The rise of 'Weed Inc.'

How much legal marijuana is sold?

About $1.5 billion a year already — but most of that is from medical marijuana. First legally approved for medical uses in California in 1996, pot is available on prescription in 20 states and the District of Columbia, to relieve pain in conditions ranging from cancer to "writer's cramp." So even before Jan. 1, 2014, known as "Legal Day One," more than 2.5 million Americans carrying special cards could buy weed from licensed dispensaries. But now that Colorado and Washington have legalized the drug for recreational use, too, the floodgates may be about to open. Advocates have long argued that legalization would hurt drug dealers, pour hundreds of millions of dollars into tax coffers, and create thousands of jobs — and now that theory is finally being put to the test. If other states follow suit, legal marijuana could become a true growth industry. One marijuana investment firm, ArcView, predicts that within just five years it could be worth as much as $10 billion.

What do the new laws allow?

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Washington's registration process is so complex and lengthy that its first recreational weed dispensary will only open later this year. In Colorado, residents 21 and over can buy up to an ounce at a time, and grow six plants at home. Smoking pot in public is forbidden; so is selling it without a license. As for vendors and growers, they have to pass criminal background checks, and can set up dispensaries only in one of the few jurisdictions that haven't opted out of the legislation. Thus far, business is booming. Colorado has about 200 shops selling cannabis for recreational use, and took in $3.5 million in weed-related taxes and fees in January alone.

Who's making all the money?

For now, most recreational dispensaries are small, self-funded startups, rather than Starbucks-style chain stores. But on the supply side, there are already some big players that have been growing industrial amounts of medical marijuana for years. In Denver alone, more than 4.5 million square feet of warehouse space is devoted to growing; one firm, GW Pharmaceuticals, is listed on the Nasdaq. Then there are all the ancillary industries. Pot-infused snacks and drinks, known as "edibles," are enormously popular. Tourists can go on high-end sampling tours, and find pot-friendly vacation rentals on dedicated websites. There are apps to explain the different "strains" of marijuana: how they taste, how they make you feel — relaxed, energetic, etc. — and where to buy them. A local paper in Denver even has its own marijuana critic. "I do my strains separately, and smoke them on different days to get the feel for them," said William Breathes. "And I try not to write my reviews when I'm really, really stoned."

Is there outside investment?

Lots of it. In fact, there are now private-equity funds devoted solely to investing in weed firms. Some of the biggest percentage gains in the market this year have been on marijuana penny stocks — although the authorities have raised concerns that fraudsters are artificially inflating prices to make a quick buck. There are even full-time marijuana lobbyists working on Capitol Hill — a sign, observers say, that "Big Pot" has finally arrived. But not everyone is convinced it will be a profitable industry. Marijuana is very cheap to grow, and increased competition may drive prices down to the level of costs — squeezing out any profits. Weed businesses also face a number of unique hurdles.

What kind of hurdles?

Most landlords are reluctant to lease space for growing and selling pot, so the few who do can ramp up prices. Because a lot of workers don't want weed-related jobs on their résumé, it's hard to attract top talent. But the biggest issue is money. Marijuana remains illegal under federal law, and though the Justice Department has informed banks they can legally provide services to state-licensed weed businesses, banks remain wary of doing so. This means that most of these businesses have to use cash to pay for everything — staff wages, supplies, even taxes — which makes them a magnet for thieves. "We try to be as discreet as possible," said dispensary owner Caitlin McGuire, who drives 80 miles with thousands of dollars in cash to pay her taxes. "You feel like you're walking around with a target over your head."

Will legalization continue to spread?

Alaska is voting on the issue in November, and Oregon will likely follow soon afterward. Six other states — Arizona, California, Maine, Massachusetts, Montana, and Nevada — are expected to hold referendums on legalization in 2016. In the long term, widespread legalization looks all but inevitable. Polls show that 58 percent of Americans now favor it, up from 50 percent just three years ago. Moreover, support is highest, at 67 percent, among Millennials — the future lawmakers. For Big Pot, that can mean only one thing: expansion. "Wall Street analysts believe there are going to be two or three billionaires minted in this industry in the next 10 years," said Tripp Keber, co-founder of weed purveyor Dixie Elixirs & Edibles. "This kind of opportunity comes around only once in a generation."

The dangers of edibles

Edibles are one of the biggest growth areas of the industry. Generally made using cannabis butter or liquid tincture — which contain THC, marijuana's active ingredient — they give a more intense, often hallucinogenic, high. But they're proving controversial. One problem is children and animals consuming the products by mistake; of the 79 marijuana-related calls to Colorado medical facilities this year, seven involved kids. But even adults struggle to get the dosage right. Tolerance varies widely from person to person, and because edibles take longer to take effect, people often inadvertently consume too much — with potentially tragic consequences. There have already been two deaths in Colorado this year attributed to edible overdoses: a college student who jumped off a hotel balcony, and a man who fatally shot his wife while hallucinating. "There's no ability to self-regulate," explained Colorado state Rep. Frank McNulty. "Whatever is in that brownie, you're on it for the entire ride."