Tribes eye pot resorts for profit
Sale and use of marijuana could serve as opportunity for economic growth.
(As seen on WZZM TV 13) The nation’s first marijuana resort is scheduled to open Jan. 1, on Santee Sioux tribal land in South Dakota, and it has many tribal communities wondering if marijuana might be the next big business opportunity for them.
Blake Trueblood, business development director at the National Center for American Indian Enterprise Development, said marijuana enterprises could offer tribes a substantial opportunity for much needed economic growth.
“For a lot of tribes, they have limited economic opportunity,” he said. “Part of that is based on location and historical issues.”
Trueblood said Native American gaming has created some misperceptions.
“Even though we have tribal gaming, it is not a silver bullet,” he said. “It creates a public perception that all tribes are wealthy, when the reality is quite far from that. There are a very small number of tribes that have large-scale, massive revenue-generating gaming operations.
“Most tribes face almost insurmountable economic challenges, and they are forced to look for other opportunities as a way to provide for their people.”
Trueblood added the once-lucrative gaming compacts between tribes and states that have given tribes a competitive advantage in the past are starting to erode.
“What we have found now is states are having budgetary issues and they are looking at the gaming industry overall and saying, ‘If we open it up wider, it could generate substantial revenues for us. We might be better off not giving tribes exclusive gaming rights,’” he said.
“What you are seeing is more states aggressively negotiating gaming compacts based on that premise.”
Trueblood said marijuana could offer tribes an opportunity similar to what gaming used to offer.
“There are a lot of parallels with Indian gaming and what we are now looking at in terms of tribal marijuana,” he said.
The opportunity presented itself nearly a year ago in the form of what is known as the Wilkinson memo, issued by Monty Wilkinson, director of the Executive Office for U.S. attorneys with the Department of Justice, concerning marijuana use on tribal lands.
The Wilkinson memo was basically an extension of the Cole Memorandum, issued by James Cole, U.S. deputy attorney general with the DOJ, in 2013, which essentially opened the door for states to pass laws regarding the use of medical or recreational marijuana.
“The Cole memo laid out criteria for states to participate in marijuana,” Trueblood explained. “It now applies to tribes.”
Essentially, the memos outline eight criteria that, in theory, if a state or tribe follows, will earn it a low priority enforcement ranking from the DOJ.
“The Cole Memorandum provides guidance to U.S. attorneys on the proper prioritization of marijuana enforcement in their districts given the number of states that have moved to legalize marijuana for medicinal, agricultural or recreational use,” the Wilkinson memo states. “Specifically, the Cole Memorandum lists eight federal law enforcement priorities where the department will focus its limited investigative and prosecutorial resources in all states.”
While recreational and medicinal marijuana remain illegal under federal law, and the DOJ maintains the right to prosecute anyone regardless of state, local or tribal laws, it sends the message that if states or tribes follow the criteria, the DOJ will leave them alone.
The Santee Sioux in South Dakota will be one of the first tribes in the country to apply the Wilkinson memo guidance.
“We have a smattering of different regulatory schemes that are going to be unique for each tribe that wants to do this,” Trueblood said. “We have tribes in states with no legal marijuana, like South Dakota, and tribes in states with medical marijuana, like Michigan, and tribes in states with recreational and medical marijuana.
“Each of those scenarios presents a different regulatory challenge and business challenge for each of those tribes, and this is playing out in different ways in different places.”
One of the biggest challenges the Santee Sioux tribe will face is ensuring that marijuana from its resort stays on tribal land, which is one of the criteria listed in the Cole memo, which requires that marijuana does not move from a legalized to a non-legalized state.
“If you are a tribe situated in a state with no legalized marijuana, medical or recreational, it will be tricky and costly to ensure that it doesn’t leave the boundaries of the reservation,” Trueblood noted.
Without the state and local community’s blessing, there might also be attempts to immediately shut the resort down.
Trueblood said there was a situation in California where a sheriff’s department raided grow sites operated by the Pinoleville Pomo Nation, maintaining the operation was illegal and local government had a right to shut it down.
In California, medical marijuana is legal, but recreational marijuana is not.
“That is going to be interesting, especially in PL280 states (which have criminal jurisdiction over tribal lands), whether or not states have authority to come onto the reservations and regulate their activity in regards to marijuana,” he said. “That remains to be seen. I don’t think they do.”
On the flip side, some states are embracing tribal marijuana enterprises.
The Suquamish tribe near Seattle, Washington — a state where medical and recreational marijuana use is legal — is pursuing a compact with the state to be able to operate a marijuana enterprise.
“What’s interesting is that it mirrors the process you have in Indian gaming, where the state and the tribe come to the table and say, ‘We have the right under federal law to do this, but we are operating within the boundaries of the state. Let’s come to an agreement on how we can split the revenue, and the state can benefit from what the tribe is doing,’” Trueblood said.
“That is an encouraging sign, that some of the states recognize this is something they are better off participating in, being a partner with these tribes, versus trying to find a way to enforce the state regulatory issues on the tribes despite tribal sovereignty.”
Trueblood would like to see the compact model followed in all states because it would give tribes the greatest opportunity to benefit from a marijuana business.
“That creates a competitive advantage for them,” he said.
He added tribes are unlikely to have much lead-time in establishing successful marijuana businesses because more and more states are expected to pass recreational marijuana laws in coming years.
“Drawing a parallel between Indian gaming and marijuana, we had a 30-year run with no competition,” he said. “With marijuana, we will not have the same head start. If tribes want to do this, they will need to get into it and get going fast. The tide is turning and attitudes are changing very quickly.”
Trueblood noted, like gaming, the marijuana business might not be a business for every tribe.
“Just because you can do it doesn’t mean it’s good business,” Trueblood said. “You have some tribes who don’t want anything to do with this. They worry about making local conditions worse. But some tribes, who may have little to no economic opportunity, are taking a hard look.”
West Michigan is not likely to get a marijuana resort any time soon.
James Nye, spokesperson for Michigan’s Gun Lake Tribe, said, “The Gun Lake Tribe does not have an interest in taking part in this type of business.”
It remains to be seen if the federal, state or local government will show up at the Santee Sioux tribe’s door come Jan. 1, and many tribes are likely waiting to see how things play out, legally and financially, for the tribe before making any decisions about getting into the marijuana business, Trueblood said.