Marijuana could become legalized in 2012 - but then what?

Making something legal is not the same as making it commercially viable - and as I write in the April issue of Los Angeles magazine, nobody has the foggiest idea how the business side of marijuana legalization would play out. Certainly, medical marijuana hasn't provided much of a template, what with the insane collection of rules and regulations that have proven to be both draconian and porous. (The city of L.A. continues to blunder in its efforts at regulating the market.) And the oft-heard promise from supporters that legalizing pot would generate hundreds of millions of dollars is hardly a sure thing.

It isn't just inept local governments that are giving dispensary owners a rough time. The Internal Revenue Service has been denying deductions on the cost of expenses for marijuana, citing a section of the tax code that's aimed at drug kingpins. Should that interpretation continue to be used, it'll be a financial killer for the dispensaries that are barely hanging on. In addition, several major banks have stopped doing business with dispensaries out of fear they'll be accused of aiding drug activity. "I was a client of Bank of America since college, so where else would I open my business accounts?" [says Don Duncan, who operates a dispensary in West Hollywood and is cofounder of Americans for Safe Access]. "Not only did they throw out my business accounts, but they threw out my personal accounts and they canceled my credit cards. No explanation."

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For all the chaos in the medical marijuana market, proponents of full-scale legalization are sounding optimistic that 2012 will be their year. Remarkably, they could be right: Proposition 19, the ballot initiative that would have legalized pot, lost by a closer-than-expected 53.5 percent-to-46.5 percent margin in November. Polling done by the Public Policy Institute of California shows a 49 percent-to-49 percent split on the general question of legalization. Those pushing for a new initiative are counting on the presidential election to draw large numbers of voters under 35, who would likely be supporters.

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Should a ballot initiative pass, there remains the overhang of federal drug laws. During last fall's campaign, U.S. Attorney General Eric Holder announced that the Justice Department would go after anyone who sells, distributes, or grows pot, and the Obama administration shows no willingness to relax its drug stance (though the laws are not being actively enforced). That's really the biggest hurdle: No one expects national legalization for many years, if ever. Even the liberal-minded Netherlands has not yet fully legalized marijuana, and if it doesn't happen there, it's not going to happen in Mississippi.