Growing Concerns

Full legalization of marijuana is often considered inevitable. But as the industry takes off, Terp entrepreneurs and academics alike are still wrestling with the implications.

by Liam Farrell | Photo by Stocksy

The gloom from a rainy February night on the Oakland side of the San Francisco Bay dissipates inside the doors of Harborside.

Hipsters, hippies and soccer moms wander past display cases on shiny wood floors, and browse the selection of body lotions, cookies and other products with names like Maui Pacific Island, King Louis and Swami Select Hindu. Perky counter and floor workers chat with customers to a soundtrack of Otis Redding singing “The Happy Song.”

Steve DeAngelo ’86 is a long-time advocate for marijuana legalization and was once called the “Father of the Cannabis Industry.” (Photo by Peter Yang/August Images)

With different products, this establishment co-founded by Steve DeAngelo ’86 would be a more typical brick in the 2019 cultural wall, akin to the trendy cafes, gadget and liquor stores found in up-and-coming or arrived areas.

But Harborside isn’t offering espressos, earbuds or a bourbon barrel stout—it’s selling cannabis.

The store’s transition in January 2018 from a medical marijuana dispensary to general adult sales was the latest accomplishment for DeAngelo, who’s been called the “Father of the Cannabis Industry” by former San Francisco mayor Willie L. Brown. A longtime advocate who spent decades in bruising political fights over the drug’s legalization, DeAngelo is now frequently on lists of the most powerful people in the legal weed business. And he’s feeling “profoundly vindicated.”

“For most of my life,” he says, “I was vilified and chased and harassed.”

Operations like Harborside make it tempting to believe the United States has already crossed the reefer Rubicon. Thirty-three states, including Maryland, and the District of Columbia have sanctioned marijuana in some form, ranging from decriminalizing the possession of small amounts to adult recreational use. After decades of the cannabis spotlight slowly moving from tales of abuse to medical possibilities and criminal justice reform, a Gallup poll last fall found that 66 percent of Americans support legalizing marijuana, up from 12 percent when the polling company first asked a half-century earlier.

But for as much as the landscape has changed since President Richard Nixon declared a “war on drugs” in 1971, University of Maryland graduates working in the fledgling yet flourishing cannabis industry face an uncertain future, with a federal government that still bans marijuana as a drug with the highest potential for damage and without any medical benefits. From ambiguous legal guidance to banking barriers, cannabis is an area rife with risk along with potential reward as it transitions from countercultural signifier to big business.

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The public service announcement planned for the Super Bowl telecast begins with a Colorado mother describing how her son used to suffer from dozens of seizures a day. A Buffalo man comes next, and says he spent 15 years on opioids for back pain. Lastly, a veteran from Oakland puts on a prosthetic leg while saying he couldn’t live with either the pain or conventional treatment plan for his injuries.

“Cannabis is giving me my life back,” the Buffalo man says, before viewers are shown the words, “The Time is Now,” and asked to contact their U.S. senators and representatives.

Acreage Holdings, an investment firm that is the largest operator in U.S. cannabis, was ready to spend millions of dollars to bring this message to arguably the most mainstream event in American society, but CBS decided it didn’t meet broadcast standards.

It’s a decision that could fast appear antiquated, as cannabis becomes more associated with suits in a boardroom than tie-dyed T-shirts in a basement. Acreage counts former U.S. House Speaker John Boehner as a board member, and celebrities including lifestyle guru Martha Stewart, actress/talk show host Whoopi Goldberg and NFL hero Joe Montana have become partners and investors with other cannabis concerns.

Howard Schacter ’87, vice president of communications for Acreage Holdings, spent a career in public relations before working for the National Association for Cannabis Businesses in 2017 and moving over to Acreage a year later, attracted to the challenge of stewarding an emerging business as well as cannabis’ medical potential.

“The objective here was to use one of the largest stages available to put forward this important message. However, CBS rejected our PSA because it ‘doesn’t accept marijuana ads,’” Schacter says, noting the story went viral shortly afterward. “In retrospect, the 3 billion impressions we generated through media coverage of the rejection dwarfed the 100 million impressions we would have generated through the telecast of the Super Bowl, without having to write that check.”

Eyeballs aside, he knows full legalization remains less than guaranteed until the federal government relents. That could happen soon, depending on the twists and turns of presidential politics. While President Donald Trump’s administration has opposed changes and at one point even threatened a crackdown, multiple contenders for the Democratic Party’s 2020 presidential nomination, including U.S. Sens. Cory Booker, Kamala Harris, Bernie Sanders and Elizabeth Warren, support legalization.

“The momentum is heading in the right direction,” Schacter says.

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Flashy billboards and trade show websites like americascashcrop.com weren’t what academics used to envision for a United States with legalized cannabis, says Peter Reuter, a professor at UMD’s School of Public Policy and Department of Criminology and Criminal Justice, who has spent his career studying drug and illegal markets. With “simple naiveté,” he says, researchers including himself believed marijuana legalization would likely entail a bland state monopoly with nondescript stores and no attention-grabbing advertising, essentially “supply without promotion.”

Instead, he says, “We’ve taken this drug, which is not harmless, and allowed it to be aggressively promoted.”

Now he believes the cannabis industry is on its way to embracing the same sins as the tobacco and alcohol industries, and should answer for studies showing legalization’s ill effects, such as intensifying consumption among its most frequent users.

“Are we better off?” Reuter asks. “The true costs of this are not particularly salient and hard to quantify.”

The National Academies of Sciences tried to do that in 2017, releasing a report on the known health effects of cannabis. It found strong evidence that cannabis is an effective treatment for issues such as chronic pain and chemotherapy-induced nausea, yet also noted increased risks for psychoses, motor vehicle crashes, and learning, memory and attention impairment.

But the top recommendation was a call for public, private and philanthropic research groups to commit to getting more information. Federal regulations remain a significant stumbling block, the report found, as researchers can’t get the right quantity, quality or types of cannabis to properly conduct their investigations.

The extent to which cannabis research is still a flashpoint was highlighted earlier this year with the release of former New York Times reporter Alex Berenson’s book “Tell Your Children: The Truth About Marijuana, Mental Illness and Violence.” Some researchers objected to how their work was used to portray the drug as a definitive cause of mental health disorders, rather than having a more ambiguous correlative or sociopolitical effect (i.e., if someone is expected to act a certain way under a drug’s influence, they will).

Cannabis presents some unique challenges for researchers and consumers, says Amelia Arria, UMD professor of behavioral and community health and director of the Center on Young Adult Health and Development. Because the drug itself has been getting stronger over time and past research was conducted on less potent marijuana, she says it’s likely we are underestimating adverse consequences.

While more research is needed, Arria says, what scientists know so far about cannabis’ connections to everything from cognitive and mental health problems to the impairment of academic achievement among young adults and adolescents should prompt a harder look at the consequences of legalization.

“When we see these signals, we get concerned,” she says. “It’s disappointing the policy is way ahead of the science.”

People in the cannabis industry often say they welcome that conversation.

“With legalization comes responsible regulation. This product should be governed,” Schacter says. “That to us is the right path, versus an illicit market where it’s a free-for-all.”

Located in a nondescript Suitland, Md., office building next to a collection of car dealerships and a Red Lobster, AltPharm is a medical marijuana dispensary founded by a family of UMD graduates. Open since April 2018, the business’ plain white door gives way to a warm interior reminiscent of a high-end coffee shop, belied only by a security door separating the couch-filled lobby from where actual products can be purchased.

The goal, says James Riordon ’14, the company’s president, is to provide an environment like a small-town pharmacy, where embarrassed or uncertain patients can be counseled through the process of buying medical marijuana—be it in edible or smokable form, in varying levels of strength.

“We like to keep it nice and small, very hands-on,” he says. “It’s an ongoing effort to educate and reach out to people. We’re completely the opposite of what they believe is going on.”

AltPharm was the result of a dinner conversation around the time Maryland legalized medical marijuana in 2013. Riordon’s grandmother was sick with glioblastoma, a form of brain cancer, and he saw firsthand “how awful some of the prescription medication can be.” A family business was born: Riordon is engaged to Marguerite Santos ’12, vice president of operations, and his parents, James Riordon ’87 and Vicky Ellen Mayoral ’86, are the directors of communications and human resources, respectively.

But cannabis businesses face different obstacles than your standard startup because the federal government still considers selling its central product a felony. So while investors and entrepreneurs can herald cannabis as the next big money-making opportunity, they also have virtually no access to the financial services available to traditional businesses, from small business loans to credit and debit card transactions. National banks are avoiding the cash-based industry, and the smaller, regional ones stepping into the gap are betting on the goodwill of the federal government.

Though a 2013 Department of Justice memorandum said the government would pursue marijuana cases only in situations like selling to minors and financing cartels, former U.S. Attorney General Jeff Sessions rescinded it. In a confusing twist, the Treasury Department’s Financial Crimes Enforcement Network is still relying on that memo.

Consequently, AltPharm had to rely on private investors for seed funding, Riordon says, and a big part of his job is making sure he is up to date on “the finest details” of all state and local regulations.

“I’m always having to learn and stay on my toes,” he says. “It’s nowhere near your average business.”

Because customers can use only cash, AltPharm houses an ATM, but Riordon says they do have a bank. (He declined to name it because of a mutual privacy agreement, but at least one Maryland institution—Severn Savings Bank—has noted in SEC filings that it accepts deposits from and makes loans to medical marijuana companies.) It’s a reflection of how even marijuana’s local legality does not always equate to openness.

“It’s still something that is, ‘Let’s not be too loud about this,’” he says.

That may not be the case much longer. A June 2018 Washington Post-UMD poll found 52 percent of Maryland residents support legalizing the sale and taxation of marijuana for personal use, with 41 percent opposed, and the General Assembly created a workgroup to study marijuana legislation and come out with recommendations for the 2020 session. While quibbling over how to regulate legalized cannabis, legislative leaders have generally conceded it will happen at some point.

“This is a trillion-dollar industry. It needs to be managed right,” state Senate President Thomas V. Mike Miller Jr. ’64 said during a January forum on Maryland politics. “We need to look at other people’s mistakes before we move forward.”

For Santos, it’s rewarding to be at the forefront of that.

“We certainly don’t operate in fear,” she says. “Literally seeing a cultural shift is so exciting.”

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James Riordon ’14 and his fiancée, Marguerite Santos ’12, run a Maryland medical marijuana dispensary. (Photo by Stephanie S. Cordle)

About 13 miles due west of Harborside and its peace-sign logo (“Be Well, Be Free” reads one parking lot sign) is the Haight-Ashbury district, a San Francisco neighborhood synonymous with 1960s rebellion and the hippie movement.

Reminders linger of its past: an anarchist bookstore and tattoo shops; street musicians with long dreadlocks; a youth services storefront and portable trailers offering bathroom and shower access for the indigent.

There’s also a Ben & Jerry’s at the corner of Haight and Ashbury streets.

DeAngelo, a former Yippie who participated in annual “smoke-ins” in front of the White House and still wears his hair in two long braids, is sensitive to the collision of commerce and the counterculture, and how the years ahead will likely increase friction between longtime cannabis activists who’ve spent years on the outside looking in, and a newly interested investor and business class.

“From a personal point of view, I am cleaved down the middle,” he says. “There is a profound culture clash and sense of distrust.”

For all his rebellious bona fides, DeAngelo is not shy about pursuing new business opportunities, noting in his 2015 memoir/polemic “The Cannabis Manifesto” that many political solutions advocated by leftist colleagues “never sat well with my entrepreneurial spirit.” Besides leading a cannabis investment and research firm called the Arc View Group, DeAngelo is in the process of getting Harborside on a Canadian stock exchange.

Not surprisingly, DeAngelo has taken some hits on this perceived hypocrisy. The short-lived Netflix series “Disjointed” had a thinly veiled antagonist named Angelo DeStevens who spent a few episodes greedily trying to capitalize on the ingenuity of the show’s mom-and-pop dispensary. (While amused at the character’s initial appearance, complete with the braids, DeAngelo later tweeted that he was disappointed at his treatment in light of “so many more worthy villains in the world.”)

“We have to remember why we started this,” he says. “We can’t now block the spread of this plant just to preserve our little fiefdom.”

DeAngelo’s ambition, as laid out in his book, is to shift the conversation from one that includes only “total abstinence or crushing dependence,” and into broader conversations about wellness instead of intoxication, regulation instead of prohibition, and social justice instead of punishment.

“For me, there’s no such thing as recreational cannabis,” he says. “This is so much bigger than recreation.”

Skepticism clearly remains. While Michigan voters legalized cannabis last November, North Dakotans rejected it. Missouri and Utah legalized medical marijuana as well, but in March, a legalization bill failed for the 15th year in a row in Hawaii.

A different future, however, is already marching on in California. Just before that busy February night at Harborside, San Francisco prosecutors announced that they would expunge more than 9,000 marijuana-related convictions dating back to 1975.

“As goes California, so goes the United States,” DeAngelo predicts. “As goes the United States, so goes the world.” TERP

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Terps in Cannabis

From advocacy and investment to research, UMD graduates are involved in every aspect of the marijuana industry. Here are a few:

• Carissa Cartalemi MBA ’15 owns the Baltimore medical cannabis dispensary location of the national Starbuds company.
• Steve DeAngelo ’86 is a longtime advocate of legalization who runs Harborside dispensary in Oakland, Calif., as well as the investor and research firm the ArcView Group.
• Darryl Hill ’65, who broke the color barrier as the first black football player in the Atlantic Coast Conference, is the CEO of Sunburst Pharm, a dispensary in Cambridge, Md., and has been an advocate for minority business representation in the industry.
• Kristi Kelly ’99 is executive director of Colorado’s Marijuana Industry Group and a founding board member of the world’s first marijuana financial institution, Fourth Corner Credit Union.
• Lauren Mendelsohn ’13 is senior associate attorney at the Law Offices of Omar Figueroa, a boutique cannabis law firm based in Northern California.
• Cary Millstein ’83 is a partner in Verano, a Chicago-based cannabis company recently acquired for $850 million in the largest U.S. marijuana business deal to date. The company has created and purchased dispensaries around the country, including one in Howard County founded by Millstein and bioengineering pioneer Robert E. Fischell M.S. ’53, honorary Sc.D. ’95.
• Ram Mukunda ’79, M.S. ’81 is the head of IGC Pharma, which has filed multiple patents for medical cannabis products.
• James Riordon ’14, fiancée Marguerite Santos ’12 and parents James Riordon ’87 and Vicky Ellen Mayoral ’86 founded and run AltPharm, a medical marijuana dispensary in Suitland, Md.
• Howard Schacter ’87 is head of communications for Acreage Holdings, a cannabis investment firm headquartered in New York City. Former U.S. House Speaker John Boehner is on the board.