Legal weed a growing market

Grassroots Cannabis CEO Mitch Kahn stands prepared for ‘full recreational program’

Things are looking up for Grassroots Cannabis CEO Mitch Kahn — and they’re not so bad as they are with the state’s existing program for medical marijuana. (One Illinois/Ted Cox)

By Ted Cox

Those who got in on the ground floor with medical marijuana are sitting pretty as Illinois moves toward full legalization.

“Things have rolled out exactly as we thought they would, but much quicker,” said Mitch Kahn, chief executive officer of Grassroots Cannabis, while sitting in his Highland Park office.

Kahn, who was in real estate before expanding into medical marijuana with Grassroots Cannabis when the Illinois medical-pot pilot program launched three-plus years ago, said quite plainly, “In truth, we got into the business because we saw a financial opportunity.

“That said,” he added, “I can tell you from personal experience the number of people that is helped with this medicine is incredible. It absolutely is a medicine. It absolutely helps people” — especially with pain and sleep issues.

“I grew up in a household where, when I was in high school, my dad said, ‘You don’t have to worry about the cops finding anything. If I find marijuana in this house, I’m calling the cops myself on you,’” Kahn recalled. “He was a very tough guy in regards to that.”

Five years ago, however, he told his son, “If you ever find something that will help my arthritis, I’m in.”

“For me, it was a real watershed moment,” Kahn said. “If he believed that — he who was so strictly against it — the whole world was going to change. It was one of a number of things that kind of got us into the business.”

With the success of medical-pot programs in most states across the nation, as well as full legalization in states starting with Colorado a few years ago, public acceptance for medical marijuana has risen to 85 to 90 percent, according to Kahn, and a solid majority now supports a “full recreational program.”

The Illinois law on medical cannabis was unusually restrictive compared to other programs across the nation. “There were parts of it that were quite frankly ridiculous,” Kahn said, such as one provision — since abandoned — calling for fingerprinting. “But in general the Illinois law that passed was really well done.” It took a cautious approach that has proven successful in gaining public acceptance.

But fast as the momentum has moved toward full legalization, Kahn said, the program could have moved faster in adding allowable conditions for medical pot to the original 40 designated. He cited how the state has 50,000 licensed users, but Pennsylvania already has 80,000 after just initiating its program this year. Kahn blamed “a lack of support from the government here — frankly, particularly, from the governor.”

Kahn pointed out there was a board created to reconsider new conditions every six months, “and every single recommendation they made was rejected by the Department of Public Health at the governor’s direction.” Gov. Bruce Rauner never allowed the permissible conditions to be expanded by the board, and when he did sign a new law adding Post Traumatic Stress Disorder to the allowable conditions (now the single largest reason for patients to take medical marijuana), he made sure the board was disbanded as part of that legislation.

“I suspect he was tired of being embarrassed by this happening every six months,” Kahn said. “I respect his own personal view,” he added, but “I think his job is not to exercise his own personal view, but it’s to do what the public wants him to do.”

That, however, was never Rauner’s strong suit as he prepares to be replaced next month by Gov.-elect J.B. Pritzker after a single term in office.

“I think we’re going to head into a much better environment in January going forward,” Kahn said with some understatement.

Indeed, Pritzker made legalization a key issue, estimating it would bring in $700 million a year.

“With a new governor, you’re likely to see a recreational bill fairly quickly here,” Kahn said. “I’d be surprised if there isn’t a bill that passes the House and the Senate and the governor signs before summer.” In fact, lead House sponsor Rep. Kelly Cassidy of Chicago said she already has a new piece of legalization legislation ready to be introduced next month.

“I’d be surprised if there isn’t a bill that passes the House and the Senate and the governor signs before summer.”

Grassroots Cannabis CEO Mitch Kahn (One Illinois/Ted Cox)

Kahn added that, with the estimated six-month rule-making period that follows passage, “my suspicion is you won’t see anything until 2020” on legal pot sales in Illinois. “You won’t see any new stores open until probably 2021.”

He granted that companies that already have dispensaries for medical marijuana will have a leg up on legalization when it happens, and he added that he welcomed the entry of big-bucks investors into the market, such as Constellation Brands’ recent $4 billion investment in Canada’s newly legal weed industry.

But at the same time Kahn sided with those like Cassidy and Chicago state Rep. Will Guzzardi who feel legal pot should also provide investment into minority communities that bore the brunt of the hardship in the War on Drugs.

“We absolutely agree with that,” Kahn said. “To some extent, that’s greens fees if you think of it that way” — no pun intended. “That absolutely is something that needs to happen. How that gets effectuated is fairly complicated. We’ll wade through that, I think.”

It’s one of many moving parts that need to be settled, which threatens to slow legislation. Others are federal, such as restrictions on banks taking deposits from what the U.S. government still considers an illicit product.

“Today we are cash-only, (with) no viable credit-card operation,” Kahn said of the company’s four Illinois dispensaries (it’s the largest distributor in the state) and the dozens of others in what will soon be 10 states Grassroots operates in.

“The banking situation is OK — certainly not great, but OK,” he added. While insisting that “it’s not an emergency situation,” Kahn said, “To me, the banking issues are undeniable. I think if we don’t fix the banking issue you’re going to see people get hurt at some point,” with all the cash flowing around in an ever-rising legal market.

Going hand in hand with that, he said, is that the government is going to have to loosen restrictions on marijuana research, as shown in a recent Politico story — both for the medical market and to set levels for what constitutes “impairment” on the job and behind the wheel.

“It is without question a tremendous medicine,” Kahn said. “If we can fix the federal laws and begin to do research, it would absolutely bring more credibility.”

Kahn was less bullish on the tourism to be gained if Illinois can somehow beat Michigan to being the first Midwest state to make legal weed available. Things were different for Colorado, he said, “when they were the only game in town,” but pot is expanding so rapidly from state to state, “I don’t think the tourism part is going to be anything significant” from now on.

Otherwise, there is no reason not to be optimistic about the prospects for legal pot in what is sometimes referred to as “the end of Prohibition 2.0.”

“I think the future is great,” Kahn said. “In my opinion, there’s little doubt it’s going to be everywhere in the next 10 years.

“In a lot of ways, it’s the most exciting consumer product we’ve seen come on the market in a long, long, long, long time.”