Sunday, January 12, 2014

Mexican Drug Cartels Will Likely Try to Overrun Colorado's New Pot Shops

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Mexican Drug Cartels Will Likely Try to Overrun Colorado's New Pot Shops
Image Credit: AP
As expected, the legal pot business has proven to be an economic flourish in just under two weeks, including $5 million in its first five days. Marijuana may be legal to sell and legal to use recreationally in Colorado, but it’s not legal to place whatever money is made from it into standard financial institutions.
This is being done out of protection, supposedly, due to some experts believing that sanctioned marijuana retailers could become targets of Mexican drug cartels. Denver DEA office spokesman Albert Villasuso told reporters, "What is quite possible is that cartels will hire straw owners who have clean records who can apply for a license, then sell large quantities both legally and on the black market."
Officials believe that operating a legal business synonymous with illegal drug cartels might make pot retailers an objective for extortion. With marijuana legally being distributed in Colorado, there is virtually no need for black-market competition or backdoor deals to be made. Obviously, this wouldn’t sit well with those involved in the illegal industry.

How much are cartels losing? In September 2013, it was believed that the federal government was working on a solution that would allow marijuana businesses in Colorado to legally use the banking system. The Mexican Institute of Competitiveness said in 2012 that if Colorado were to legalize marijuana, drug cartels could end up losing $1.425 billion annually, which would put a dent in drug trafficking revenues 20-30%. The Sinaloa cartel, who does a lot of business in Colorado, could lose up to 50%. Because these institutions are federally regulated to prevent money laundering by folks like the drug cartels, marijuana retailers who use them would be breaking the law.
Then there's the price: Legal weed is being sold at a much higher price than on the black market, meaning there is business opportunities to be had, especially for gangs and cartel with a ready supply of the product.
In fiscal year 2012-2013, medical marijuana in Colorado made more than $9 million in sales taxes, up from the $6 million in the previous year. All of it was deposited into JPMorgan Chase Bank, which has a contract to hold state funds. That money could be seized by the government at any time if it’s connected to illegal activity.
What next? It’s more than likely that the drug cartels will have some kind of retaliation to the legal retailers, as there’s just no way that they’ll be happy with losing $1.425 billion per year. The legal retailers take cash only, leaving them vulnerable to robbery. They have to take cash only because they’re not allowed to establish accounts with standard financial institutions. If they do, they’re violating federal laws.
That puts retailers in a position where they’re damned if they do and damned if they don’t. It’s only been a little less than two weeks since they’ve been in business, but as anyone could imagine, it couldn’t possibly be easy to do business with both the federal government and violent drug cartels breathing down your neck at the same time.
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