Pubdate: Fri, 22 Jan 2016
Source: Chicago Tribune (IL)
Copyright: 2016 Associated Press
Contact:  http://www.chicagotribune.com/
Details: http://www.mapinc.org/media/82
Author: Kristen Wyatt, Associated Press

POT STATES TAKE FRESH LOOK AT OUT-OF-STATE INVESTMENT

DENVER (AP) - States that have legalized pot are taking a fresh look 
at making it easier for out-of-state investors to get in the weed 
business, saying the industry's ongoing difficulty in banking means 
they need new options to finance expansion.

The four states that allow recreational pot sales - Alaska, Colorado, 
Oregon and Washington - have another big reason to take a new look at 
pot investment: California. It's the nation's most populous state and 
largest marijuana producer, though it allows the drug only for people 
with certain medical ailments.

California voters could approve recreational pot this fall, giving 
the nascent pot industries in the other states reason to want to 
attract investment now, before a giant enters the picture. California 
has no ban on out-of-state owners, pressuring other pot states to 
loosen the rules before California opens for business.

"There's only so many people willing to invest in this risky and new 
industry, so allowing people from out of state to become investors in 
this business ... seems like a good idea," said Chris Holbert, a 
Colorado state senator and sponsor of a bill to allow out-of-state 
ownership of marijuana businesses.

The head of the Colorado Cannabis Chamber of Commerce was more blunt.

"We can't go get a loan from the bank to grow our business to help us 
accelerate," Tyler Henson said. "We are susceptible to falling behind 
other states."

Pot-business residency ownership requirements generally date to the 
early days of regulated pot as a safeguard against investment by 
foreign drug cartels. Those fears have largely dissipated, but public 
officials have hung onto the residency requirements because they 
believe it keeps the industry small and easier to manage.

Pot regulators also cite the U.S. Department of Justice, which has 
warned pot states they must keep drug money out of interstate 
commerce or face a crackdown.

Alaska's pot regulators voted last year to ease residency 
requirements for pot industry investment, then backtracked in 
December and restored more stringent standards.

Residency requirements range from six months in Washington to two 
years in the other states.

In Washington and Colorado, those requirements apply to business 
applicants and investors. But Washington's Liquor and Cannabis Board 
announced this month that it intends to drop the ban on out-of-state 
investment to make it easier for marijuana businesses to raise money. 
The change would take effect in March if it's approved as expected.

In Oregon, majority ownership must rest with Oregon residents. 
Outside investment is allowed there, but non-resident owners can't be 
directly involved in a business' operation or management. A bill 
pending in the Oregon legislature would change that.

One prominent Denver marijuana attorney called the removal of 
marijuana ownership requirements a logical next step in the 
industry's maturation. As long as interested pot investors can't have 
a say in how a company is run, they're unlikely to pour much money 
into it, attorney Brian Vicente said.

"Residents of other states are already allowed to loan money to these 
businesses. Given the risk they are assuming in this uncertain 
industry, they should be able to hold equity in the companies as 
well," Vicente said.

But the change won't be easy, neither for regulators nor the existing 
marijuana businesses in legal states.

"I think the industry has always liked the idea of being a homegrown 
industry," said Jason Warf of the Southern Colorado Cannabis Council. 
"This definitely opens the door for your larger out-of-state venture 
capitalists to walk right in. If we have folks with much more capital 
than our owners who are able to walk in, when our owners have had to 
meet these requirements for many years, it would just be an unfair advantage."
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MAP posted-by: Jay Bergstrom