SPOTLIGHT LANDS ON COLORADO, THE MEDICAL MARIJUANA LEADER

Steamboat Springs -- The room erupted in applause after Kush Magazine
Publisher Michael Lerner told a packed audience of more than 300
center owners, infused-product makers and growers at the Medical
Marijuana Business Alliance's August networking meeting that "Colorado
is so far ahead of the rest of the country in this industry, there is
no second."

It was a common reaction to the speakers throughout the night at
Casselman's Bar & Venue in downtown Denver. They whistled, whooped and
hollered when Matt Cook, a career law enforcement officer charged with
overseeing the state's medical marijuana industry, said, "It truly is
a privilege to grow with this industry as we moved forward."

It seemed like the group felt it was part of something big. The
industry had come so far, and there was still room for growth.

"For me, the energy is crackling," said Brett Magdovitz, who is part
of a group that owns three Front Range medical marijuana centers and
several product lines. "This is history in the making."

A few days later, at Cannabis Festiva at Dick's Sporting Goods Park in
Commerce City, Lerner drove home his point.

"I feel Colorado -- being the leader -- is basically paving the way for
the rest of the world," said Lerner, publisher of the Calabasas,
Calif.-based Kush Magazine, which has local editions in 34 cities in
14 states. "I think the capital for medical marijuana is right here."

An estimated 113,000 Colora-dans have been approved to use medical
marijuana, which became legal after state voters passed Amendment 20
in 2000.

Now medical marijuana centers number more than 800, a majority of
which are in the Front Range cities of Denver, Colorado Springs and
Boulder. The industry has taken root across the state and quickly
spread to mountain towns such as Steamboat Springs, where three
medical marijuana centers serve a population of about 12,000.

Perhaps more profound is the societal impact of medical marijuana's
sudden rise. With marijuana-related advertisements bombarding
residents young and old in newspapers, on TV and on storefronts across
the state, it quickly is becoming a part of Colorado culture. But the
industry's future still is hazy.

"I think it is becoming more a part of the community all over
Colorado," Steamboat Springs City Council President Cari Hermacinski
said in August. "The big concern going forward for me: The state has
passed new rules. I don't know whether that simplifies matters or
complicates them for Steamboat."

Legitimizing a culture

Marijuana long has been a part of Steamboat Springs culture, City
Council member Jon Quinn said.

"I think particularly in Steamboat, there's always been this accepted
underground culture in which marijuana has been accepted for decades,"
he said. "If you visit other communities, that might be different."

There was little opposition among city leadership to allowing medical
marijuana centers in Steamboat. The City Council allowed two such
businesses to open in August 2009 before imposing a moratorium that
gave the city time to craft an ordinance to formally regulate the
industry. That ordinance was approved in January.

Some City Council members are reconsidering whether capping the number
of medical marijuana centers at three -- two for-profit businesses and
one cooperative -- created a monopoly instead of a competitive
marketplace for business owners and customers.

Kenny Reisman was the only member of the City Council who voted
against the ordinance in January, citing his preference for no cap and
a higher license fee. In August, Reisman said a higher license fee
would have required a larger commitment from center owners.

"We as a government were trying to balance a lot of different
entities: patients, businesses, the police department," he said. "I
almost felt more was better if it came with a higher price tag."

The passage of House Bill 1284 and Senate Bill 109 -- legislation
created to regulate the business and medical sides, respectively, of
the state's medical marijuana industry -- will require the city to
amend its medical marijuana ordinance.

"I would be surprised if the new ordinance restricts the number to
three," Quinn said. "We may restrict to some number, but I have a
feeling that number will be more than three."

Hermacinski agreed that Steamboat's new ordinance, which City Attorney
Tony Lettunich plans to propose to the council this fall, could allow
more medical marijuana centers. Whatever that number might be, budding
entrepreneurs still will have to wait. House Bill 1284, passed by the
General Assembly this spring, imposed a moratorium preventing new
medical marijuana businesses from opening before July 1, 2011.

Some Steamboat medical marijuana center owners disagree that the City
Council's ordinance stifled competition.

"It's not a monopoly," said Kevin Fisher, co-owner of Rocky Mountain
Remedies. "There's a monopoly if it's one. There's three."

Challenges loom

Like Steamboat, other communities are grappling with amending existing
medical marijuana ordinances. Some will leave it to voters to decide
whether to allow marijuana businesses in their communities. And some,
including Hayden, already have banned medical marijuana businesses.

That ban was made possible by the passage of House Bill 1284. The
provision is one of several that medical marijuana advocates say they
will lobby to change in the upcoming legislative session.

"It's our belief patients have the right to access marijuana in a
convenient manner in their communities," said Brian Vicente, executive
director of patient advocacy group Sensible Colorado. "They shouldn't
have to get on the bus to go out of the city or county to get the
medicine that their doctor says they need."

There also could be a challenge of Gov. Bill Ritter's proposal to use
$9 million in revenue generated by the state's Medical Marijuana
Registry cash fund to help balance Colo-rado's budget.

The state's constitution and Colorado Revised Statutes state that
revenue generated from fees paid by medical marijuana patients to
obtain a registry card can be used only to administer the program and
can't be appropriated to any other state fund. The transfer would
require General Assembly approval.

Denver medical marijuana attorney Rob Corry also said he was gearing
up to challenge House Bill 1284.

"There are a lot of horrible unconstitutional restrictions on
caregivers," he told the group at the Medical Marijuana Business
Alliance's meeting in August.

Corry said he would challenge the provision in the legislation that
restricted caregivers, or medical marijuana providers, to five
patients. Caregivers were allowed to have more than five patients
after a successful challenge to the restriction in 2007. That
challenge was upheld by the state Board of Health in July 2009, but
House Bill 1284 reinstated the five-patient limit.

Rep. Tom Massey, the Poncha Springs Republican who helped draft House
Bill 1284 and Senate Bill 109, said in August that he expected the
state's medical marijuana legislation to require tweaks in upcoming
legislative sessions. But he added that other states were starting to
take notice of what Colorado has done.

Others will follow

The legislation is part of the reason Lerner called Colorado the
country's medical marijuana leader. As he noted, the world is watching.

Matt Cook, senior director of enforcement for the Colorado Department
of Revenue, told the same Medical Marijuana Business Alliance groupthat
"I'll even go so far as to say we're in the international
spotlight," citing a recent media request from the BBC.

He's also been contacted by states that have or are considering
medical marijuana legislation. He said in an August e-mail that
officials in South Dakota, Vermont, Arizona, New Jersey and
Washington, D.C., have contacted him to ask about Colorado's medical
marijuana regulatory system.

At the meeting, Cook highlighted the nation's capital, which in May
approved the use of marijuana for medical purposes. The program there
hasn't started.

"Does anybody really know the significance of what happens in the
District of Columbia?" Cook asked the group. "If you're not (aware),
their laws had to be ratified by the Congress of the United States,
and they were passed."

House Bill 1284 gave Cook the authority to draft rules to further
regulate Colorado's medical marijuana industry. He released 92 pages
of draft rules after the first meeting of a workgroup Aug. 27.

The rules, which the group of medical marijuana stakeholders will
continue to refine at subsequent meetings, will be presented during a
hearing of the state's licensing authority in January, Cook said.
During the ensuing six months, he said his enforcement officers would
work closely with members of the state's medical marijuana industry.

"There's three components: education, compliance and enforcement,"
Cook said. "That will not change. We will ensure the industry
understands the expectations for them."

Some of those rules could include a radio frequency identification
system to track medical marijuana sales. The tracking system is
intended to prevent the sale of medical marijuana on the black market.
It's one of several proposed regulations that would help the state
keep track of medical marijuana from seed to sale.

In addition to extensive security regulations, medical marijuana
center owners, infused-product makers and growers will be subject to
rules that require safe cultivation of marijuana and related products.

And that's where people like Michael Lee come in.

A green science

Lee owns Cannabis Therapeu-tics, which he says is the state's oldest
surviving medical marijuana center. He said the business opened in
2004. Lee also owns Genovations Creations, a lab he opened in 2006 to
study the science of marijuana. Lee said he has invested $800,000 in
it.

In the Colorado Springs lab, Chief Science Officer John Kopta isolates
cannabinoids, the compounds that have medicinal properties, to create
a cannabinoid profile. Those profiles indicate how much of each
cannabinoid is present in a particular strain of medical marijuana or
other product.

"Ultimately, I think it's all for the patients, for them to know
what's in their medications instead of sticking their nose in a jar,"
Kopta said. "Just because it looks pretty and smells pretty, it
doesn't mean what they're getting will help. We'll get to a point
where we'll know a patient's ailment and be able to recommend the
different strain or liquid or product that works best."

Kopta said he knows what different cannabinoids treat based on
European research. Clinical trials of marijuana aren't permitted in
the U.S. because it's categorized as a Schedule 1 controlled substance
by the federal government and isn't considered to have medicinal value.

Eventually, he said Genova-tions Creations would be able to breed
plants with certain cannabinoids to treat specific medical conditions.

"My research is not going to stop. ... It's where (the industry) is
going to be. It's where the future is," Lee said, but modified his
thought. "It's now, today. It's not tomorrow."

Lee said there are only three other labs in the state conducting
research similar to that of Genovations Creations. One of those, Full
Spectrum Laboratories in Denver, lists Mary's in Oak Creek as a
medical marijuana center it tests for.

Genovations Creations also offers that service for a fee, but Kopta
said there's been a mixed reaction from medical marijuana center
owners. He said it comes down to whether people want to help patients
or make money.

In addition to creating cannabinoid profiles, Lee said the research
can detect whether a marijuana sample has mold or other contaminants.
He also uses his lab to create some of the 84 medical products he
sells at Cannabis Therapeutics.

"I would like to see testing of medical marijuana in every state," he
said, "so they know it's medicine and it helps people."

Kopta said research like his will continue to move the industry toward
legitimacy.

"Everyone is recognizing that this could be the next Zoloft or next
Viagra," Kopta said. "Once it's taken off that Schedule 1 ranking, it
will be available to the pharmaceutical companies. It will be sold in
Walmart."

Matt Brown, of the industry business advocate Coloradans for Medical
Marijuana Regula-tion, said he thinks it will be years before
pharmaceutical companies come on board and are able to conduct
clinical trials.

"I always tell people when this changes federally, I think the biggest
threat is a company like Whole Foods," he said. "Their product chain
is most like ours. They understand how to take a product from a small
organic farm."

Legitimacy to legalization

As Colorado's medical marijuana industry becomes more legitimate, so
too could measures to make marijuana legal for all users.

Vicente said the state has its eyes on California, whose voters will
consider a ballot initiative next month to make it legal for anyone 21
or older to possess as much as an ounce of pot.

State officials in California have estimated that approval of the
proposition could generate $1.4 billion in sales tax revenue statewide.

But Vicente said what happens in California won't dramatically affect
future initiatives in Colorado.

"I think they're distinct entities, different states," Vicente said.
"I think if it would pass and was successful, I think it could create
a model for other states and Colorado. If it fails, I think it could
inspire people to work harder on this issue."

Proponents of a similar initiative already are raising money to place
a legalization measure on Colorado's 2012 ballot.

The Legalize 2012 Project, which is led by medical marijuana advocacy
group the Cannabis Therapy Institute, has proposed a legalization
model that wouldn't limit pot possession or use. The model also
wouldn't subject marijuana to taxes beyond regular sales tax.

Vicente said in August that Sensible Colorado has begun fundraising
and reaching out to local and national leaders for a 2012 legalization
push of its own. He said the organization is starting to line up
resources and endorsements and plans to have a website up and running
by December.

Law enforcement reaction

As a young patrol officer for the Aspen Police Department in 1967,
Routt County Sheriff Gary Wall and another officer made the town's
first marijuana possession arrest. At the time, Wall thought pot would
be legal within 10 years. Now more than 40 years later, he still
thinks legalization is inevitable.

"I'm not advocating people use marijuana," he said. "It's prolific in
this town among all people in all age groups and professions. I can't
pretend to be this law enforcement guy who's going to lock everyone up
using marijuana. No. Nobody feels different about it than I do. It's
heading that way."

Instead of pursuing criminal charges for petty marijuana offenses,
Wall said he's taken an active role in the Routt County drug court,
which works toward alternatives to incarceration for people with
addiction problems. He said it's been successful for people who buy
into the program.

Wall also said the Sheriff's Office has not seen an increase in crime
since medical marijuana centers began operating here. He said his
office hasn't used additional resources, whether in dollars or time,
to increase monitoring or make more marijuana-related arrests.

"I don't have any hard and fast rules about this," Wall said. "I don't
have any policies. My people, I expect them to use their judgment and
discretion when they come across these things and do what's
reasonable. I'm not one to take a zero-tolerance approach for
relatively minor things. Obviously, serious crimes are a different
situation."

In addition to concerns about the potential for increased crime, local
law enforcement officials have expressed concern that the presence of
medical marijuana centers makes access to the drug easier for youths.

"From our perspective, our primary concern -- more than a concern about
people getting medical marijuana cards that don't need them -- is it
will end up in the hands of kids," Steamboat Springs Police Chief JD
Hays said.

Asked whether he thinks that has happened, Hays said, "So far,
no."

Hays, like Wall, said his office hasn't dedicated additional resources
to marijuana enforcement since the first centers opened in Steamboat.
He said there hasn't been any crime associated with the centers and
they all passed compliance checks in May.

Front Range law enforcement agencies also are reporting no clear link
between the presence of medical marijuana centers and higher crime
rates.

A Sept. 14 story in the Colorado Springs Gazette reported "no evidence
the industry -- which boasts about 175 businesses in Colorado Springs --
disproportionately attracts robberies and break-ins."

During an 18-month period ending Aug. 31, the Gazette reported there
were 41 criminal incidents at medical marijuana centers and grow
operations: 33 burglaries, six robberies (burglaries with a threat of
violence) and two cases of vandalism.

By comparison, the Gazette reported that there were 797 robberies of
businesses and homes during an 18-month period ending June 30, the
most recent statistics. The story stated that there were 4,825
burglaries of businesses and homes during the same period.

The Gazette cited a Colorado Springs Police Department spokesman who
said the numbers don't indicate that a higher crime rate exists with
medical marijuana centers but more time is needed to collect
information about the industry.

The Denver Police Depart-ment came to a similar conclusion that no
clear link existed between medical marijuana and increased crime in
the city.

Values remain the same

Some Steamboat elected officials said the presence of medical
marijuana centers hasn't changed the community.

"I don't think it has, in my mind," Reisman said. "I think the core
values of our community are many, many years in the making. Having
(medical marijuana centers) does not change those core values in six
months or the core character in six months."

Council President Hermac-inski said she's heard positive comments
about the businesses.

"When I compare it to other issues we've dealt with, I wouldn't say
it's a particularly difficult one," she said. "In terms of public
input, it's dog parks and Frisbee golf that fills the room. With
medical marijuana, it was only the guys who wanted licenses. ... I'm not
saying it's not an important issue. But about how it's resonating in
the community, the only ones who show up are the licensed (center)
owners."

There are now three medical marijuana centers in Steamboat and five in
Routt County, and more may be on the way, depending on how the city
amends its ordinance.

It doesn't appear that the state's medical marijuana industry is
slowing down either, even though some officials, law enforcement
officers and medical professionals question the treatment and the
potential for abuse within the industry.

And despite the statewide moratorium that will prevent new medical
marijuana businesses from opening until July 1, 2011, the industry is
expected to grow to an estimated 150,000 patients by year-end, Rep.
Massey said.

The same type of growth can be expected in Steamboat, with new
patients motivating centers such as Rocky Mountain Remedies to
continue expanding.

Quinn said the fact Steam-boat's medical marijuana centers have drawn
little attention speaks to the owners doing what the city asked.

"Overall, I guess I would say we don't have giant marijuana leaves on
Main Street," he said. "They've operated under the radar. They've toed
the line with the requirements from the city and Police Department. I
guess I would say, so far, so good."