A new approach is under review to protect Colorado’s marijuana industry from a potential federal restriction. The state would forfeit millions of dollars in tax collections by doing so. A proposal in the Legislature would permit marijuana farmers and retailers to reclassify their recreational marijuana as medical marijuana if the change in law happens. This would be the most audacious move by an American marijuana state to avoid intervention in its cannabis market.

The proposal would permit approximately 500 licensed recreational marijuana growers to reclassify their crop. The reclassification would cost the state more than $100 million a year because the tax on medical marijuana is substantially lower in comparison to recreational marijuana.

The proposal says licensed farmers could become medical licensees “based on a business need due to a change in local, state or federal law, or enforcement policy.” The change wouldn’t take recreational marijuana off the books, but it wouldn’t entirely safeguard it either. What it could do is help farmers protect their inventory in case federal authorities start seizing recreational marijuana. The provision is getting a lot of attention in the marijuana industry following recent comments from members of President Donald Trump’s administration. White House spokesman Sean Spicer has said there’s a “big difference” between recreational and medical marijuana.

Sponsors of the proposal call it a possible exit strategy for the new marijuana industry. It is hard to say how many businesses would be affected, or if medical marijuana would flood the market, because some businesses hold licenses to both sell and grow marijuana in Colorado. The state had about 827,000 marijuana plants growing in the retail system in June, the latest available data. More than half were for the recreational market.

Senator Tim Neville, a suburban Denver Republican who sponsored the bill stated, “If there is a change in federal law, then I think all of our businesses want to stay in business somehow. They’ve made major investments.”

If federal authorities start seizing recreational marijuana, Colorado’s recreational marijuana entrepreneurs “need to be able to convert that product into the medical side so they can sell it,” Neville stated. His proposal recently passed a committee in the Republican Senate four to one.
However, it is unclear whether the bill could pass the full Colorado Senate or the Democratic House. Skeptics of the proposal doubt the classification change would do much more than cost Colorado tax money. Senator Lois Court, a Denver Democrat who voted against the bill stated, “It’s a big deal for our taxation system because this money has been coming in and has been set aside for this, that and the other.”

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