Comment of the Week: The Medical-Marijuana Bubble Bursts

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This week, like probably every week for years now, we brought you news about the ongoing fight over medical marijuana and states' attempts to legalize and regulate it.

The latest news is that the Obama administration, through the U.S. Department of Justice, is "clarifying" (read: reneging on) a widely sourced memo from 2009 that essentially says that the feds will stay out of states' pot business so long as people adhere to state laws.

One reader compared the federal attack on medical marijuana to the bursting of the housing bubble. Well-played, sir.

Sd Blue writes:

Well to be fair, I always thought people interpreted the Ogden memo somewhat liberally. Especially people in the business of medical marijuana, and more specifically the lawyers who charge money to help people get into the medical marijuana business. "It's legal, look, uncle Sam said so". It was a bubble, like the housing bubble. Misinformation, piled on top of rumors, and hopeful thinking. The bubble started to burst after Prop 19 in CA failed, and now it's clear to most people we are on the downswing of the rise of the MMJ market. Remember back in the Bush years, the DEA, DOJ, etc, they actually did go after individual patients, and prosecute them. I think the Ogden memo was simply stating, that unlike the Bush DOJ, Obama would not waste resources prosecuting individual cancer patients (which Bush did do). But the memo did not say dispensaries, huge warehouse grows, would be tolerated. That was just the wishful thinking of those who invested money in such operations.

The Ogden memo's money line is this:

As a general matter, pursuit of these priorities should not focus federal resources in your States on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana. For example, prosecution of individuals with cancer or other serious illnesses who use marijuana as part of a recommended treatment regimen consistent with applicable state law, or those caregivers in clear and unambiguous compliance with existing state law who provide such individuals with marijuana, is unlikely to be an efficient use of limited federal resources.

Sd Blue is right in that the memo doesn't reference dispensaries or large-scale pot-growing facilities. But the fact that it doesn't cuts both ways.

By not providing crystal-clear direction for state-run cannabis operations and instead giving generic protection for people in "unambiguous compliance with existing state laws," Ogden opened the door to the kind of large-scale near-legalization of pot that is happening now.

Incoming U.S. Deputy Attorney General James Cole is trying to put the genie back in the bottle, saying that the Ogden memo never meant what it certainly seemed to mean.

So Sd Blue's idea that it's all similar to the collapse of the housing market is apt.

When the housing market collapsed, Bush-era policies that had been designed to make more people homeowners backfired when banks and lending institutions pushed the letter of the law to the nth degree until the whole thing came crashing down.

The medical-cannabis bubble, it would seem, is now following a similar path.

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