Delusional Confidence? A Report From The Marijuana Investor Summit

COLORADO: “When we want to raise capital,” Dooma Wendschuh, the thirty-eight-year-old co-founder of a cannabis company called ebbu, said, “I go up to someone and say, ‘Would you like to invest in my company? Here’s how it will work. One: you may go to prison for making this investment. Two: I may go to prison, and you might lose all your money. Three: our minimum investment is two hundred and fifty thousand dollars. Sure you want to play ball?’ ”

There was nervous laughter from the crowd. It was the first day of the first Marijuana Investor Summit, in Denver, and Wendschuh was speaking at one of the most popular panels, “Raising Funds.” More than eight hundred people from around the country had come to the summit, at the Crowne Plaza Hotel, near the airport. It was a testosterone-fuelled crowd, mostly white men in suits—entrepreneurs mixing with hedge-fund managers and venture capitalists. But there were outliers: an Orthodox Jew with a long white beard, whose family in Philadelphia wants to obtain the first license to grow medical marijuana in Pennsylvania; an African-American man who spent seventeen years on Wall Street, then left to grow pot near Detroit; and a female doctor who wants to start a practice treating chronic conditions with cannabis.

All were convinced that the ongoing legalization of marijuana has created an opportunity for people with a high tolerance for risk to make a killing. Twenty-three states and the District of Columbia have legalized medical marijuana, and four of those—Colorado, Washington, Oregon, and Alaska—have made recreational pot legal. But it’s not legal federally, resulting in chaos and conflicting rules.

Marijuana Businesses In Colorado Can Get Insurance, But It's Pricey

COLORADO: Colorado’s marijuana-related businesses have to work a little harder and pay more to insure their businesses because standard carriers won’t cover them, but they are able to get the coverage they need.

Standard insurance carriers like Farmers Insurance GroupState Farm Insurance and others so far aren’t covering pot businesses in the state because of the conflict between federal and state law over the legality of marijuana, and because the industry is so new, it’s hard for carriers to evaluate risk, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

“It’s such an unprecedented coverage situation that has evolved,” Walker said. “The coverage marijuana businesses can get now is part of excess lines coverage, which is more expensive and has higher deductibles.”

Colorado voters changed the state constitution to allow sales of small amounts of recreational marijuana starting Jan. 1. But pot sales remain illegal under federal law, although federal authorities are backing off on enforcement in places like Colorado that have legalized it locally.

Marijuana Businesses In Colorado Can Get Insurance, But It's Pricey

COLORADO: Colorado’s marijuana-related businesses have to work a little harder and pay more to insure their businesses because standard carriers won’t cover them, but they are able to get the coverage they need.

Standard insurance carriers like Farmers Insurance GroupState Farm Insurance and others so far aren’t covering pot businesses in the state because of the conflict between federal and state law over the legality of marijuana, and because the industry is so new, it’s hard for carriers to evaluate risk, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

“It’s such an unprecedented coverage situation that has evolved,” Walker said. “The coverage marijuana businesses can get now is part of excess lines coverage, which is more expensive and has higher deductibles.”

Colorado voters changed the state constitution to allow sales of small amounts of recreational marijuana starting Jan. 1. But pot sales remain illegal under federal law, although federal authorities are backing off on enforcement in places like Colorado that have legalized it locally.