Earlier this week the Supreme Court decided that it would not hear a case that the states of Nebraska and Oklahoma sought to bring against Colorado because of its legalization of recreational marijuana use. Since the Surpeme Court is the body that addresses matters regarding inter-state cases, Nebraska and Oklahoma wanted the court to address their claim that Colorado’s laws enabled large-scale exports of marijuana across their borders.
Though this challenge was dismissed, in the United States’ current movement towards legalization, there are, and will continue to be, many legal and legislative challenges along the way. Simultaneously, all kinds of new companies are popping up, trying to become a part of the lucrative and still nascent legal cannabis industry.
So how much do the members of this startup culture devote themselves to following and shaping issues that will be decided in the courts and on voting ballots? To get a sense, we spoke to Kyle Sherman, owner of Flowhub, a tech company that creates point of sale and grow management software specifically built for the cannabis industry so compliance data can be sent back to the state. Sherman moved from Los Angeles to Denver two years ago to become part of the cannabis industry. After working on the marketing side and within the grower supply chain of Matt Berger (the inventor of Bubba Kush), he founded Flowhub in late 2014. Here he talks about trying to be an entrepreneur in a budding economy that’s facing significant opposition and shifting regulations.
Starting a new business is an incredibly tough challenge on its own, but with what you guys are doing, there’s the added aspect of figuring out the legal changes that are constantly going on and how they apply to you. So in your daily operations, how much are you tracking what’s going on in the legal world?
Well, a lot of it we’re helping drive. We’re not just followers anymore, trying to figure out what the regs are doing, we’re actually helping drive policy. You’re right, we’re not just building a business here, we’re building an industry. We’re devoted to legalizing cannabis in the United States responsibly, we actually want to make that globally. That takes a lot of effort, trying to figure out what laws exist and how to work within those parameters, and how we can create more effective, efficient policy.
You have all these policy makers that don’t understand the industry at all. You’re dealing with business people who’ve never been in this industry before, but they are great at business. Then you have a whole other group of people who are great at illegal cannabis [growing] who now have a license and want to do it legally—maybe they’re not as good in business. All these different people are trying to get their hands dirty and work together.
I imagine you guys are facing legal challenges every step of the way. Did you consider the case that Nebraska and Oklahoma tried to bring to the Supreme Court a high priority that needed addressed, or was it just one of many?
The whole case was a frivolous suit. I knew it would get thrown out. I don’t think many people felt this would actually go through. If you really looked at the details of the lawsuit, there was nothing to stand on. You don’t know where the cannabis is coming from. It could be coming from California or Washington or one of the other five states that have legalized. It wasn’t worrisome really, but we were relieved that it was thrown out. It’s a great sign that the federal government is backing off a little bit and it’s interesting to see that the Supreme Court is not necessarily so worried about this. I wonder if in the Reagan era or the Nixon era, when we were criminalizing people and we were criminalizing drug use so strongly, if they would’ve seen a case like this. It’s a great sign that we’re headed in the right direction.
Are there any particular legal and government challenges that you see coming up that you’re really watching out for right now?
I’m really nervous about Hillary Clinton and her having big pharma in her back pocket. It’s going to be really interesting to see how if Hillary is in fact nominated and if she wins, how she deals with legalization. She’s talking about rescheduling cannabis from Schedule 1 to Schedule 2 [as defined by the Controlled Substance Act]. That doesn’t necessarily mean anything except that pharmaceutical companies and the FDA can do research on cannabis and can produce pharmaceutical products with cannabis. We need to see if this means that pharmaceutical companies will take over now and dispensaries won’t exist. Pharmaceutical companies are extremely scared of cannabis. Here’s a substance that’s readily available and that works so much better than most pharmaceutical medicines, just in its raw form.
What do you think about what’s left of the presidential field and how they’ll approach the issue of legalization?
I don’t know how much say the president is going to have in this. Congress defunded the DEA from prosecuting medical marijuana states. Every presidential candidate won’t be able to affect legalization too much. Now if Trump becomes president and Chris Christie becomes the attorney general, he could make it really difficult for the weed industry. There’s the ability for these presidents to slow down legalization, they’re not going to stop it.
Do you anticipate we’ll be seeing more legalization legislation in the upcoming elections? Have you been tracking where this is going other states?
It’s going to be interesting to see what happens in California. There are a couple of initiatives that are all well funded there. We are going to see other states legalize. I mean, this is not rocket science. We have policy makers coming to Colorado all the time, touring facilities, talking to other policy makers here, and learning firsthand that prohibition is just full of lies and, in fact, [legalization] is a good thing. This is not Democrats versus Republicans, this is literally a bipartisan movement.
Is it the economics that makes it a bipartisan movement?
Absolutely. The amount of money we save in the state from no longer having the police prosecuting people who are growing a couple plants in there backyard or traveling with it in their car, it’s amazing. Other states are starting to realize, “Why are we fighting this? We could put our police back to doing real police work here. Why are we prosecuting small time drug offenders and putting them in prison? It makes no sense.”
If it got legalized for recreational use in California would you come back or you want to stay in Colorado? Do you go to the new frontier or stay in the epicenter?
This is ground zero. We are 10 years ahead of California in terms of our technology that we’re using. It’s going to take a very long time for other states to catch up to Colorado.