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In 2012, Washington and Colorado voters made history when they approved measures to legalize recreational marijuana. Washington Initiative 502 “authorizes the state liquor board to regulate and tax marijuana for persons twenty-one years of age or older.”Since the vote in Washington, the Liquor Board has written a complex set of rules for the state’s new, legal recreational cannabis marketplace. The agency has also set limits on the amount of marijuana that can be grown. And the Board has begun to license growers, processors and retailers.For now, the Obama administration has signaled it will not interfere with Washington and Colorado’s legal pot experiment, unless there is evidence that legal pot is “leaking” to other states or children are getting access to the legal product. The feds are also watching to see if criminal organizations exploit the legal market.The first marijuana retail stores in Washington opened in July 2014.Recreational marijuana is also set to become legal in Oregon on July 1, 2015 after voters approved Measure 91 in November 2014.

'Grey' Market Concerns Grow As Washington Legalizes Pot

As Washington moves to legalize marijuana, there are fresh concerns that a parallel market for pot will continue to flourish. It’s not quite a black market. Let’s call it a “grey” market – for medical marijuana. The question now: how will highly taxed and regulated pot compete with largely unregulated medical marijuana?

Green Solution is a medical marijuana dispensary southeast of Tacoma. The first thing you notice is the reflective blackout film on the doors and windows. Step inside and you’re in a secure waiting room - surveillance cameras, bulletproof glass. Beyond that – through two secure doors – is the dispensary.

The dispensary features glass display cases. One with jars of various strains of marijuana buds. At another glass-topped counter, owner Ricardo Claiborne shows off his supply of marijuana edibles.

“Everything from cheddar munchies, hash snacks, peanut butter and jelly, pho, medicated marinara sauce,” he says.

But Claiborne is most proud of something else. He leads me through two more doors into a brightly lit concrete and steel reinforced room full of marijuana plants.

“We’re looking at plants that are about, gosh, 6 feet high, we have about 23 different strains in here.”

Large industrial fans keep the air circulating. Thousand watt lights help the plants grow. A head gardener with a pair of shears tends the crop. This high-tech operation has all the feel of a business. But it’s actually unlicensed.

In Washington, medical marijuana – or MMJ as it’s often called -- is loosely regulated. That won’t change when Washington’s new pot legalization law is fully implemented. Initiative 502 was silent on medical marijuana.

You might think a hands-off approach would please the industry – who likes regulations? But medical marijuana growers worry about operating in the grey.

“Without any change you’re going to see the medical marijuana community produce and sell a large quantity of cannabis, because possessing it is no longer illegal,” says the Washington Cannabis Association's Chris Kealy.

And, he says, they’ll sell it for less. He points to government estimates that predict legal pot under I-502 will go for about $12 a gram.

“The current marketplace in MMJ world is between $8 to $10 -- and that is likely to go down.”

And that, says Kealy, could create a “grey” market for marijuana that competes with the state of Washington. That’s not a comfortable position for a business like Green Solution. So Kealy wants state regulators to incorporate medical marijuana as they write the rules to implement I-502.

That’s the job of the state’s Liquor Control Board. Deputy Director Rick Garza agrees that if there’s a price disparity that’s a problem.

“Obviously the legal market is always going to have to begin lower than the illicit or the medical marijuana or why would I participate in a legal market. So that’s something that I think has to be examined and looked at.”

Theoretically medical marijuana is only for patients with a health care provider’s authorization. But most people I talked to say there are ways to get that permission even if you don’t truly qualify. That’s a problematic says Pat Oglesby, who has written extensively about marijuana legalization. The North Carolina attorney served as chief tax counsel to the US Senate’s finance committee.

“If folks can get a medical card and not pay tax and there are no questions asked, then a lot of folks will do that.”

On the other hand, Oglesby doesn’t worry too much about unscrupulous medical marijuana providers entering the true black market – and selling pot to recreational users without a medical card. Why? Because of something he calls, “The prohibition premium. You gotta charge more if you are engaged in illegal activity to compensate you for the risk of getting caught and going to jail.”

For now, there’s a lot speculation about what will happen when I-502 takes full effect. State Senator Jeanne Kohl-Welles is one of the Washington legislature’s leading experts on medical marijuana. The Seattle Democrat won’t propose fixes until she sees what happens.

“Where there’s a vacuum, people are going to step in and do so in incredibly imaginative ways," Kohl-Welles says. "But I’m not that imaginative or creative myself in my thinking I suppose so I don’t know what’s going to happen.”

In the end, the chief sponsor of I-502 hopes medical marijuana patients gravitate to the state regulated stores and away from unlicensed dispensaries like Green Solution.

Alison Holcomb of the ACLU of Washington says she doesn't think it’s workable to have a parallel medical marijuana system.

“Medical marijuana can remain in place for the patients, not for people who want to make money off of patients.”

She adds, if ultimately the price of taxed, legal pot is too high, then the legislature can always step in and make adjustments.

Since January 2004, Austin Jenkins has been the Olympia-based political reporter for the Northwest News Network. In that position, Austin covers Northwest politics and public policy, as well as the Washington State Legislature. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) Emmy-nominated public affairs program "Inside Olympia."