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Politics

As Maine Considers Pot Legalization, State Could Be on the Leading Edge of a Growing Industry

The crystalline properties of the OG Kush strain of pot.
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As the campaign to legalize marijuana heats up in Maine, voters can expect pro-pot advocates to talk a lot about outdated laws that criminalize the use and possession of the drug. But in the background is a burgeoning billion dollar cannabis industry that some experts believe is poised to explode as states march towards legalization. This is second of a two-part report about the money behind the marijuana campaign.

Meet Regina. She’s the host of a series of videos that sell the qualities of a growing offering of consumer products, in this case, a variety called OG Kush.

A video on the Leafly website describes the characteristics of the OG Kush strain of pot:

http://www.youtube.com/watch?v=fNhOCZytv8o#action=share

Leafly, the company that produces these videos — as well as the app that helps users find and rate the pot — tops it all off by depicting the different pot strains as if they’re part of the Periodic Table: OG is shown as Ogk. White Widow is Ww.

Leafly and its parent company, Privateer Holdings, are hoping to cash in on a fledgling legal pot industry that was valued at $7 billion this year by New Frontier, a D.C.-based industry analyst. And New Frontier’s VP for industry analytics, John Kagia projects the industry will explode as states like Maine consider knocking down weed prohibition laws — to the tune of $220 billion dollars by 2020.

“There’s an enormous amount of innovation that can happen, but has largely been constrained by the fact that cultivation and consumption of the plant has been illegal,” says Kagia.

Kagia says states that allow recreational adult use of marijuana are still in conflict with federal prohibition on the cultivation and consumption of the plant. That’s made it difficult for legal sellers to even set-up bank accounts, never mind find companies that will provide business services, like point of sale software, inventory monitoring — you name it.

But that’s changing.

A story on CBS Morning News last year announced that Founders Fund, a big-time Silicon Valley investment firm, was putting $75 million dollars into Privateer Holdings. It’s the same company that owns Leafly, which is basically the pot user equivalent to Yelp, the app that helps people find and rate bars and restaurants. Privateer also owns Tilray, a Canadian Company that grows marijuana and Marley Natural, created by the family of reggae star Bob Marley.

Founders Fund was an early investor in Facebook, Spotify and Elon Musk’s SpaceX. Peter Thiel, a principal partner with Founders Fund, has been in the news lately because he’s also bankrolling Hulk Hogan’s lawsuit against gossip website Gawker. And, Sean Parker, the former president of Facebook and former partner at Founders Fund, is also a major contributor to New Approach, the political action committee helping to fund pro-legalization ballot initiatives in Maine and other states. Privateer Holdings has also contributed to New Approach, although not since 2014.

Kagia says the Founders Fund investment was significant.

“It signaled to a lot of people who have been sitting on the sidelines that there are some very serious players who are paying attention to this industry, and who are seeing investment opportunity, that rise to the level of 75 million dollars,” Kagia says.

There’s still reluctance by some on Wall Street to get involved in the legal marijuana industry, but other investors are emerging. In June, Microsoft announced it was partnering with Kind, a Los Angeles start-up that offers products for the industry, including ATM-style kiosks that help complete pot transactions. Other companies are ready. One, Mjardin, offers turnkey consulting services, including growing software, material procurement — even help to hire temp workers for cultivation. Meanwhile, companies like Leafly, which operates as a social network like Facebook, are gathering consumer preference data that will ultimately help inform sellers of pot of the most popular strains.

“It’s going to allow a lot of the smaller farmers in the state to have access to a larger market because currently they’re limited under the medical marijuana system, says Paul McCarrier, of Legalize Maine

He believes existing pot growers will benefit from legalization.

“It’s going to allow a lot more people to invest in this local industry and that is going to create hundreds, if not thousands of jobs across the state,” he says.

McCarrier says Maine Farmers could also benefit from possible new investment by medical groups exploring the health benefits of the drug. New Frontier’s John Kagia says the state’s high rate of illicit use also signals high demand, and therefore, a growth opportunity. And, while Maine’s small population means that growth could have a ceiling, Kagia says the state could follow the lead of Colorado and cash in on a cannabis tourism.

So, stoned leaf-peepers? Sure, Kagia says.

“It kind of adds to the experience of being there, even though the principle reason for being there is to see the leaves,” Kagia says.

But despite predictions of a windfall in tax revenues and an opportunity to join an emerging industry, there are some who believe that legalization supporters are high — on optimism.

“It’s hard to collect taxes on things you can grow in the backyard. You have a row of carrots, a row of cucumbers, a row of lettuce and a row of marijuana,” Kagia says.

Mainers will decide whether to join the four other states piloting the legal pot industry when they go to the polls in November.