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Native American Tribes Are Looking to Cash in on the Legal Weed Industry

Native American tribes have used their sovereign status to provide some of America's most beloved vices. Now some are wondering if legal marijuana could be their next big business venture.

by CJ Ciaramella
Apr 22 2015, 3:30pm

Image via Wikimedia Commons

Over the years, Native American tribes have used their sovereign status to provide some of America's most beloved vices—cigarettes, fireworks and gambling—free from the pernicious taxes and regulations of the federal government. Now some tribes are wondering if legal marijuana could be their next big business venture.

In December, the Justice Department released a memo giving Native American tribes the green light to grow and sell marijuana on their lands, provided they follow the same conditions the department has placed on states where weed is now legal. The memo sparked interest among some of the 556 Indian tribes recognized by the US government, and several are now exploring the possibility of allowing marijuana businesses to operate on their lands.

"A lot of the tribes are in the discovery phase right now," said Allyson Doctor, one of the founders of the National Indian Cannabis Coalition. "There's been a lot of conferences and marijuana has been a subject that's come up at every one."

The coalition, the first marijuana trade group focused on tribal lands, launched in March at the Reservation Economic Summit in Nevada, which included a standing-room only discussion on the potential marijuana market. "We recognized that there was no one in Indian Country that had stepped into this arena," Doctor said. "It was a space that hadn't been filled. My husband and I are both Native. We already had some experience in the industry, and we recognized there needed to be good information out there."

For now, everything is still very much in the exploratory phase—how the regulatory mechanisms would work between tribes and the states surrounding them, especially on reservations that straddle more than one state, is uncharted territory—but tribes and the marijuana industry see big potential benefits from a mutual partnership.

In February, roughly 200 tribal leaders gathered at the National Congress of American Indians, which included a closed-to-the-press panel discussion with Justice Department officials on marijuana legalization, according the Associated Press. And earlier this year, the Pinoleville Pomo Nation in northern California inked a contract with Foxbarry Farms, a management firm, to build the first marijuana cultivation center on tribal lands. FoxBarry CEO Barry Brautman toldThe Huffington Post that more than 100 other tribes have contacted his firm, expressing interest in similar deals.

Partnering with established outside firms may be attractive for tribes as they look to enter the new industry. And for businesses, tribal land is alluring for several reasons. "It's very difficult to find space in California to cultivate outdoor or indoor," Derek Peterson, the CEO of the TerraTech, a company that builds and runs medical marijuana dispensaries, cultivation and production facilities, said in an interview with VICE. "You have to deal with safety, landlords, and any number of other problems."

Leslie Bocskor, a co-founder of Electrum Partners, a consulting firm that advises marijuana businesses, said in an interview with VICE that marijuana businesses on tribal land could also potentially escape the steep tax rates levied on the industry by the federal government. Because of IRS rules enacted in the 1980s, which prohibit legal weed purveyors from deducting regular business expenses, some marijuana companies have claimed that they face tax rates as high as 70 percent on their profits.

Tribes, on the other hand, pay no federal income tax. "If you can get around that tax rate, that's a hell of a margin from a business perspective," Bocskor said. He added that there's also a potential opportunity for tribes to legally import marijuana seeds and act as quality assurance. "When you go buy a bottle of Malbec from the supermarket, you never doubt the grape used for that wine. But nobody is guaranteeing quality in the marijuana industry yet."

Finally, the Justice Department's current stance on marijuana is by no means assured to remain in place when a new administration takes over in 2017. Marijuana businesses on tribal lands might be better positioned to weather changes in political winds than those in states where marijuana has been legalized, Peterson said, due to federal reluctance over interfering with tribal sovereignty.

"We don't know how that will shake out," Peterson said. "We think Pandora's box has mostly been opened and can't be closed, but you can't be sure."

Still, many tribes are wary of the social and environmental costs of opening their lands to marijuana, especially considering the substance abuse problems many reservations already face. According to a 2009 survey, Native American youth have higher rates of illicit drug use than any other ethnic group in the U.S—18 percent compared to 9.6 percent for blacks, 8.8 percent for whites, and 7.9 percent for Latinos.

In Washington, the Yakama Nation banned marijuana on its reservation and has sought to block hundreds of applications for pot businesses on 12 million acres of land where it holds hunting and fishing rights. "Citizens of the state of Washington don't get to vote on what happens" on those lands, Yakima tribe attorney George Colby told TIME last year. "The federal government wasn't supposed to let alcohol come on the Yakama reservation, and thousands of people have died. We're not going to let that happen again."

The Hoopa Valley Tribe in California is also fighting illegal marijuana grows on its reservation. The tribe will vote sometime this month on whether to repeal its ban on marijuana. A 2012 news investigation of substance abuse on the Hoopa Valley Indian Reservation found that "meth abuse rates have reached 30 percent on some rural Indian reservations, and in some Indian communities as many as 65 percent of all documented cases involving child neglect and placement of children in foster care can be traced back to parental involvement with methamphetamine."

But tribes, especially larger ones, are not monolithic. Although the Oglala Sioux Tribal Council in South Dakota rejected a proposal last year to allow marijuana on its lands, the Wounded Knee district of the Oglala Sioux Pine Ridge Reservation passed a motion last Wednesday to legalize the sale of medical and recreational marijuana.

Whether it's possible to untangle the legal knot of running a marijuana business on sovereign tribal land—and whether tribes will go for it—remains unclear. But the revenue potential has piqued interest.

Jeff Doctor, of the National Indian Cannabis Coalition, compared the potential to that of Indian gaming, which started as humble bingo halls in the '70s and over the next three decades slowly flourished into large casino operations.

"It could be a very big opportunity if its done properly," Doctor said in an interview with VICE. "It almost coincides with what's happened with Indian gaming over the years. It's something that cannot be rushed into. There's a lot to consider."

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