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The Changing and Challenging World of Tribal Cannabis

Being its own sovereign nation recognized by the federal government is different than a state's regulated industry.

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This story originally appeared on Marijuana Venture

When the COVID-19 pandemic struck in 2020, forcing businesses to shutter their doors for months on end, few economies were hit harder than that of the Confederated Tribes of the Chehalis Reservation in Southwest Washington state.

Though the tribe had diversified its interests with a variety of economic development, the pandemic meant closing nearly everything, from the Lucky Eagle Casino to the water park at the Great Wolf Lodge, the Marriott-branded hotel, and several restaurants.

“The tribe took a tremendous economic hit,” says Harry Chesnin, lead counsel for the Chehalis. “When COVID hit we closed all of our operations except the gas station and c-stores.”

The tribe continued to pay employees for 90 days after they closed to help them get on the state’s unemployment system, but eventually the tribe furloughed the bulk of its 1,600 employees.

The economic developments act as the reservation’s tax base, so the loss of revenue threatened the services provided to the tribe’s 900 members, 40% of whom are under the age of 18.

Enter cannabis

But in Washington, like in most states, the cannabis industry remained opened and like everyone else, the tribe’s business committee took note that sales not only continued, but increased. And though there had been some discussion about entering the cannabis business prior to pandemic, Chesnin says development “went into high gear as a result of the pandemic.”

On April 10, Thunder Cannabis opened on a piece of Chehalis land just off of Interstate 5 outside of Olympia, promising the lowest prices for customers and to be a constant, new source of revenue for the tribe.

“It’s a whole other income stream that the tribe is able to put in place to take care of their own,” says Lance Hanson, one of the owners of JKL International, the company hired to run the cannabis operations for the Chehalis.

But being its own sovereign nation recognized by the federal government, means the challenges and path to open a store on Native American land is different from those in the rest of the state’s industry, a process that other tribes and other states have also been working on to ensure that all Americans who live in legal states can take part in the booming cannabis marketplace.

It’s a complicated system that in many states involves agreements of compacts with state regulators that not only governs the exchange of product from the state system to the tribal store, but usually how taxes and revenues are regulated.

RELATED: This 23-Year-Old Native American Is Boosting Tribal Cannabiz

The Thunder Cannabis retail store outside Olympia, Washington, opened this spring, providing a new income stream for the Confederated Tribes of the Chehalis Reservation. Photos courtesy of Marcus Martin.

TCC

Like the Chehalis, the leaders of the Ely Shoshone Tribe in Nevada were also looking for a new revenue stream.

Hawk Dumont, secretary of the Ely Shoshone Tribe and a cultivator at the tribe’s current grow operation, was working in mining when discussions began about the tribe getting into cannabis. Dumont says there was an opioid problem among his people at that time and the tribe’s only economic development, a gas station, was barely breaking even and not providing the revenue for services that was needed. And though some of the elders were – and are still – unsure about cannabis, the tribal council was all on board.

But in 2014, no tribes had made a move into the cannabis space yet, and there were questions about how. First, the tribes had to legalize marijuana on their own lands. Then, the Ely Shoshone hired Tribal Cannabis Consulting to help bring legalization to their lands.

“When we first started doing it we saw it as a financial opportunity,” says, TCC CEO and co-founder Joseph Dice says, but says that all changed as he learned about the ways, history and the “trauma and genocide” of the Ely-Shoshone people. “We were naïve when we got here.”

Dice and TCC helped pioneer the compact system that is widely used today, laying out agreements and roles between the states and sovereign Native American nations.

“It was a way to do cross-commerce and protection, so when a tribal member drives off tribal land with marijuana in their car from tribal store, they’re not breaking any laws if they are pulled over on a state highway and vice versa,” Dice says, talking about “all the little things” that had to be dealt with and continue to deal with on a regular basis.

The Ely Shoshone created an entire system to mirror the state’s cannabis program on their own land using language that has become standard for many tribes and with the state of Nevada. The Intertribal Cannabis Commission was created to act as a regulatory agency and enforcement division, issuing medical cards that are recognized for reciprocity purposes in Nevada and other states. Today, the Tribal Marijuana Enforcement Division oversees six different tribal cannabis operations, including the Ely Shoshone’s own Tsaa Nesunkwa Dispensary.

“The first part is all the government stuff,” Dice says, noting that it is like a state agency. “It’s very complex. They issue the license after their establishments are inspected and they meet protocol.”

But it’s clear, even in the compact language and regulations, that these are still tribal lands and tribal rules and while the state can raise question, ultimately, sovereignty rests with the tribe.

Dice and the TCC have since gone on to help dozens of other tribes set up their own operations using the basic formula and regulations developed for the Ely Shoshone, something Duce says is “all I want to do now.”

RELATED: The St. Regis Mohawk Tribe Opening New York's First Legal Adult-use Cannabis Shop

The Ely Shoshone Reservation in northeast Nevada is home to the tribe’s Tsaa Nesunkwa Dispensary and grow operation.

Compacts

In Washington, where the Chehalis opened their store, tribes and regulators also use compacts to ensure the Native American and state systems mesh legally. Legislation was passed in 2015 – nearly three years after the state’s voters legalized adult use – to allow the governor to enter agreements with tribes for cannabis regulation, with the authority delegated to the Liquor and Cannabis Board.

“The agreements lay out a number of key aspects of the system, how it is envisioned to be governed and things like dispute resolution,” says Chris Thompson, director of legislative relations and tribal liaison for the LCB, noting that each tribe needs its own tribal codes governing cannabis incorporated into the compact. There are separate agreements for medical cannabis.

Thompson says the compacts are part of the state’s government-to-government relations with the sovereign nations located in Washington, jointly regulating the product and the industry to ensure public health and safety and promote tribal economic development.

According to Thompson, the Evergreen State had 18 compacts in place by Spring 2021, with six more in the works, overseeing 29 different Native American cannabis establishments. Thompson says most are retail, though there are several producer/processors. Other tribes, like the Puyallup Tribe of Indians, opted to get lab licenses to focus on testing.

Thompson says tribal interest in cannabis increased through the past year as the pandemic impacted tribal nations and who, like the Chehalis, looked for new, secure revenue streams to protect their members.

“It’s been really important for a number of tribes and so many more have moved in this direction fairly recently,” he says

The compacts also highlight some of the major differences between Native and state industries, such as ownership, enforcement and taxes. A tribal cannabis business, for example, is not owned by a single entity, but is instead owned by the tribal government as a collective enterprise.

“These are tribal government-owned, either directly or through a tribal enterprise that must be majority-owned by the tribe as a whole,” Thompson says. “These are agreements with tribes.”

As for enforcement, Thompson says though the compacts, which are available in boilerplate on the state’s website, allow for LCB enforcement, state regulators take a step back to recognize the sovereignty of the tribal government to enforce its regulations through its own agency and police departments. They also allow for vertical integration, which is illegal in the state’s regulated industry.

The tribes do have to be connected to the state’s traceability system, however, in order to use product from non-tribal producers or to get their product in non-tribal stores. And though tribes can create their own systems, none have.

As for tax dollars, Washington’s compacts require tribal stores to charge the same percentage tax as other stores in the state to ensure fair competition, but that money does not go to the state, instead it stays with the tribe to support its services.

But from a consumer standpoint, the experience at a state-licensed store and a tribal should be the same.

“In theory, there’s no reason the experience couldn’t be the same for a customer walking into a store in either system,” Thompson says, though he says tribal stores have a little more flexibility on pricing.

But even the compact system in Nevada, for example, was strongly opposed by that state’s legal cannabis community, according to Dice, going so far as to organize and encourage members not to buy product from tribes.

“They fought hard against the compacting legislation,” Dice says. “They said it wasn’t fair.”

Michigan

While states like Washington and Nevada use compacts and agreements with the tribes, those systems are more mature than in some other states, such as Michigan, where legislation on how to work with Native American communities is currently being debated.

But that isn’t stopping the Wolverine State’s tribes from getting into the industry.

“Particularly during COVID we heard from a lot of tribal leaders who want to explore the space,” says Andrew Brisbo, executive director of the Michigan Marijuana Regulatory Agency, noting that his agency is working with tribal leaders.

The Sault Ste. Marie Tribe of Chippewa Indians, located in Michigan’s upper peninsula, for example, simply partnered with Lume Cannabis, acting as landlords and leasing property to the state-licensed retailer. There are currently two Lume stores open on tribal land, with two more opening this year and additional stores coming next year.

Joel Schultz, Executive Director for the tribe, says the tribal board first legalized on tribal land and then looked for opportunities within the space, eventually going with Lume, a privately held, vertically integrated cannabis company with more than 20 stores in the state.

“We had a lot of suitors,” he says. “We think we partnered with the Cadillac.”

Schultz says at first the state wasn’t sure how to handle putting a store on native land, but he says the tribe has experience working with the state to create documents and policies that would allow the tribe to take part.

“We couldn’t get people to work with us without being in the licensed arena,” Schutlz says, which led, ultimately, to the decision to partner with a state-licensed entity, reducing the cost and allowing the tribe to provide a better product, since it had no internal experience with cannabis cultivation and sales. Plus, the state still gets its tax dollars.

“Right now the state of Michigan is getting everything they would get from any other store,” says Schultz.

The partnership is already proving fruitful, especially in Escanaba, where the municipality’s decision to opt-out of the state’s system made the Lume store located on tribal land the only game in town.

Meanwhile, the Bay Mills Indian Community, just 25-miles west of the Sault Ste. Marie Tribe of Chippewa Indians, opted to simply legalize, opening its own cultivation site and retail stores, and telling the MLive.com news website “Look, we’re sovereign governments. We’re not giving up our right and our authority to regulate what goes on on our lands.”

Brisbo says that the legislation currently being worked on should give Bay Mills the opportunity to legally move their product between their land and the state land.

The Winnemucca Indian Colony hosted its first CannaMucca Music Festival event this year at its Water Canyon Dispensary

Community-owned

One of the other major differences between state-licensed cannabis and tribal cannabis is the ownership and profits. Unlike in the state systems, on Native land, cannabis operations benefit to the larger community has changed his entire view on cannabis and capitalism in general.

“It opened my eyes to something totally different: community owned cannabis,” he says.

Most tribes use the profits from cannabis sales to invest in their communities and provide services for their members.

“We use the money to help with our programs. We use it for our schools. We use the money to help buy them new computers, to re-do the schools we have, like a daycare/preschool, and that’s open to not just Natives,” Dumont says of the Ely Shoshone. “We subsidize our health program. When we were running low on money, when Covid hit, this helped us out a lot.”

One tribe that has been helped drastically by an infusion of cannabis money is the Winnemucca Indian Colony in Nevada, which Dice says was “on the verge of not existing.”

According to Winnemucca general counsel Treva Hearne, the small tribe of 33 members has been struggling since the murder of its chairman in 2000 by drug dealers trying to take over the colony’s land. After that, many members left the reservation in fear. Hearne has been fighting for 20 years to help get the tribe’s land back so members can return. After opening the Water Canyon Dispensary this January, which was made possible through a compact with the state, she says the influx of cannabis money has made it possible for the Colony to start building new homes and a community hall to encourage its members to return and live on tribal land.

In addition, the money is used to support a member’s business, provide health services for members including the Covid vaccine, create a memorial garden for elders who have passed and to build a fence to help stop the illegal drug trafficking through their land.

The tribe previously owned a smokeshop, but she says it became a “nightmare” and the tribe decided to close the store, leaving them without an economic development revenue stream.

“They wanted to find something to economically get a jump start,” she says. “Without the cannabis, they would not be anywhere at all.”

Hearne calls the tribe’s cannabis retail store the foundation and a “springboard” to other economic development that is helping the small tribe finally get back on its feet.

“It was critical for them to be able to exist,” she says. “How often do you get to build your own community?”