that have legalized recreational marijuana since 2012, the topic has become a progressive lightning rod in the body of American politics.

Signed by Vermont’s Republican Gov. Phil Scott on Monday, H.511 facilitated the Green Mountain State in becoming the first to legalize cannabis without a ballot initiative. Passed through the state legislature and approved by the governor, this new pathway to legalization will likely cause some serious consternation for the embattled Attorney General (AG) and his Department of Justice.

AG Sessions – whether he realizes it or not – will find he is on the wrong side of history and lacks the ability to prohibit states from legalizing marijuana.

While Sessions proposes another front in the war on weed, the DPA report indicates those states that have legalized recreational marijuana are more effective at protecting the public safety and the health of their citizens.

Legalization enjoys the support of approximately 64 percent of the American population. No longer a partisan issue, a majority of Republicans (51 percent) also embrace the socioeconomic value of reforming the country’s disastrous marijuana laws.

The DPA’s report drills down on the inconvenient truth: prohibition doesn’t work. The data suggests after states have legalized the recreational herb, marijuana-related arrests have nosedived, millions of taxpayer dollars have been saved, and thousands of people will be spared the unfortunate reality of being saddled with a criminal record.

Meanwhile, contrary to the AG’s diatribe, marijuana use has not increased, there have been tangible reductions in opioid-related overdoses, and alcohol-related DUIs declined precipitously.

As states legalize recreational marijuana, they are filling their coffers with millions of dollars that would otherwise be headed to the black market. Allocated for the good of society, this new tax revenue is providing critical funding for expanding educational opportunities and creating drug diversion programs.

  • From 2015 to 2017, Colorado’s recreational marijuana tax revenue has generated $230 million for the Colorado Department of Education.
  • Since legalization began in Oregon, the state has distributed $34 million to its school fund.
  • Nevada’s state school fund is projected to harvest approximately $56 million over the next two years based on their 15 percent wholesale marijuana tax.
  • Washington state allocates 25 percent of their collected marijuana tax revenue to substance abuse treatment and 55 percent to fund basic health plans.
  • Alaska is projected to collect approximately $12 million annually from the recreational marijuana program, funds which will help finance community centers and drug treatment programs.
  • California and Massachusetts will invest a share of their marijuana tax revenue in the communities most adversely impacted by drug arrests and incarcerations historically, particularly low-income communities of color, to help repair the harms of discriminatory law enforcement.

By legalizing marijuana, states have dramatically reduced incarceration rates and are erasing many of the egregious injustices of prohibition. Now, with the overwhelming support of the American population and a fast-growing history of success, marijuana legalization is proving to be both fiscally responsible and a societal imperative.

54 Bipartisan Members of Congress Urge Trump to Revive Cole Memo

Leafly/January 25, 2018/Ben Adlin

On the campaign trail, candidate Donald Trump said cannabis legalization should be left to the states. “In terms of marijuana and legalization, I think that should be a state issue, state-by-state,” he said in October 2015. “I really believe we should leave it up to the states.”

With the threat of a federal crackdown looming, a bipartisan group of congressional representatives is now urging the president to stand by his own words. “We trust you still hold this belief,” the group, led by Sen. Elizabeth Warren (D-MA) and Rep. Jared Polis (D-CO) wrote this week in letter to the White House.

It’s the latest in a growing number of actions by members of Congress to defend and support state cannabis laws.

That letter, signed by 54 members of the US Senate and House and sent Thursday, calls on Trump to direct US Attorney General Jeff Sessions to reinstate the Cole memo, a Justice Department policy that urged prosecutors not to interfere in legal-cannabis states. Sessions rescinded the Obama-era memo earlier this month.

That rescission, wrote federal lawmakers, “puts jobs, small businesses, state infrastructure, consumers, minorities, and patients at risk. This action has the potential to unravel efforts to build sensible drug policies that encourage economic development as we are finally moving away from antiquated practices that have hurt disadvantaged communities.”

In place of the Cole memo, the attorney general’s new directive stresses that “marijuana activity is a serious crime” and leaves it to individual US attorneys to decide whether to bring charges in legal states. “This new guidance,” wrote the group of lawmakers, “will have a chilling effect across the country in states that have worked tirelessly to implement voter-approved laws, creating legal and economic uncertainty.”

The letter is the latest in a growing number of actions by members of Congress to defend and support state cannabis laws.

The Observer: Waters rules may cap cultivation

Daily Journal Columns/January 28, 2018/Jim Shields

Water districts throughout five critical watersheds were put on notice last week by the State Water Resources Control Board (Water Board) that, “Through a coordinated effort between the Water Board and California Dept. of Fish and Wildlife, the following five priority stream systems have been identified as a starting point for the California Water Action Plan (WAP) effort:

  • South Fork Eel River, tributary to the Eel River, Humboldt and Mendocino Counties
  • Shasta River, tributary to the Klamath River, Siskiyou County
  • Mark West Creek, tributary to the Russian River, Sonoma County
  • Mill Creek, tributary to the Sacramento River, Shasta and Tehama Counties
  • Ventura River, Santa Barbara and Ventura Counties”

You probably don’t need me to explain to you that these five watershed systems are the primary regions of the state where cannabis is grown.

Here’s how the Water Board explains it:

“The Water Board and CDFW are currently working to identify potential actions that may be taken to enhance and establish instream flow for anadromous fish in these five priority streams and other streams of importance for the WAP objectives. The development of hydrologic characterization models is one of the first efforts that the Water Board will work on to better understand water supply, water demand, and instream flow needs in the priority watersheds… In recent years, flows have been decreasing due to extended dry periods in winter and early spring, as well as increases in legal and illegal water diversions. There are many surface diversions and groundwater wells associated with rural residences, Cannabis culitivation, pastures, crops, and municipal water systems. Since the legalization of Cannabis, cultivation of the crop has expanded dramatically in the basin, and is associated with increased water diversions.”

Honing in on the North Coast, the Water Board cites a study by NOAA Fisheries regarding water consumption by cultivators: “Mendocino and Humboldt Counties are home to some of the largest Cannabis growing operations in California, which have been increasing in number and scale during recent years. The consumptive demand for Cannabis farms impact summer stream flows during low-flow periods. This altered hydrologic function is one of the most critical stressor for juvenile salmonoids in the South Fork Eel River watershed, particularly in more urbanized areas such as the Salmon Creek and Redwood Creek watersheds where Cannabis cultivation coincides with domestic usage.

In a previous column, I warned folks that the Water Board is in the process of basically “locking down” watersheds by restricting how much marijuana can be grown on a sustainable basis, watershed by watershed. It appears the Water Board is moving in the direction of establishing a cap on licenses and permits based on watershed sustainability That’s why they are requiring water districts, including the one I manage, to provide them with all this hydrological data.

Erin Ragazzi, an assistant deputy director for the State Water Board’s Division of Water Rights and Water Quality Certification, said in a Water Deeply interview, “Well, I think one of the things that’s important to point out is that the policy creates a comprehensive mechanism to regulate cannabis cultivation, and it includes both those water supply, water rights side and water quality components. Specifically, I think it’s important to note we have a lot of important requirements to address individual and cumulative impacts that can occur in watersheds, and that’s been a big concern for a lot of folks, in terms of not just the site-specific impacts but the broader cumulative impacts in a watershed.

“To that end, that policy includes requirements establishing maximum diversion rate, a forbearance period when no diversions can occur and instream flow requirements so that even when you’re in the season of diversion, you can always divert when flows are above that instream flow requirement. So there’s a pretty comprehensive look at ensuring that we’re not seeing the impacts associated with diversion and use of water, while at the same time allowing folks a pathway to get a storage water right, which often would take a very long period of time … There’s the potential to have a limited number of plant identifiers and licenses issued by the various entities, and so those folks that come forward earlier are going to be in a better position than folks that may stand on the sidelines and wait for a while.”

I think that’s a pretty strong message to cultivators, but you have to wonder if any of them are listening, or even care.

Here’s How Big the Marijuana Market Could Be in Colorado in 2018

Fox Business/January 27, 2018/Motley Fool

Colorado’s a state that every marijuana investor should be watching because its maturing recreational market offers insight into what may happen in other states Opens a New Window.  that legalize cannabis. So far, Colorado’s recreational marijuana market has been a success. Since recreational marijuana became available in 2014, marijuana sales have grown from $996 million in 2015 to $1.25 billion in 2016 to $1.49 billion in 2017. Can demand push Colorado’s marijuana sales even higher in 2018?

Momentum to end marijuana prohibition has picked up significant momentum over the past 20 years and that momentum has increased as more states have passed laws creating recreational marijuana markets. So far, 30 states have medical marijuana laws on the books and eight of those states have OK’d recreational marijuana, too.

It’s likely that more states will follow suit, especially given shifting attitudes among Americans. Since Gallup began asking Americans about their opinions on marijuana in 1969, there’s never been a time when more Americans have favored legalizing it.

The research company’s 2017 survey shows that 64% of the country believes that marijuana use should be legal, including 72% of Democrats and 51% of Republicans. Democrats have supported legalizing marijuana since 2010, but it’s only recently that Republican support has picked up. Only 28% of Republicans were OK with legal weed in 2010 and only 35% were in favor of legalization as recently as three years ago.

Improving support among conservatives to legalize marijuana may suggest that worries over stricter enforcement of federal laws prohibiting marijuana by the Trump administration may be overblown. If so, it wouldn’t be surprising if more red states start paying attention to what’s going on in Colorado, the first state to legalize and tax recreational use.

Colorado’s recreational marijuana market has been a big success by many measures. In terms of sales and tax revenue, it’s been a particularly good experience.

The state’s marijuana sales have increased from $699 million in 2014 to nearly 1.5 billion last year, and according to GreenWave Advisors, sales could hit $1.64 billion in 2018. State tax revenue from marijuana taxes, licenses, and fees added $247.4 million to Colorado’s budget in 2017, up from $193.6 million in 2016, and $135 million in 2015.

Undeniably, legalization has shifted a significant share of marijuana sales from the black market to dispensaries. However, GreenWave’s 2018 forecast does suggest marijuana investors and industry participants might want to start tempering their optimism. If Colorado’s market achieves GreenWave’s estimate this year, it would represent just 10% year-over-year growth, which isn’t nearly as impressive as we’ve witnessed so far. Sales grew 19% year over year last year alone.

Colorado’s decelerating growth rate may be explained by the fact that its market has matured and is now serving most residents who are interested in consuming marijuana. It could also be because marijuana wholesale prices are falling. The state’s marijuana producers have rushed to add capacity to meet demand and that may have resulted in too much marijuana production. In November, The Economist reported that marijuana prices per pound have declined from $2,000 in early 2015 to about $1,300. That trend has continued this winter. According to Cannabis Benchmarks, Colorado spot prices per pound fell $210 last week to $1,131.

Colorado’s slowing growth and falling wholesale prices may lead to consolidation as smaller operators with higher operating costs sell-out or close shop. If that happens, then investors will need to become more selective when it comes to picking which marijuana stocks to buy or businesses to invest in.

A thinning of the herd in Colorado could ultimately be good news for the strongest players. However, there’s still plenty of obstacles that make investing in U.S. marijuana companies risky. For example, marijuana’s still illegal at the federal level, so marijuana businesses have limited access to banking services, they can’t build scale by operating across state lines, and they’re forced to pay inflated tax bills because they can’t deduct many common business expenses.