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Ohio's marijuana legalization ballot measure, explained

On Tuesday, November 3, Ohio voters rejected a ballot measure that would not just have legalized marijuana, but created what even legal pot advocates called an unfair oligopoly by handing all the rights to grow pot to a group of wealthy campaign contributors for the initiative.

Ohio was already an unexpected candidate for full legalization compared with the four legal pot states. It isn't especially progressive like Colorado, Oregon, and Washington state, or libertarian like Alaska. It doesn't even have medical marijuana yet, although it was one of the states to decriminalize pot back in the 1970s.

But what was truly unusual is how Ohio's Issue 3, as the legalization measure is called, was its structure. It didn't just legalize marijuana for medical and recreational purposes; it put the wealthy contributors for the legalization campaign in charge of growing all the pot in the state — as an explicit gift for their support. That didn't just rankle opponents of legalization; it also pushed away some of the major national advocacy groups that would typically back a marijuana legalization measure.

The distinction left even supporters of legalization wondering: Is ending the failed war on marijuana worth locking Ohio into a potentially disastrous system of legalization? Overwhelmingly, the state's voters said no.

Ohio's measure put the campaign's wealthy donors in charge of all the state's pot farms

Nick Lachey, who has rights to one of Ohio's marijuana farms, speaks to Extra.

Nick Lachey's next business endeavor could be marijuana.

D Dipasupil/Getty Images for Extra

Under the measure, Ohioans 21 and older would have been able to possess up to an ounce of marijuana in general and, with a $50 license, up to four flowering marijuana plants per household and up to 8 ounces of pot in their homes. Ohioans wouldn't have been able to use pot in public spaces. These limits are fairly typical for a pot initiative — Alaska, for instance, allows adults 21 and older to possess up to 2 ounces of pot and up to six marijuana plants, and doesn't allow public consumption.

Where Ohio's measure really differed from other states was how marijuana was commercially produced.

Knowing that a ballot measure would be very expensive, ResponsibleOhio, the group behind the state's legalization measure, structured its initiative to reward the top contributors to the campaign — and therefore get them on board. As a result, the state would have only allowed 10 marijuana farms, and more than 20 wealthy contributors signed on to the campaign would have been guaranteed licenses to all 10 sites. These contributors varied — ranging from 98 Degrees band member Nick Lachey to the local Taft family.

These 10 farms would have sold marijuana to more than 1,100 retail outlets, nonprofit medical dispensaries, and manufacturers. The measure charges a regulatory commission with overseeing all of these businesses, with a particular focus on making sure that Ohio's demand for marijuana is met by the industry.

On top of existing local, state, and federal taxes, growers and manufacturers would have had their gross revenue taxed by an additional 15 percent, and retail outlets would have had their gross revenue taxed by an additional 5 percent. The extra revenue would have gone to local and county governments, which would then be able to use the money for everything from public safety to infrastructure, and to the regulatory commission, which could have used the proceeds for, among other things, funding itself and public health programs.

Legalization advocates didn't like the measure

More states are legalizing weed, but a drop in marijuana arrests isn’t translating into a smaller racial disparity between blacks and whites. Kevin Cummins/Getty Images

It's the structure of the licensing system for marijuana farms that's drew widespread criticism. The setup — a bunch of wealthy people fund a ballot initiative, then personally profit from it by owning the full rights to pot production — felt gross, even to typical supporters of legalization.

"It's good in that it ends marijuana prohibition," Dan Riffle, federal policy director at the pro-legalization Marijuana Policy Project, said. "That being said, if we were going to write a marijuana legalization initiative, we would do so with competitive, merit-based licensing rather than awarding the licenses before the law even passes to people who happen to be rich enough to finance the initiative and may or may not be qualified to have a license to run this type of business."

Local critics, such as Ohio Auditor Dave Yost, characterized the measure as creating a cartel of marijuana producers. And these criticisms led the Ohio legislature to put its own measure on the ballot that would "prohibit an initiated constitutional amendment that would grant a monopoly, oligopoly, or cartel."

But the ResponsibleOhio measure placed some limits on pot growers, allowing the regulatory commission to revoke licenses and give them to someone else. "Collusion [between growers] is a violation," Ian James, executive director of ResponsibleOhio, said. "Violation of the law is subject to removal of your license. And the Marijuana Control Commission … determines what the laws need to be, what the rules need to be," with the power to take away licenses from rule breakers.

The commission would have concentrated particularly on meeting the demands of the market, with the ability to revoke licenses from growers who weren't growing enough pot. After a few years, the commission would also have been able to establish new farms if it was necessary to keep up with demand — so the original 10 farms may not have been the only businesses in the industry for very long.

James claimed that the set-up, which is essentially a gift to campaign contributors, was necessary to lock in funding for the ballot measure — particularly in a state where campaigns are notoriously expensive and public opinion on legalization is so evenly split. "If the statehouse won't pass it … then it's up to the voters," James said. "And Ohio is so expensive for ballot issues, it requires funding. In Colorado, it required millions of dollars. In Ohio, it's going to cost tens of millions of dollars."

The measure always faced tough odds in the election

A bud of marijuana.

Frederic Brown/AFP via Getty Images

An April survey from Quinnipiac University found a big split in support for full and medical legalization: 52 percent of Ohio voters support full legalization, while 84 percent support medical legalization.

But another survey of Ohio voters from the University of Akron found that the ballot initiative has less support than legalization. Although 53 percent of respondents said they favor the concept of legalization, only 46 percent said they support Issue 3. So even some supporters of legalization turned against the Ohio initiative — in large part, the poll found, due to opposition to the sections of the measure that limit commercial marijuana farming to a few wealthy land owners.

This compounded other factors going against the amendment. For one, Ohio is a very expensive state to run an initiative in: It's the seventh most populous state, and it's a major political battleground, since it can swing presidential elections. And the measure went to a vote in a year that has no national elections, making it very likely that the voting demographic would skew to older, more conservative voters who are more likely to vote but less likely to support legalization.

So to successfully run a legalization campaign, ResponsibleOhio decided that it would need tens of millions of dollars. And that led to its deal with campaign contributors.

It sounds dirty. But for James, this deal was necessary to end what he characterizes as a major failure of the war on drugs.

"The war on drugs is a failure"

A marijuana flag at Coachella.

David McNew/AFP via Getty Images

During our conversation, James invoked the typical arguments for legalization, characterizing pot prohibition as "an epic failure" and a waste of taxpayer money.

A 2013 report by the American Civil Liberties Union found that Ohio spent more than $120 million enforcing laws against marijuana possession in 2010. That year, more than 19,000 people were arrested across the state for marijuana possession — and the arrests were racially skewed, with black Ohioans 4.1 times as likely as their white counterparts to be arrested for pot possession. Nearly half the state's drug-related arrests in 2010 were for marijuana.

Those arrests cracked down on a drug that's relatively safe compared with other substances. While pot carries a risk of dependency, no one has ever reportedly died of a marijuana overdose. And the risk of accident appears to be lower than other drugs: A study from Columbia University researchers suggested the increased risk of fatal car crashes is nowhere near the level of narcotics, stimulants, and especially alcohol.

The US's black market for marijuana also makes up a significant chunk of drug cartels' drug export revenue: as much as 20 to 30 percent, according to previous estimates from the Mexican Institute of Competitiveness (2012) and the RAND Corporation (2010). This gives these criminal groups more money to carry out violent trafficking operations in much of Latin America, which contribute to the killing and kidnapping of tens of thousands of people each year and have spawned horrifying stories of cartels beheading and torturing people. And some of that violence occurs in the US, where gangs fight over turf to position themselves to sell illegal drugs.

In theory, legalization would eliminate most or all of that black market, pushing marijuana to legal and gray markets and cutting a big source of revenue from drug cartels.

These are the issues that drive support for legalization — and they apply to Ohio's ballot measure as much as any other legalization initiative. Where drug policy experts see a problem is the rest of the initiative — not just the questions about who will run the marijuana farms, but how much pot growers will be able to produce.

The measure didn't address public health concerns

There was always a conflict between what Ohio's legalization advocates want and what drug policy experts think is a good idea.

The measure's supporters, cautious of appearing like they're creating an oligopoly that will lead to artificially high prices, wanted to ensure the state's demand for marijuana was met so the drug was easily available to consumers. One of the regulatory commission's main missions, in fact, would have been to study the state's demand for pot to ensure that growers kept up with consumers' desires.

But drug policy experts say the regulatory commission should be built in the opposite way — and take an almost antagonistic approach toward pot businesses to limit supply and keep prices high. Ideally, the price of marijuana should be low enough to drive out the black market, but not low enough that pot is so accessible and affordable that it can be easily abused.

The ideal for experts is to build a system that minimizes pot's biggest public health problem: the risk of abuse.

"The main risk of cannabis is losing control of your cannabis intake," Mark Kleiman, drug policy expert at New York University's Marron Institute, told me in February. "That's going to have consequences in terms of the amount of time you spend not fully functional. When that's hours per day times years, that's bad."

Jon Caulkins of Carnegie Mellon University put it more bluntly: "At some level, we know that spending more than half of your waking hours intoxicated for years and years on end is not increasing the likelihood that you'll win a Pulitzer Prize or discover the cure for cancer."

The marijuana industry has an incentive to sell marijuana to heavy users, since those are the customers who make up most of the industry's profits. For example, in Colorado, a study of the state's pot market conducted by the Marijuana Policy Group for the Colorado Department of Revenue found the top 29.9 percent heaviest pot users in the state made up 87.1 percent of demand for the drug. For the marijuana industry, that makes the heaviest users the most lucrative consumers.

Colorado marijuana demand

So if marijuana companies are able to grow as much pot as they want, they'll be able to flood the market with cheap pot that the heaviest users will gobble up — and abuse. That's why experts have suggested all sorts of mechanisms to keep the price of marijuana high — higher taxes, a cap on how much marijuana can be cultivated and sold, or a state monopoly on production and sales.

But Ohio's measure imposes a low, rigid tax on pot that will enable low prices. And this was actually a goal of the initiative — again, one of the chief tasks of the regulatory commission under the proposal was to make pot easily accessible.

The measure also gave very large cultivation areas to growers, ranging from 20 to 80 acres. When I asked Kleiman how much pot growers would be able to produce at these sites, he said it will be "a shit load of marijuana." Caulkins agreed it will likely be more marijuana than Ohio needs, although he added that it's also possible a lot of pot will flow out of the state. But if all or most of that pot remained in-state, it would have meant a lot of supply, low prices, low tax revenue (since the tax is pegged to price), and higher use and abuse.

"This sounds like every possible bad idea," Kleiman said. "Could it be better than prohibition next year? Sure. Almost anything is better than prohibition next year. But locking in a long-term policy that essentially is the theft of public property in order to legalize this today rather than two years from now is horrible."

These concerns were magnified by Ohio's initiative, experts and legalization advocates said, because it was a constitutional amendment — meaning any of the specific policy details would have been very difficult to change. And that could have locked the state into a model it could have come to regret.

"We're creating an industry that will profit from people who are harmed by their product, and the regulators need to have that mindset of being allied with the consumers and suspicious of the industry," Caulkins said. "None of the states has made that choice. Ohio is just making this problem flagrant."

Watch: Marijuana is not more dangerous than alcohol

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