For This Pot Guy, States Are His Biggest Customers

After leading the creation of the nation's first legal marijuana market in Colorado, Andrew Freedman took the lessons he learned and made a business out of helping states regulate the drug.
by | August 2017

It’s a Wednesday morning in June and Andrew Freedman is taking another meeting. For once, it’s at his home office in Denver. Since February, work has taken him to Boston; Chicago; Oakland, Calif.; Sacramento, Calif.; Tallahassee, Fla.; New York City; and Washington, D.C. Like every meeting for Freedman these days, this one’s about marijuana.

For nearly three years, Freedman worked for Colorado as the world’s first and only state marijuana czar, a temporary position created to help Colorado implement regulations around medical and recreational marijuana. Now he’s taking what he learned from that experience and using it for a new consulting business.

The office of Freedman & Koski is a condo in a converted church near Denver’s Five Points neighborhood. The conference room doubles as Freedman’s living room, which is also his dining room. It has a giant stained glass window. Freedman has been pining for a whiteboard where he and his business partner, Lewis Koski, can conduct their weekly strategy meetings, but there isn’t a practical place to put one.

The first meeting of the day is with a potential client, David Sutton, who is developing a new line of medical marijuana products for temporary pain relief. Sutton hopes Freedman will join his company’s board of directors. They both grew up in Denver and know each other from elementary school, but only reconnected recently. Sutton is pulling demo products from his bag and explaining to Koski how customers would apply a THC-infused lotion on the skin. “It doesn’t get you high. It’s relaxing when you put it on a pulse point,” Sutton says. “I don’t know if you have any pain where you can …”

“No, thank you,” Koski interrupts, shifting uncomfortably in his chair. He smiles. It’s a friendly but stern rejection. He doesn’t try marijuana products.

Koski is the former director of the marijuana enforcement division within the Colorado Department of Revenue. Before he was a regulator, he was a police officer in suburban Arvada, northwest of Denver. Although he and Freedman helped make legal marijuana a reality in Colorado, they are not advocates for legalization and, as a rule, do not take clients who make money from growing or selling marijuana. Ask about their personal experience with the drug, and they decline to comment. They won’t even disclose how they voted on Amendment 64, the ballot measure that brought legalized recreational marijuana to Colorado in 2012. “Not even my wife knows,” Koski says.

 

Since legalization in 2012, Colorado has licensed nearly 700 marijuana cultivation facilities. 

 

After the meeting, Freedman and Koski agree that they can’t take Sutton on as a client. “With opportunities like that, we’ve probably turned down a lot of work,” Koski says. Though they market themselves as experts in marijuana policy, they want to maintain a regulator’s distance from the industry itself. “We’re a good-government company,” Koski explains. “We want to do everything we can to protect public health and public safety with the cards we’re dealt.”

Freedman is quick to point out that they aren’t lobbyists, and none of the three founding partners (the third is John Hudak, an academic researcher at the Brookings Institution) has taken a public position for or against legalization. But once voters have decided to legalize marijuana, Freedman says, “we’re the technocrats who make it happen.”

There’s increasing demand for that kind of technocratic expertise. Support for legalizing both medical and recreational marijuana has increased over the past two decades. National polling from Gallup shows that 60 percent of Americans now think the use of marijuana should be made legal, up from 25 percent in the mid-1990s. In the past five years, voters in Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington state have approved the legalization of marijuana for recreational purposes, with a retail market that is -- or soon will be -- taxed and regulated. Twenty-seven states and the District of Columbia also allow for state-regulated dispensaries of medical marijuana. An estimated 65 million Americans, about one-fifth of the country’s population, now live in states with some form of legalization. With the likely expansion of it in more states, annual marijuana sales in North America are projected to grow from $6.7 billion last year to more than $20 billion by 2021.

But this is also a period of uncertainty for the marijuana industry. Under the Obama administration, the U.S. Department of Justice signaled that it wouldn’t use its limited resources to prosecute people and businesses that complied with state marijuana laws, so long as they met certain federal criteria such as keeping marijuana out of the hands of minors. But President Trump’s administration has cast doubt on whether the federal government will maintain its hands-off approach. As a candidate, Trump sent mixed messages about his position on legal marijuana, calling it “bad” but also suggesting it was an issue best left up to states. Trump’s attorney general, Jeff Sessions, is a longtime critic of states that legalized marijuana. In February, White House spokesman Sean Spicer told reporters to expect ramped up enforcement of federal marijuana laws.

Meanwhile, in states where marijuana ballot measures have already passed, many governors and their counterparts at the local level are becoming the reluctant stewards of a policy they once opposed. But after voters approve a marijuana measure, officials look for advice from the few places with some experience in taxing and regulating legal marijuana. Colorado Gov. John Hickenlooper says his office has fielded calls from more than 25 states asking for guidance. When he read Freedman’s pitch for a consulting firm aimed at meeting that demand, Hickenlooper encouraged him to pursue the idea. “This is going to be one of the great social experiments of the 21st century, and it’s going to require taking all of the experience and the knowledge that we create, and building upon that,” he says. Citing Freedman’s prior role as a convener across agencies and businesses, and among legislators and other outside interest groups, Hickenlooper says Freedman is uniquely suited to provide insights about the implementation details. “His understanding of the process and how it works would be invaluable to other states.”

 

Freedman and Koski launched their consulting firm in January.   

 

Freedman, 34, hadn’t planned on becoming the world’s first marijuana czar. About seven years ago, he graduated from Harvard Law School and had a job lined up with a private law firm in Washington, D.C. But the job didn’t start right away, so Freedman was toying with the idea of spending those few months learning to surf in Australia. The year after undergrad, he had managed to pack in a lot: teaching English in India, working at a peace camp in Israel and volunteering at a women’s rights center in Thailand. But his older brother talked him out of embarking on yet another international adventure and persuaded him to instead work on Hickenlooper’s first campaign for governor.

Following the gubernatorial race, he became chief of staff for then-Lt. Gov. Joseph Garcia before spearheading an ill-fated ballot measure that sought to raise billions in new tax dollars for public education. Despite several years in state government, Freedman was a novice on marijuana policy when Hickenlooper’s chief of staff recruited him to be the director of marijuana coordination. He was so unfamiliar with the industry that he hadn’t been to a grow facility until he visited one on the job. In a way, that lack of experience was an asset. The governor’s chief of staff told Freedman the state needed someone who was seen as neutral on the question of legalization.

Though Freedman’s official title was never “marijuana czar,” the term quickly became shorthand for what he did. In one TV interview, a local anchor pushed Freedman on the term. “We are working very hard not to be called that,” Freedman said, in a futile effort to distance himself from the title. As he sees it, policy czars, as a rule, lack authority. And drug czars in particular are meant to be adversaries of illicit substance use. By contrast, Freedman did have authority -- he spoke for the governor -- and he didn’t see himself as an antagonist to the marijuana industry. His role was to help in setting up rules for legitimate businesses and customers to safely use a legal product. The anchor called him the pot czar anyway, and it stuck.

The title may help Freedman and Koski market their new business. While other states have tapped someone to oversee marijuana regulation and enforcement, Colorado is the only one to have created a special position in the governor’s office for coordinating policy across executive agencies and the legislature. Freedman will also go down as the last marijuana czar in Colorado. Because most of the initial implementation details have been settled, Hickenlooper, with Freedman’s support, asked the legislature to sunset the czar position in June.

Although states have plenty of pro- and anti-legalization advocates, not many people can claim firsthand experience in developing and implementing policy. In addition to their insights from Colorado’s rollout, Freedman and Koski also draw from the expertise of Hudak, their third founding partner, who recently published a book on the history of marijuana policy. As a result, in their first five months of business they have already won contracts with Florida, Los Angeles County and Ohio.

Public officials will be hungry for advice, says Beau Kilmer, a drug policy researcher with the RAND Corp., because there isn’t a playbook for overseeing a legal marijuana retail market. Early adopters are still learning from their own experiences. “We still don’t know the best way to regulate and tax marijuana,” he says. In 2015, Kilmer co-authored a report for the state of Vermont on the potential benefits and costs of legalizing marijuana, illustrating the many paths that the state could take and the tradeoffs officials will need to consider. For example, some states may decide to prioritize the elimination of a black market, with looser regulations and fewer protections for public health; others may choose heavier taxes and regulations in an effort to protect public health. “So much comes down to your personal values,” Kilmer says, “and your preferences for risk.”

Whatever choices state and local governments make, they’ll want expert counsel in thinking through competing interests, and he predicts an increasing number of private firms will try to provide those services. “It’s a growing industry,” Kilmer says. “No pun intended.”

 

Colorado pot regulations require licensed businesses to track every plant from seed to sale with tags and bar codes. 

 

Although officials undoubtedly will try to emulate what worked in Colorado, the consulting business also gives Freedman an opportunity to address misgivings he has about how his own state handled the marijuana rollout. He can fix what he saw as loopholes, and apply some lessons learned.

For example, in the first year of legalization in Colorado, customers -- especially out-of-state tourists and first-time users -- didn’t have enough guidance on recreational products. Children and adults alike were ending up in the emergency room after consuming unsafe concentrations of THC. One visiting college student from Wyoming jumped out of his hotel room after consuming some especially potent pot cookies. New York Times columnist Maureen Dowd highlighted the plight of uninformed consumers when she wrote about her own experience underestimating the potency of edibles.

Over time, the legislature made tweaks in the law to address some early oversights. Packaging for marijuana products now must have a universal “THC” diamond symbol, along with a warning that the edibles are for adults over 21 years old and should be kept out of children’s reach. In an effort to make edible gummies look less like candy for children, the state has banned gummies in the shape of a fruit, animal or human. Chocolate bars now have to be divided in to squares with equal doses of 10 milligrams of THC, an amount that’s considered safe to consume in one sitting.

Freedman also would have liked to see the state put in place public information and youth prevention campaigns before retail stores opened. Today, the state Department of Transportation runs television ads urging residents not to drive while high. Giant billboards warn against using marijuana while pregnant or during breastfeeding. But the state didn’t launch those public health and safety campaigns until they could be funded with revenues from retail marijuana sales. That meant residents were buying legal marijuana for eight months before the earmarked money was available for public awareness campaigns.

Another insight from the Colorado experience is that states need to collect better baseline data. For the most part, Colorado officials don’t have precise information about how expanded access to legal marijuana has affected the health and safety of residents. For example, before legalization the state didn’t require schools to document when they suspended students for marijuana use; instead, the older data only show that suspensions were related to some kind of drug use. When the state examined last year’s newer, more precise data, they discovered that roughly two-thirds of student drug suspensions involved marijuana. While they can monitor marijuana suspensions going forward, they’ll never know if an increase occurred because of legalization.

The state faces similar problems in measuring the impact of the policy on driving under the influence of marijuana. Before legalization, Colorado didn’t have statewide standards for what constituted driving while high. Now the standard is set at five nanograms of active THC per milliliter of blood. Law enforcement has also received training on identifying and charging impaired drivers, so it’s likely that the marijuana DUI arrests have gone up. But it’s difficult to know how much.

States seem likely to accept most of these good-government recommendations, but Freedman does have at least one controversial idea he’s floating with his government clients: He doesn’t think surplus revenue from marijuana sales ought to fund schools. In Colorado, the constitutional amendment legalizing recreational marijuana set aside roughly $40 million a year for public school construction projects around the state. That may sound like a lot of money, but it’s dwarfed by the current demand for school infrastructure funding in the state, which is roughly $2.8 billion. Freedman worries that the average voter in Colorado is now reluctant to approve funding increases for education because the linking of marijuana revenue to education was so well publicized. “I think that it sets education back,” he says. “They’re more likely to believe marijuana can save education, and it can’t.”

 

Freedman watched as Gov. Hickenlooper signed bills to place tighter limits on the number of plants grown at home. 

 

States would be better off, he says, using marijuana tax revenues in areas that might see a bigger return on investment. Before he left his job with the state, Freedman helped pitch the Colorado Legislature on the idea that surplus marijuana revenue -- in addition to the money already going to school construction -- ought to support affordable housing for the homeless. The result was roughly $15 million next year for housing and support services.

There was one last loophole in Colorado’s marijuana laws that Freedman wanted to address before he stepped down from his post. The state already had strict regulations for licensed businesses selling marijuana, but it also allowed people to grow up to 99 plants for personal use, so long as they had a note from their doctor. The law allowed people to ask others to assist in growing marijuana plants for medical purposes. No other state allows caregivers or patients to grow more than 16 plants at home. The fact that Colorado had much looser regulations around homegrown medical marijuana had an unintended consequence: Organized crime syndicates were growing large amounts of marijuana in their backyards and then shipping it out of Colorado to sell in other states. Freedman saw it as the Achilles’ heel of the state’s regulatory system, and he spent the better part of three years working with law enforcement, legislators, marijuana lobbyists, patients and caregivers to address it.

Four separate attempts to close the loophole through legislation had failed. Patients and caregivers had fought any regulations that impeded their legitimate use of homegrown medical marijuana. “It had become my white whale,” Freedman says.

Though Freedman officially launched his firm this January, he stayed on with the governor’s office for four months on a part-time basis to usher through one last set of bills that might finally address the gray market. Legislators took up the bills in March, and passed them unanimously. The new laws limit the number of homegrown plants to 12, down from 99, but patients and caregivers can appeal to their local governments to receive individual exemptions. The legislature also allocated $6 million a year in grant funds for local law enforcement to find and shut down illegal grow operations.

At the bill signing in June, marijuana business owners, public health advocates, police, patients and caregivers all came to celebrate. It was a diverse set of groups who often lobbied on opposite sides of an issue. As people gathered, Freedman circled the room, shaking hands and smiling. It was his victory lap.

Hickenlooper called the bills an “unlikely compromise” that was emblematic of the way Freedman coordinated across government and private stakeholders for his three years as marijuana czar. “He was able to build relationships with conflicting interests,” Hickenlooper says, and persuade the larger community to support changes that protected public health and safety. “One of the [areas] where Andrew exceeded expectations was to help advise this incipient marijuana industry that they needed to be good citizens, that they needed to care about public welfare.”