By Ben Adams
On Nov. 4, 2014, Alaskans voted to legalize recreational marijuana. However, many unique challenges lie ahead for those wishing to take advantage of the opportunity. Make no mistake about it: Legalization in Alaska is indeed a once-in-a-lifetime opportunity, because unlike the other states that have legalized, there is no existing marijuana infrastructure in Alaska. While underground growers in Alaska have been producing extremely high-quality cannabis for years, there is no structure in place for the legal manufacture or distribution of cannabis. Except for the ability to grow cannabis, the entire industry will be brand new in 2016 when the first licenses will be granted.
However, despite the opportunities, the largest problem facing those who wish to help create the industry in Alaska is uncertainty. This uncertainty manifests itself in several ways.
While the overall trend in the country is positive regarding federal intervention, it would be foolish to discount that potential entirely.
Alaska is unique among the states in that approximately 80% of its land is inaccessible except by air or water. Both forms of travel are usually regulated by the federal government. Additionally, the federal government owns 69.1% of land in Alaska. While federal presence (outside of the military) is not particularly overwhelming in Alaska, federal prohibition does remain a significant factor for those who wish to create canna-business in Alaska.
The next potentially problematic issue is that the rules and regulations that will govern the industry have not been written yet. While it is expected that many of the issues will be similar to other states, there will no doubt be issues unique to Alaska. At the time of writing, it is uncertain who will be responsible for overseeing the industry in Alaska. The Alcoholic Beverage Control Board may oversee the regulation of cannabis, or the Legislature may create a Marijuana Control Board. This lack of certainty is difficult for both entrepreneurs and investors alike. However, Gov. Bill Walker has announced that he expects the rules to come out within the nine-month period outlined in Ballot Measure 2, meaning the rules should be available by December 2015.
Perhaps the most problematic issue is the right of local governments to opt out. While the right to opt out is not unique to Alaska, the sheer size of the state means an opt-out could eliminate effective access to legal cannabis for many Alaskans. For Alaskans not on the road system, a local opt-out means they could have to travel on federally-regulated means of travel (ferries or airplanes) for hundreds of miles to reach a legal market. This could reduce the size of the legal market significantly. However, depending on which communities decide to opt out, this could create significant business opportunities for those able and willing to create canna-business within reach of the prohibiting communities.
A final challenge for those wishing to take advantage of this opportunity is that Alaskans will likely be highly protective of this industry. It likely won’t be possible to move to Alaska and obtain a license without a significant period of residency. It is also unknown what, if any, limitations the state will try and place on investment from outside money.
Despite these challenges, Alaska should be on the radar of anyone serious about the industry. There are several significant advantages. First, the rules can be written from the ground up, learning from the Washington and Colorado experiences. Second, although Alaska is a medical state, there is no medical system to merge into the recreational one. This makes the roll-out much simpler. Third, in an industry expected to be worth between $100 million and $250 million a year, every single business will be a new business. Finally, due to the low population of many towns in the state, it may very well be possible to open a canna-business that has little, or no, competition.
Ben Adams in a marijuana compliance attorney with offices in California and Alaska. His firm advises clients involved in all aspects of the marijuana industry.