1. Colorado Marijuana Grey Market Practices: A Policy Recommendation
By Lance Hostetter
Prepared for
State of Colorado
Governor’s Office of Marijuana Coordination
Dr. Malcom Goggin
Public Policy and Management Advanced Seminar | PUAD 5631
University of Colorado Denver
School of Public Affairs
December 3, 2014

2.
Acknowledgements
Because marijuana policy is in its infantile stage, this paper would not have been possible
without a variety of support and access to many individuals.
My specials thanks to:
Dr. Alan Wallis
for continued support throughout and
guiding initial thoughts that helped to create a framework for this research.
Steve O’Dorisio
for providing networking opportunities
that opened conversations important to this paper research.
Teri Robnett
for trusting policy research and
providing invaluable resources and contact for this paper research.

3.
Table of Contents
Executive Summary……………………………………………………...…………….Pg. i
Introduction and Background…………………………………………...….………....Pg. 1
Methodology and Purpose…………………………………………………….Pg. 2
Review of Scholarly Literature………………………...…………….………….…….Pg. 6
Examination of Parallel Grey Markets……………………....………...…..….Pg. 6
Examination of Colorado Marijuana Market Study….…………………….…Pg. 8
Examination of Medical Marijuana Recommendations.…………..……….....Pg. 9
Findings and Discussion………………………………………….……………….....Pg. 12
Policy Recommendations……………….……………….…………………………..Pg. 20
Ft. Collins Option…………………………..………………………………..Pg. 20
Tightened Regulations on Caregivers…………….…………….……..……..Pg. 21
Conclusion……………...………………..…………………………………………..Pg. 22
Sources….……………………………………..……………………………………..Pg. 24
Appendix A: Definitions..……………………………………………………………Pg. 27
Appendix B: Implementation……………………………………..…………………Pg. 28
Appendix C: Course Competencies...……………………………...………...………Pg. 30
Attachments…………………………………….……………………………………Pg. 33

4. Executive Summary
The guiding directive for this paper is to examine current marijuana policies and
regulations in place at the local government level and to formulate policy
recommendations for the State of Colorado based on these findings. The result of this
paper is a recommended path for closing loopholes in current marijuana policies that
allow for grey market practices believed to exist within the caregiver and home grower
areas of marijuana policy. Because the issue of marijuana policy in both recreational and
medical markets is fairly new, the research for this paper included interviews with state
and local government officials, medical marijuana advocates and users, and recreational
and medical marijuana business owners. Colorado’s unique situation with two
constitutionally mandated marijuana markets dictates examination of parallel markets.
Because of this, the review of scholarly literature for this paper examined the grey market
in trademark law, various market studies, and initial findings within market studies
conducted on behalf of the State of Colorado.
Policy recommendations were formulated after review of current and proposed
local government regulations of both marijuana markets and after conducting interviews
with the stakeholders. The analysis and synthesis of information created several
intriguing policy options. However, concluding that many options are viable, this paper
proposes two policy recommendations for the Governor’s Office of Marijuana
Coordination to recommend to local governments for the regulation of the two marijuana
markets in an attempt to close grey market practices inherent in current state and local
regulations and policies.

5. 1
In 2012 Colorado voters voted to legalize recreational marijuana, one of two
states to first legalize recreational use of marijuana in the United States. Prior to the
recreational marijuana legalization, Colorado voters approved a Constitutional
amendment to legalize medical marijuana in 2000. When voters approved Amendment
64 to the Colorado Constitution effectively legalizing the sale and use of recreational
marijuana within the state, the state of Colorado was left to draft and implement
regulations that would create the legal retail marijuana market within one year’s time.
A complex issue alone, the state continues to craft policies that intertwine retail
marijuana and medical marijuana markets. Originally legalized in 2000, medical
marijuana has operated and adapted in the 12 years leading to the legalization of retail
marijuana in Colorado. With the implementation of Amendment 64 in January 2014, the
state began to recognize strengths and weaknesses in the state’s marijuana policies.
Nearly four months after the implementation of retail marijuana, the Colorado
Health Department announced it would seek tighter regulations on medical marijuana
caregivers and patients as recommended by the state auditor nearly one year earlier
(Ingold, 2014). In order to be a caregiver the state requires the applicant to be at least 18
years of age. Other restrictions exist, but provide leniency in the medical marijuana
market (CO Department of Health and Environment, 2013). Because of this leniency and
loopholes in retail marijuana regulations, a grey market has arisen where some medical
marijuana is being sold or grown for retail purposes. The issue is perpetuated by low
medical marijuana tax rates and high retail marijuana tax rates. This creates a market
where consumers may take advantage of leniency in medical marijuana regulations to

6. 2
ovoid purchasing retail marijuana thereby negating the higher tax rate and avoiding
higher retail prices.
In 2014, the Colorado Legislature appointed an interim committee to explore fixes
to the current marijuana markets in Colorado. The committee is tasked with exploring
weaknesses within the two markets and to find fixes to those weaknesses. As the
committee continues work, the Governor’s Office of Marijuana Coordination continues
to work to fuse together or at least close the gap between Colorado’s two marijuana
markets and to identify local government regulations that may be effecting curtailing
marijuana grey and black market activity. To do this, the state has identified a need to
explore additional regulatory measures that would further restrict the leniency within the
medical marijuana market where some illicit practices are believed to exist.
The Governor’s Office of Marijuana Coordination believes that various local
governments are currently working to close loopholes presented by the two markets.
Specifically, local governments have been forced to work and adapt quickly to not only
regulate the two markets, but to enforce restrictions that dissuades marijuana users from
acquiring products through a non regulated source – like a caregiver or home grower
selling marijuana without adhering to state and local marijuana tax and business
regulations.
Methodology and Purpose
The state of Colorado has an immediate need find solutions inherent in two
separate legal marijuana markets. The State Auditor’s Office in January 2014
recommended that policy makers address a loophole created by separate constitutional

7. 3
amendments that gave home growers and caregivers leeway to grow and distribute
marijuana products without regulation. The Governor’s Office of Marijuana
Coordination recognizes this issue as a legitimate concern, and therefore recognizes the
need for additional research into how local governments are addressing or discussing how
to address the issue of grey market practices promulgated by differing regulations and tax
measures between the two markets. The purpose of this project is to provide research
that can be used to formulate policy options for the state to disseminate to local
governments regarding marijuana grey market regulations.
Key questions addressed included:
1. Which local governments have regulations in place that address grey market
practices and hone in caregivers? This will be addressed by researching local
regulations via internet - surveying local government websites and public records.
What are the strengths and weaknesses of these regulations? This will be
addressed during interviews of government officials and caregivers. Interviews
should indicate whether or not local regulations are sufficiently monitoring and
restricting illicit activities.
2. Do medical marijuana regulations need to be tightened? Does a more direct
definition of caregiver need to be applied? What health issues constitute medical
marijuana use?
3. Is direct delivery of medical marijuana (from production/sale site to patient) a
practical option?
4. Should grow sites be restricted and moved towards commercial production?

8. 4
These questions and concerns were addressed through two methods: collection
and analysis of current and proposed state and local marijuana regulations and
stakeholder interviews.
To compile and suggest policy options concerning the unregulated marijuana
market, the project examined current state and local regulations through the collection
and analysis of several localities regulatory measures. The Cities of Aspen, Boulder, Fort
Collins, and Northglenn have or are actively discussing both medical and recreational
marijuana regulations that aim to cohesively implement the two markets while limiting
grey or illegal market activity. The Colorado Department of Health and Environment is
also tasked with exploring and implementing new medical marijuana applicant practices,
which include new tracking or database software and new state issued medical marijuana
identification cards. The data collection included memos, meeting minutes and
presentations, and municipal codes pertaining to marijuana.
An aggregate methodological approach to this project includes stakeholder
interviews. Interviews were conducted in person and via telephone with representatives
from stakeholder groups including government officials, caregivers, medical marijuana
advocates, and marijuana entrepreneurs from both medical and recreational markets. The
structure of the interviews looked for both fact-based evidence reliant on current state and
local regulations and stakeholders’ opinions of what regulations are effective or
ineffective and what regulatory options might be effective in limiting grey market
activities while not limiting true medical benefits offered by medical marijuana.
The methodological approach described above, formally recognized as
triangulation, is rooted in qualitative research. This approach will allow for “innovative

9. 5
ways of understanding a phenomenon, revealing unique findings, challenging or
integrating theories, and providing a clearer understanding of the problem” (Thurmond,
2001). Because this issue lacks in current or historical policy research, triangulation
allows the research to work with current data, structured interviews, and parallel research
to better understand the issue of the marijuana grey market and to propose reasonable and
innovative policy options. Triangulation, however, is not without disadvantages.
Qualitative research requires abundant data collection and interviews. This process, vital
to triangulation, can be compromised by time. Triangulation requires the researcher to
collect ample data and conduct numerous structured interviews. Because of this,
triangulation can be undermined by a lack of quality data, incomplete interviews, or
inadequate or underrepresented stakeholders (Thurmond, 2011). However, if this
methodological approach is properly conducted, it can yield beneficial results that lead to
useful policy options.
Because marijuana policy is a new policy area, triangulation will help focus the
research and policy options on what is happening in the current markets. By conducting
structured interviews with each stakeholder group, a clearer understanding of current
policy advantages and disadvantages should become evident. Data collection – current
regulations and policies and current sales, taxes, and medical marijuana statistics – should
offer insight into early market trends and influences. Coupled with the interviews, the
results should yield policy options that will help mitigate marijuana grey market
practices.

10. 6
Review of Scholarly Literature
Colorado’s issue to coordinate two legal marijuana markets – medical and
recreational – gives rise to a newer issue within the United States. This is the first time
that marijuana has been available for legal recreational sale and purchase. Therefore, the
scholarly literature pertaining to the regulation of recreational marijuana is still being
written. In order to guide regulatory discussions of marijuana, then, more specifically the
discussion of coordinating two separate marijuana markets, literature from parallel issues
must be examined. For this case, literature discussing grey markets, medical marijuana
markets, initial scholarly recreational marijuana policy proposals and guidelines, and the
first retail marijuana market study composed for the State of Colorado should serve as
initial indicators for regulatory projections when coordinating the two markets.
To understand the issue an examination of grey markets must first be conducted.
Grey market economies have existed for some time. However, the marijuana grey
market has only existed for a short period of time and looks different from textbook
definitions of grey markets. In order to understand how a marijuana grey market can
attempt to be regulated, it is important to look at existing grey markets and how they
might parallel marijuana.
Examination of Parallel Grey Markets
While examining trademark laws and the trademark grey market, Lars H. Liebeler
(1987) argues “a free-rider” problem exists in grey markets where, in trademark law, the
trademark owner or retailer creates “goodwill” where consumers trust a product and trust
the outcome of purchasing the product. Grey market importers, Liebeler (1987) writes,

11. 7
damage the goodwill of the trademark when consumers purchase grey market goods.
When compared to the two legal marijuana markets – medical and recreational, they are
compromised by grey market dealers that stem from medical marijuana caregivers and
home growers.
In a July 2014 study, John Hudak (2014) of the Brookings Institute noted that,
although the numbers cannot be proven, there is evidence that a grey market exists where
some marijuana is being sold for recreational use. When paralleled to the trademark grey
market, the marijuana grey market mirrors trademark goodwill as marijuana grey market
dealers play off the goodwill of both medical and recreational marijuana. Instead of
importing and mimicking a trademark, grey market dealers might use the lax regulations
of the medical marijuana industry to sell to recreational consumers at a lower price than
the recreational market. Jonathon P. Caulkins, Anna Kasunic, and Michael A. C. Lee
(2012) argue “the basic tradeoff is between amounts of use-related harms on one hand,
and amounts of black market-related harms on the other. Prohibition reduces availability
and use. (Even marijuana—by far the most widely consumed illegal drug—is used much
less commonly than two legal drugs: tobacco and alcohol). However, illegality cannot
eliminate use, and the remaining illicit use tends to be riskier. Illegal markets also
generate their own harms, including crime, violence, corruption, and the societal costs of
efforts to suppress them.” This important observation is the crux of the marijuana grey
market issue.
Liebeler’s (1987) solutions to trademark grey market issues would principally not
solve the marijuana grey market issue. Liebeler (1987) suggested that grey market
solutions could be broken down into four categories: “(1) allowing all grey-market goods

12. 8
to be imported; (2) mandatory labeling of all grey market goods as such; (3) mandatory
demarking of all grey-market goods to eliminate brand name identification; or (4)
preventing the importation of all grey market goods.” Of these four categories only the
fourth option would serve as an adequate parallel solution to the marijuana grey market.
Yet, even if regulation sought to prevent sale of all grey market marijuana, there would
be no guaranteed solution. Liebeler’s fourth solution, however, should serve as a guiding
principle for regulation.
Examination of Colorado Marijuana Market
Hudak (2014) noted that since the legalization of recreational marijuana the
number of medical marijuana users have increased. This, in part, is due to the fact that
there is a wide margin between the price of medical marijuana and retail marijuana,
where retail marijuana is taxed at a much higher rate – medical marijuana is taxed at 2.9
percent state tax (plus additional local tax) compared to a 12.9 percent state tax (plus
additional local tax) (Hudak, 2014). The initial response would be to create a more
favorable price for retail marijuana that would not push purchasers toward medical
marijuana. Hudak (2014) suggests a logical option of closing the disparity between the
two tax rates would include one of the two options of a combination of the two: increase
the medical marijuana tax rate, decrease the retail marijuana tax rate, or impose a
combination of both. However, a contingent of drug, alcohol, and crime policy experts
argue that in order to dissuade certain populations of users or potential users from
purchasing marijuana it remains important to maintain a higher tax rate for marijuana
sales (Kleiman and Ziskind, 2014).

13. 9
Because of recent trends in Colorado medical marijuana regulation, acquiring a
medical marijuana recommendation and license have become increasingly accessible. A
greater look into the accessibility of medical marijuana and how individuals in Colorado
acquire a medical marijuana recommendation sheds light on the increasing medical
marijuana market. Since the implementation of medical marijuana in Colorado, the
number of registered medical marijuana users has steadily increased to a total greater
than 10,000 users (Kamin, 2012). As noted above, Hudak (2014) argues that the tax
disparity between to the two legal markets is directly correlated to the exacerbation of the
grey market. Regulations limiting marijuana distribution and usage are best served by
higher tax rates (Kleiman and Ziskind, 2014). However, the low tax rate combined with
continually decreasing cost to acquire a medical marijuana license exacerbates market
regulations currently in place. By Kleiman’s and Ziskind’s (2014) argument, it is
reasonable to determine that a greater tax increase on medical marijuana would be more
favorable to regulatory bodies than a greater decrease in retail marijuana. Hudak (2014)
writes, however, that because of Colorado’s history with medical marijuana, any tax
increase would be met with an unfavorable reaction from the medical marijuana
community.
Examination of Medical Marijuana Recommendations
A second compelling option that could be implemented with or without tax
increase is a shift in how medical marijuana is prescribed. Current Colorado medical
marijuana regulations allow doctors to merely recommend a patient for medical
marijuana use. Kleiman (2014) argues another key element to closing the medical-

14. 10
recreational marijuana loophole is to refine how and for what doctors prescribe medical
marijuana. According to statistics from the Colorado Department of Health and
Environment (2014) 93 percent of medical users in Colorado claim pain, chronic pain, or
severe pain as the medical necessity for needing marijuana. J. Michael Bostwick (2012)
argues in an article written for the Mayo Clinic that two studies indicate the typical
medical marijuana user to be previously familiar with recreational use and generally fit a
profile of a young male user who sites pain as the leading cause for needing to use
medical marijuana. Although this correlation can be generalized as coincidence, it does
give regulatory bodies cause for concern about the availability and proper use of medical
marijuana. To combat this issue and hone in grey market use, regulations can be
tightened on doctors, which would then limit the availability of medical marijuana use
(Collett, Gariffo, Hernandez-Morganargues, 2010). At this moment, there are no
Colorado regulations or laws that restrict doctors from recommending marijuana liberally
across the adult population. As a part of tightened regulations, policies should indicate
clearer guidelines or rules for which medical issues should require medical marijuana
use. Doctors should also be required to provide a written prescription instead of only
having to provide a recommendation (Kleiman, 2014). If regulations are tightened, the
marijuana grey market can be limited because it is likely that doctors will not risk their
medical profession as freely as grey market dealers and users might risk their legal rights.
This, then, should limit medical marijuana distribution into the grey market, which would
then decrease the size and scope of grey market activities.
In summary, the examination of parallels within other markets and other grey
markets provides an initial structure to formulate regulatory measures for a marijuana

15. 11
grey market. Furthermore, by looking into the current market strengths and weaknesses
within the Colorado marijuana markets, certain assertions act as guiding principles for
addressing needs. The struggle for Colorado is not to balance a single new market for
one product; rather, the state must balance two markets for one product where both
markets are required by state constitutional law. Although the two markets, in theory,
should not compete against one another, they are competing against each other and
creating a grey market. The mix, then, must find a way to limit grey market activity.
This can be done by implementing one or more options, which includes one of or a series
of tax rate measures or by tightening regulations in the medical marijuana market. Tax
measures include limiting the medical marijuana market by increasing tax rates, by
increasing the recreational marijuana market by lowering tax rates, or by implementing a
combination of both limiting the medical marijuana market by increasing tax rates and
increasing the recreational marijuana market lowering tax rates. A separate option
includes limiting the medical marijuana market by implementing tighter, stronger
regulations in the medical marijuana market. This includes requiring doctors to prescribe
marijuana to patience, hone in on a definition for medical need, and requiring caregivers
and home growers to file thorough documentation of their patients and their marijuana
purchase and distribution.

16. 12
Findings and Discussion
The review of scholarly literature gave rise to several guiding questions for the
stakeholder interviews and data collection. The overall guiding principle for this
discussion, however, focuses on what local governments are doing to curb marijuana grey
market activities.
For the interviews three stakeholder groups were interviewed – local and state
government officials, medical marijuana patients and advocates, and marijuana business
owners. The interviews’ purposes were to delve into ideas and regulations that may or
may not exist that are effectively limiting grey market activities. This included a
discussion of market activities, change in clientele since the implementation of
recreational marijuana, and proposed regulations moving forward.
To first understand the need for regulations limiting grey market practices, a
better understanding of the current medical usage or purchase and sale is needed.
According to the Colorado Department of Health and Environment (2014), as of August
2014 there were 2,895 caregivers in the state and 113,506 total registry ID cards issued.
Of the 113,506 registered patients, 51 percent grew their own marijuana and four percent
required a caregiver to grow marijuana (see table below for breakdown).

17. 13
Grower Patients Accounted For Percentage of Patients
Self 57,614 51%
Care giver 4,349 4%
Medical Marijuana
Business
51,543 45%
Totals 113,506 100%
*Graph and date derived from Colorado Department of Health and Environment on August 27, 2014
Based on these August 2014 numbers, 61,963 individuals in Colorado are
growing marijuana outside of a regulated business. How many of these individuals are
profiting from selling marijuana in the grey market is unknown. Yet, the number is high
enough and market studies have indicated that a portion of this population coupled with
an unknown number of home growers in the recreational market are contributing to an
unregulated market that compromises business, government regulations, and quality of
product. The concern for this is demonstrated in the following information gathered from
interviews with various stakeholders.
Stakeholder Interviews and Local Government Regulations
After reviewing market numbers and predictions and medical marijuana
registrants, it is important to understand how current regulations are affecting individuals
and how governments are moving to regulate the marijuana markets.
In order gain a broader understanding of how marijuana is being regulated
throughout the state, a variety of local governments were interviewed. The variation of
localities includes a mix of metro Denver localities, college towns, traditional suburban

18. 14
localities, and a tourist economic-driven locality. This mix of localities gives a wide
variation of differences and issues, which aimed to gather a wider range of policy options
and ideas. The interviews included a Northglenn city councilman, representatives from
the City of Aspen, representatives from the city of Boulder, representatives from the City
of Ft. Collins, and an Adams County Commissioner. Each city or county had in place or
is seeking regulatory measures concerning marijuana at the times of interviews. The table
below shows which localities have regulations in place and which are proposing new
regulations.
Medical
Marijuana
Allowed
Recreational
Regulations
Proposing
Regulations
Cap on
Businesses
allowed
Northglenn, CO Yes Yes Yes N/A
Aspen, CO Yes Yes No No
Boulder, CO Yes Yes No No
Ft. Collins, CO Yes Yes Yes Yes
Adams County,
CO
Yes No Possibly N/A
Of these localities, two – Boulder and Ft. Collins – have or are stipulating
regulations that differ from current state mandated regulations (disregarding local tax
impositions). Adams County, Northglenn, and Aspen are using or pursuing regulations
that comply with state mandated regulations. Adams County and Northglenn currently
impose a moratorium on the sale of recreational marijuana. On the 2014 ballot, Adams

19. 15
County voters approved a measure that would allow for a tax to be levied on recreational
marijuana that paves the way for the county to eliminate the countywide moratorium.
According to Adams County Commissioner Chaz Tadesco (2014) conversations began to
eliminate the moratorium on recreational marijuana prior to the issue 1A. This will only
happen after public hearings and public testimony. Tadesco (2014) noted that Adams
County is losing revenue to surrounding localities because of the legalization of
marijuana. Tedesco (2014) believes that there is illegal selling and distribution occurring
within the county, thus the need to legalize recreational marijuana exists. Other local
government officials interviewed held similar beliefs. A supporter of issue 1A,
Northglenn City Councilman Wayne Dodge (2014) supports marijuana from a business
standpoint. Dodge (2014), like others, believes keeping marijuana removed from a
locality only exacerbates grey market activities.
Northglenn and Adams County are moving towards what seems to be more
typical regulations – increased tax rate and standard business application. This style of
regulatory measures resembles those in place in Aspen and Boulder, where city officials
believe no additional regulations are necessary. Aspen City Attorney Debbie Quinn and
Records Manager Linda Manning (2014) believe current regulations are prohibiting the
transfer and sale of unregulated marijuana in Aspen. At this time Manning and Quinn
(2014) believe that 90 percent of all marijuana purchases are tourists visiting Aspen.
When asked if marijuana was believed to be leaving the state though Aspen, Manning
and Quinn (2014) flatly reported “no marijuana is leaving Aspen’s airport.” Manning
and Quinn (2014) believe airport policies are restricting any flow of marijuana out of the
city. Furthermore, the number of local users is so low that Manning and Quinn believe it

20. 16
is nearly impossible for a grey market to exist. According to CDPHE Pitkin County has a
total of 564 medical marijuana patients, or approximately one percent of the total
Colorado population, which signifies marijuana usage is low within the City of Aspen
(CDPHE, 2014).
Much like Aspen, the City of Boulder does not, at this time, see a need for
additional marijuana regulations to prohibit the grey market activities. According to
Mishawn Cook, City of Boulder Tax and Licensing Manager, (2014) Boulder has seen an
approximate 55 percent shift from medical marijuana to recreational marijuana since the
implementation of recreational marijuana. Cook (2014) notes that Boulder police
conduct regular compliance checks with registered marijuana business, growers, and
caregivers. This, she believes, is curbing grey market practices in the City of Boulder
noting there are not concerns about illicit marijuana activity.
Unlike these localities, the city of Ft. Collins is moving in a drastically different
direction. According to Project and Policy Manager Ginny Sawyer (2014), Ft. Collins is
currently discussing the issue of caregivers and home growers as it relates to the grey
market. An intriguing idea, city officials plan to present to the public the idea of public
growing for caregivers and home growers (Sawyer, 2014). Ft. Collins hopes to use a
vacant warehouse where marijuana could be grown in a community garden fashion. The
warehouse would house individual cages where “lot owners” would be able to lock and
grow their plants. This option would allow the city to track and enforce regulations on
the caregivers and home growers more easily by eliminating the legality of growing
within residential property (Sawyer, 2014).

21. 17
This option, however, conflicts with some of the medical marijuana community’s
access. Medical marijuana activist and user, Teri Robnett (2014) argues that access to
medical marijuana is the single most important issue for the medical marijuana
community. Robnett (2014) argues that some patients are unable to go pick up the
marijuana at a store or from a grower. The caregiver, in this case, is important for
transportation and distribution. Like Robnett, Mark Pederson (2014) believes that
restricting caregivers only restricts patients from “medicine.”
This idea of restriction moves into a second popular discussion for regulations –
tax adjustment. In the review of scholarly literature, Hudak (2014) mentions a tax
increase on medical marijuana might help mitigate the grey market. Local governments
and business owners varied on this issue while the medical marijuana community
vehemently oppose any tax increase to medical marijuana. Likewise, local governments
oppose any tax reduction to the recreational market. This leaves the two markets with a
still large disparity between pricing, which could still pull recreational users towards the
medical or grey markets. Regina Nelson (2014) is a doctoral student and medical
marijuana user who believes the answer lies in public education: “We think of this like a
prohibition problem. We should think of it as a public health issue.” Nelson (2014)
believes the state should use more funding to educate the public on marijuana issues and
uses. By doing this, she believes many of the issues surrounding the grey market will
dissipate.
Business owners, on the other hand, share similar concerns of both local
governments and the medical marijuana community. Rod Hurlbut, Jane West, and Jon
Cooper operate different marijuana businesses within the Denver metro area. Hurlbut

22. 18
operates three medical/recreational businesses in south Denver that have been in
operation since 2007. West operates Edible Events, LLC., a new BYOB-style
organization that partners with local events to coordinate marijuana events. Cooper
operates a new marijuana research and soon-to-be recreational store operation. Each
agrees that more regulation and guidance from the state is needed for business protections
(Cooper, West, Hurlbut, 2014). Hurlbut, however, takes an opinion that differs from
most. Hurlbut (2014) believes that access to medical marijuana needs to increase and
restrictions need to be broadened to lessen the effects of the grey market. This does not
include a tax increase on medical marijuana. Instead, Hurlbut (2014) argues that
caregivers should be forced to “play by the same rules.” Simply, Hurlbut (2014) implies
that caregivers and home growers should be subjected to similar regulations as
businesses. This, though, would drastically increase law enforcement time and expenses.
Likewise, West’s enterprise looks to normalize marijuana consumption while coupling
events with recreational use. West, however, does not sell or distribute marijuana.
Instead, her organization partners with community organizations, like the Colorado
Symphony, to coordinate marijuana friendly events. West (2014) believes that a clearer
direction from the state and the City of Denver would benefit business by eliminating
criminal activity inherently intertwined with the marijuana markets.
Of these opinions and findings one commonality exists between the three
stakeholder groups – more direction is needed from the state concerning marijuana
regulation. What that direction is still does not resonate the same with the various
groups. These findings coupled with the initial framework as dictated from the review of

23. 19
scholarly literature frames two policy options for the Office of Marijuana Coordination
that can be formulated to help guide Colorado’s local governments moving forward.

24. 20
Policy Recommendations
After engaging the stakeholder groups and evaluating current regulations, the
Office of Marijuana Coordination should consider two policy options: the Ft. Collins
proposal or tightened regulations on caregivers. Because the key directive is to limit grey
market activities that are believed to arise from caregivers and home growers, the state
must focus solely on loose ends associated with regulations concerning these groups.
Ft. Collins Option
The state should follow closely as Ft. Collins begins to explore the option of
community garden style growing. This option gives the state the best opportunity to
monitor and tighten grey market practices. As discussed earlier, this option sets up a city
owned grow facility where home growers and caregivers can grow the maximum number
of plants in a public space. This allows for strict local control, as enforcement agencies
would be able to closely monitor how much marijuana each individual grows. In part,
these regulations include zoning restrictions where it is illegal to grow in any residential
building. Currently, Ft. Collins does not allow marijuana to be grown in any residential
building with shared walls – condominiums or apartments (Sawyer, 2014). If this is
expanded to include any residential dwellings, local governments can expect the majority
of personal, private, and medical growing to be done in the shared grow area. To offset
costs of property purchase and upkeep, the locality should charge a base rental or
purchase fee to use the space. After the base fee is charged, a yearly upkeep fee should
be levied on the occupants of the space. If done correctly, regulatory bodies should be

25. 21
able to more closely monitor the distribution of marijuana from caregivers and home
growers based on caregiver records, plant count, and visible harvesting of plants.
Tightened Regulations on Caregivers
Because of the Hurlbut (2014) interview it is reasonable to assume that the issue
with the grey market does lie within a tax disparity. In fact, Hurlbut (2014) believes that a
tax increase on medical marijuana would be more harmful than helpful. Instead,
caregivers need to be regulated in the same manner as a business. In many ways, minus
the exchange of money, caregivers are performing a service for a good – the same as a
business. It is reasonable, then, to stipulate that caregivers be subjected to the same
registration, licensing, and monitoring as a business. Regular enforcement checks on
caregivers with increased patient counts should be administered. By regulating caregivers
more like a business, regulatory bodies can more easily track and enforce marijuana laws,
thereby shrinking the grey market. This option, however, would increase state and local
costs drastically. Furthermore, because of the current definitions of caregivers, the
business-style regulations would restrict access to patients.

26. 22
Conclusion
Mark Kleiman Ph.D. mentioned in a Botec Analysis webinar (2014) on marijuana
policy that the key to successful marijuana regulation is local control. From the early
market analysis conducted by Hudak (2014) and the findings from this paper, it is evident
that each Colorado locality is working to regulate both marijuana markets according to
their respective citizen’s views and needs. The general consensus, however, is that more
direction is needed from the state on these issues, specifically regulating grey market
practices.
At this time, it is too early to know what is and what is not working to limit grey
market activities. However, Kleiman (2014) argues that by making marijuana illegal,
governments are only ensuring the continued relevance of the black and grey markets,
and although these markets can never be completely eliminated, they can be minimized
through smart legalization. Colorado, however, must continue to work through two
constitutionally mandated marijuana markets while shrinking the grey market associated
with marijuana. Because of this it is vitally important to view local governments in the
same way that the United States is viewing Colorado and Washington – laboratories
where experiments are being conducted. While localities like Aspen and Boulder feel no
need to expand marijuana regulations beyond what is currently in place, other localities
like Northglenn and Ft. Collins are pushing to find innovative or more stringent
regulations before fully implementing the marijuana legalization.
Policy experts mentioned in the review of scholarly literature recommend not
lowering tax rates, but instead point to tightening regulations in the medical marijuana
market. Kleiman (2014) suggests an array of options that include direct delivery of

27. 23
medical marijuana to tighter restrictions on doctors. For Colorado, however, local
governments should work with stakeholders in their communities to find options that are
workable. The options listed in the policy recommendations are universal and adaptable
to any community. For purposes of state recommendations to local governments, the
Office of Marijuana Coordination would be best served to continue to push the state to
allow local governments to experiment with these options and others. As Hudak (2014)
writes, it is still too early to know one way or another what regulations are working and
what are not.

28. 24
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Caulkins, J., Lee, M., & Kasunic, A. (2012). Marijuana Legalization: Lessons from the
2012 State Proposals. World Medical & Health Policy, 4-34. Retrieved September
15, 2014, from http://www.antoniocasella.eu/archila/Caulkins_2012.pdf
Collett, S., Gariffo, T., & Hernandez-Morgan, M. (2010). Evaluation of the Medical
Marijuana Program in Washington D.C. Botec Analysis. Retrieved September 13,
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31. 27
Appendix A
Definitions
Recreational marijuana – marijuana grown, sold, and used for recreational purposes as
defined by the Colorado Constitution.
Medical marijuana – marijuana grown, sold, and used for medical purposes as defined by
the Colorado Constitution.
Caregiver – Any person 18 years or older registered with the State of Colorado as a
primary caregiver for an individual or patient for purposes of administering, purchasing,
distributing medical marijuana.
Home grower – Any person who grows recreational marijuana in a residential dwelling
as permitted by Colorado law and local ordinances.
Grey Market – A marijuana market believed to exist where home growers and/or
caregivers are profiting by selling legally grown or acquired marijuana in an unregulated
market.

32. 28
Appendix B
Policy Implementation
The Ft. Collins option is the most cost effective and reasonable option. The following
should be considered when implementing the Ft. Collins option:
Property
In order for the local government to mandate home growers and caregivers to grow in a
government owned facility, the government must first possess adequate property and
infrastructure. Therefore, localities must first identify the approximate number of home
growers and caregivers within their jurisdiction. From there, the locality must determine
what size the grow space is needed.
Cost analysis
Secondly, the locality must conduct a cost analysis of all factors associated with the grow
facility. This includes but is not limited to: purchase of property and/or construction of
property; building maintenance and general upkeep; additional monitoring and policing;
administrative costs.
Fees for use or taxation
Once a cost analysis is conducted, the locality must consider payment options to justify
the building, use, and maintenance of this option. The locality should consider two
options: a tax increase on recreational and medical marijuana or usage fee. In this case, a
usage fee might be favorable. This would allow the locality to rent or sell individual grow

33. 29
spaces, impose a general usage fee, and impose additional charges associated with
policing and regulatory maintenance. Additional taxation would impose an additional
burden on non-growers who choose to purchase from a local retailer.
General planning
Lastly, the locality must formulate a system, which includes routine site compliance
checks, penalties associated with violations and noncompliance, and additional resources
for properly carrying out this option. The only way this option succeeds is with proper
compliance and penalties associated with noncompliance. The locality should conduct an
assessment of appropriate departments to determine how the locality will enforce rules
and regulations and what resources are needed to make this option successful.

34. 30
Appendix C
Course Competencies
The capstone course provides MPA students an opportunity to exhibit the various
skills and knowledge accumulated through the program. Although this project exhibited
all five areas of the core competencies, three of these competency areas were especially
relevant: leading and managing public governance, participating in and contributing to
the public policy process, and to analyze, think critically, solve problems and make
decisions.
This paper is a direct example of leading and managing public governance.
Because of the directive from the Governor’s Office of Marijuana Coordination to
propose policy options for the state to disseminate to local governments, the work
presented in this paper exhibits an understanding of public governance. Furthermore, this
project demonstrates an understanding public administration in society, of mission driven
goals, the use of data, economic concepts, continuous improvement to manage and lead
in service of the mission, and the ability to manage and lead with emotional intelligence.
This paper is a result of emerging policy needs within the state that allowed this project to
explore various areas of government and emerging public policy options to formulate a
cohesive policy proposal for the State of Colorado. This included using data and
economic studies that coincided with other concepts and competencies that collaborated
with other competencies to move the project forward. Because recreational marijuana is
a new policy area, this project shows the ability to lead in policy formulation. By looking
into an area with little or no prior research, this project proves the ability to use parallel
and similar policy research to formulate new policy that will lead to better public

35. 31
governance. The crux of the project is to mitigate a public governance issue by finding
better options for marijuana public policy.
As noted above, the project is rooted in public policy. A key competency for the
program, participating in and contributing to the public policy process is the single most
evident competency exemplified in this project. The review of scholarly literature shows
an understanding of market studies and parallel policy studies. From the literature, the
project drew on current and proposed state and local government marijuana regulations
and policies and various stakeholders’ interviews to synthesize data and information to
formulate policy options. This paper demonstrates the ability to engage citizens and the
ability to use techniques and tools to formulate public policy. The understanding and use
of triangulation and qualitative research exemplifies the need ability to identify barriers to
effective implementation and how policy connects with the administrative process. When
tied together, reasonable public policy options resulted from the research obtained
through this process, which proves the not only the participation, but a contribution to
public policy for the State of Colorado.
Lastly, the project exemplifies the understanding and use of research methods.
Qualitative research mandates the researcher to collect and analyze data that can be used
collaboratively with structured interviews and scholarly research. This description of
qualitative research was used to formulate public policy options. The review of scholarly
literature showed the ability to select and use appropriate research that set a framework
for the research. The structured findings and policy options showed an ability to
synthesize data and information that allowed policy options to formulate. Furthermore,
the policy options proved the ability to critically assess options gained from the findings

36. 32
to formulate two policy options that should be considered reasonable policy proposals.
Finally, the policy proposals prove the ability to further criticize the finding to propose
two options, specifically one strong option for implementation. When compared to the
original directive, the proposed policy option in this paper supports the understanding of
criteria for appropriate decision-making processes. In all, this project exemplifies
research methods because it offers the client viable, real world options for public policy.
Although this project is not representative all material and skills gained in the
MPA program, it does exhibit many core competencies that led to research that can be
useful in marijuana public policy. This project includes examples competencies in public
governance, public policy, and research methods. The project allowed me to work with
various citizens, advocacy groups, community members, government officials, and
business owners to pull together varied opinions, ideas, and information. The project
allowed me to research market studies, past and present, and to use current and past data
to make critical decisions about current and proposed policies. Furthermore, this project
gave me a broader understanding of why each of the core MPA courses coincides with
one another – to provide aspiring leaders the tools to find and create better public
governance, policy, and representation.

37. 33
Attachments
Light, M., Orens, A. Lewandowski, B., and Pickton, T. (2014). Market size and Demand
for marijuana in Colorado. The Marijuana Policy Group. Retrieved August 21,
2014, from
https://www.colorado.gov/pacific/sites/default/files/Market%20Size%20and%20
Demand%20Study%2C%20July%209%2C%202014%5B1%5D.pdf.
This market study was prepared on for the Colorado Department of Revenue. The
cited reference within the text is an additional study conducted by the Brookings
Institute. This document should be viewed as supplementary evidence into market
data presented within this paper.
Hyman, R. (2014). Memo: Request for Rule-Making Hearing to Colorado State Board of
Health. Colorado Department of Health and Environment. Retrieved September
21, 2014, from
https://www.colorado.gov/pacific/sites/default/files/MMR%20HRG%20Packet%
208.8.14.pdf.
This document outlines proposals from the Colorado Department of Health and
Environment that aim to address issues illustrated in this paper. Specifically, this
document addresses the need to address regulations on caregivers, definitions for
illnesses and/or ailments, and proposals for new registration and waiver policies.