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Chart of the Week: Court Ruling on Guns & MMJ Could Lead to Millions in Lost Dispensary Sales

Chart of the Week: Court Ruling on Guns & MMJ Could Lead to Millions in Lost Dispensary Sales

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Chart of the Week 9-12-16

Keep your medical marijuana card or surrender it to purchase a firearm.

This is the decision patients in western states may face after a recent court ruling upheld a federal ban on gun sales to registered MMJ users, which could result in millions of dollars in lost sales for dispensaries.

 

The 9th U.S. Circuit Court of Appeals recently ruled that a Nevada woman’s Second Amendment rights were not violated by a federal law prohibiting gun sales to an “unlawful user of and/or an addict to marijuana.” This includes registered medical marijuana patients in states that have legalized MMJ.

The ruling covers nine western states, all but one of which has legalized medical marijuana.

In terms of overall dollars, Arizona has the potential to lose more MMJ sales than any other state affected by the ruling. If 10% of patients declined to renew their MMJ cards it would cost dispensaries an estimated $7.7 million – 3.4% of the $225 million in projected 2016 MMJ sales.

But in Nevada, the same 10% decline in patients choosing not to renew their MMJ card would amount to an overall loss of 6.3% of the state’s total projected $30 million in 2016 MMJ sales – nearly twice the net effect as in Arizona. This is driven primarily by Nevada’s higher rate of gun ownership, meaning that gun-owning MMJ patients make up a higher proportion of Nevada’s MMJ patient base, thus the larger impact to overall dispensary sales.

There’s a great deal of nuance in this case – the full text of which can be read here – but essentially the court found that possessing an MMJ card is enough to reasonably assume that an individual is using marijuana, and “that the use of marijuana raises the risk of irrational or unpredictable behavior with which gun use should not be associated.”

Therefore, the possession of an MMJ card provides proficient grounds by which federal firearm dealers can deny gun purchases.

The sale of firearms to marijuana users was already federally illegal, and to this point does not appear to have limited MMJ sales.

But Gary Smith, an attorney with Smith Paknejad PLC in Phoenix, Arizona, believes the court’s decision brings attention to an issue that many have been previously unaware of, causing the issue to loom larger in the public consciousness.

Furthermore, Smith suggests that risk-averse firearms dealers may choose to specifically point out to their customers that state-legal MMJ use is viewed as a federally illegal use of a controlled substance – denying sales out of a desire to stay fully compliant with federal law.

How the ruling will affect MMJ patients, and consequently the businesses that serve them, varies by state.

For the court’s decision to truly impact an MMJ patient desiring to legally purchase a gun from a federal firearms dealer, that person must live in a state with a patient registry. Of the nine states impacted by this ruling, Arizona, California, Hawaii, Nevada, Oregon and Washington State have patient registries and already have (or in the case of Hawaii, will have) dispensaries.

In California, the registry is voluntary, however, and patients can still buy MMJ with a recommendation from a doctor if they don’t want to sign up for a card. Very few patients have joined the registry, so the impact will be minimal.

Washington State just recently established a mandatory registry for patients that want to buy medical cannabis without turning to the legal recreational market, but only 9,000 patients are registered for MMJ cards so far.

In Arizona, Nevada, Oregon and Hawaii (where dispensary sales are expected in late 2016), however, the base of registered patients is fairly large. The impact of the gun law likely won’t be too severe in Oregon, as the state has a relatively low percentage of firearms owners in general.

To understand how an MMJ patient surrendering their card could affect dispensary sales, per-person medical marijuana spending data was taken from the What Cannabis Patients & Consumers Want research report by Marijuana Business Daily. This spending data was then combined with an estimate of the number of gun-owning MMJ patients in each state – calculated by multiplying the number of MMJ patients in each state by that states gun ownership rate.

While the gun ownership rate in each state may not apply directly to that state’s population of MMJ patients, it’s a sufficient starting point that’s rooted in empirical data.

These estimates do not account for the chilling effect the court’s ruling may have on potential new MMJ patients – deterring those still on the fence that want to maintain their right to legally purchase firearms.

But no matter how the dynamics of this case play out in the market, it’s a clear setback to MMJ advocates that have worked hard to remove the stigma associated with the use of medical marijuana.

Eli McVey can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

By Eli McVey

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