>> we're here to fully get into the nuances of everything that's going on, not just in this country, but around the world. getting the news from the people who are affected. >> people need to demand reform... >> ali velshi on target. night. [ ♪ ] using marijuana for fun in colorado and washington state is already legal. and there's a longer list of states where meddiesinal marijuana is -- medicinal marijuana is available. but the federal government lists cannabis as a schedule one drug. that big disconnect between federal and state law left sellers trying to make a profit in an odd cul-de-sac of the law. the business of pot is

tonight's "inside story". welcome to "inside story", i'm ray suarez when states legalize marijuana, they do more, they make it available, creating a legal business, allowing them to monitor the distribution of a formerly forbidden drug and to take a cut of the profits. providing cannabis to legal customers is an enormous and fast-growing business hemmed in as a target of police and courts. mckinley. >> when you pay your taxes, do

you liar combat veterans to keep thieves from stealing your money. you do if you own a marijuana dispensary. >> whether it deals with the enby in one way or another. >> biggal is a team - hired to transfer tens of thousands of dollars. if you look on the left. there's a guy in a dark vehicle, dark tinted windows looking out as well. >> hundreds of shots are paying bills. in many cases hundreds of thousands each, all in cash because federal laws will not allow them to have bank accounts. building. >> biggal is a former special apps marine. dispensaries like light shade labs turned to him, when armoured car companies found the job too risky. you have grown five fold because you need help.

>> they will join 48 other shops selling pot retail. along with that is a pile of cash. following that, more nerves. >> it's like growing tomatoes, compete the correspondent is tomatoes. >> they are worth thousands of dollars. to protect the crop and the spots. >> you are always being recorded no matter what you do or say. the second thing is panic buttons. we have standard operation procedures where we can shut the dispensary down like that. >> denver mayor is nervous too, despite the fact that the mile-high city is going to reap millions, he sees the cash as a safety problem for employees. i'm concerned when large amounts of cash come into the city. >> how much are we talking about. >> $50,000 in cash, walking no

the building by an owner. >> danby big alsecurity left loaded down with thousands in cash. light shades asked us not to say how much. one day's take joining us from denver colorado is david swarts, c.e.o. of urban meddizinals, a marijuana center expanding into the adult recreational use. welcome to the programme. you've been selling medicinal marijuana for years. how come that experience didn't lay down a dem plate for you and others -- template for you and money? >> i feel like it did lay down a template. i feel like it hasn't been something approved on a federal level, and keeps the banks from accepting money. we have cash handling procedures worked out in sop and we are

bringing it over to the recreational side. >> did you assume by this point in the game you would be able to write a check or go online and do an automatic transfer into a tax coffer, pay off your suppliers and so on? >> sure. we were definitely hoping that that would be the case, but i guess challenge will be a slow moving process. we are hoping that it happens any day soon now. >> the treasury department did write a memo telling banks more or less "you can handle the deposits in the states where it's legal." but the banks seem not to have taken that on faith, that they are not going to get in trouble. have you spoken to bankers about handling your business? >> i have. i have spoken to numerous bankers, and a lot of them have had answers to why they didn't do it, but the more sophisticated are people that

are higher up, that i have spoken to, a member of the fed, and i have them on both sides of the story, when it seems that the banks are liable for making sure their customers being us, are doing everything by the book, while the federal government and empowering them to take marijuana money, they are not - like, they are putting the burden of responsibility on the banks for betting that the dispensaries are doing everything by the book, the banks don't want to take on that liability, so therefore they'd rather not take our money. >> in carol's report we saw piles of cash, boxes and security men. i understand it's a pain in the neck. are there practical considerations. if you wanted to buy a building, could you walk into a bank and

apply for a mortgage? >> not with revenue belived from medical or retail marijuana businesses. i have mortgages from money i haven't made in this industry, but i keep that money separate from the money i make specific to the marijuana industry. >> what do you need now. and is colorado's delegation, for instance, to capital hill trying to get it for you. is there going to be a break in business? >> i don't see a clear cut answer to that. i'm hoping, but there are people that are working on the problem directly. i know that some people were within the industry were talking about purchasing their own bank. at the beginning of the year there was a bank in

denver and a credit union. they both backed away from it, to the best of my understanding. >> does this make the cost higher. if there are people watching this programme, who own a business, and thinking about money coming in and going out. how is your cost structure different, because you sell this specific, in colorado, product? >> well, it's challenging. the regulations are in place. they have us hemmed in, so we deal with large amounts of money, it taxes the infrastructure of each company. you have to create your own protocols for dealing with the money and keeping employees safe at the same time. you have to basically become your own banker where you track every dollar in and out and you are accountable for that revenue for the state and the city.

you have to take on more asks where other businesses you could deposit all your cash into the bank and use a credit card to track your transactions. on top of regular day to day procedures, i think a lack of banking creates problems for money going missing, and doesn't create a paper trail. one of the things that the legislature here in colorado worked hard to create is a model for other states to implement medical and possibly a retail marijuana industry in those other states, and as such, it's created a template, but the cash-handling procedure is still not implemented and, therefore, there's no paper trial and accountability - i shouldn't say no, there's less accountability that if there was a paper trial established through the banking industry.

finally, the biggest financial burden is the i.r.s. 280 e regulation, which basically prohibits marijuana or cannabis related businesses from deducting day to day expenses that any other business have the right to deduct. we don't get to deduct anything related to the product, we can deduct anything related to the manufacturing of the products. anything to do with sales, like advertising or represent, they are not able to be deducted as common expenses that you can take off of your store like if you were a restaurant. >> you probably had to pay uncle sam in cash too, right? >> yes. they do want their payments - they do want their payments by eft. we are left to pay them in cash. i believe there's an additional fine to pay in cash.

>> david swarts, the c.e.o. of urban meddize analyse. still ahead - will the federal government stick to its national marijuana policy or is the justice department ready to recognise changes taking place nationwide. the business of pot is tonight's inside story. >> this is al jazeera america live from new york. >> at 7:00 - "news roundup". tony harris gives you a fast-paced recap of the day's events. >> this is the first line of defense. >> we have an exclusive story tonight. >> then at 8:00 - john seigenthaler brings you the top stories from across america. >> the question is, will these dams hold? >> and at 9:00 - >> i'm ali velshi, on target tonight... >> ali velshi on target. digging deeper into the issues that matter. >> i'm trying to get a sense for what iranians are feeling.

>> the only live national news show at 11:00 eastern. >> we start with breaking news. >> let's take a closer look. welcome back to "inside story". tonight we are taking a closer look at the business of pot. the legalization of pot, forcing lawmakers and law enforcement to

change, how they think about it, how they work with it. joining us now, an attorney, and a former chief of intelligence operation for the u.s. drug enforcement agency. let me start with you, it seems like the feds didn't get ready for what is happening. right now a bunch of states are in the pipeline getting ready to make the change that colorado already has, and it doesn't seem yet. >> i think that the federal government should have gotten way ahead of this issue of medical and recreational marijuana when the got started. i think that we are playing catch up at this point in time. but the fact of the matter is that we feel that marijuana, you know, is - it is a schedule one drug. and despite the disinformation that

is provided by the advocates of marijuana. it has no medical properties, and the fact is that it's a dangerous drug. >> once voters head to the polls, they head to a new realm. won't it move into a world of cash. if not. i don't know about the issue of cash transaction. i can speak to legalization, i can speak to the issues of negative impact on society relevant to drug abuse, which includes marijuana. >> hillary, let me bring you in here. you have been handling cases

like the one of david swarts. what are the big impediments that remain in those states, where you have meddize jipal approval, where you have people ready to get into the business and begin to invest. what should they know about now. >> the federal conflict nowadays has gone beyond drug enforcement coming in and creating state laws the conflict as outlined by mr swarts manifests in a variety of weighs. one being the i.r.s., where the tax structure is problematic. you can't take reductions, the inability to bank, that it is a schedule 1 steps, there's no clinical trials, there's no massive quality assurance going on. when the states are doing the job of what would fall to the federal government. there'll be gaffes.

and mr swarts did a job of pointing out the two big impediments which is an inability to bank because of the schedule one status. >> like a good lawyer, i am sure you talk con law. does the united states live with a long-term disagreement between the states and federal government when it comes to something like this, and it involves revenue, tax collection and bank chartering. can that go on for a long time. >> your guess is as good as mine. no one knows what will happen in 2016. i'm confident there won't be a change on the federal level. if someone like hillary clinton gets the presidency, he made it clear that more research needs to be done. the one example to which we can

look in this country is alcohol. and that actually ended up, as we know, manifesting in an amendment to the constitution that regulation law falls to the state. if alcohol proibition tells us anything, marijuana is following that trajectory. i don't know how long a struggle will go on. soon. >> you can go to a score in washington and be in idaho in a few minutes. you can go to a marijuana dispensary in colorado, and be over the border in new mexico. marijuana is legal in both those places. can we have a checker board marijuana enforcement structure in this country? >> i think that we have a broad marijuana structure in the

united states, and had one for a number of decades. i feel strongly that we can. >> can you raid a house in sante fe and le off a house in durango and steam boat springs in the adjoining state. when you start to get more states allowing recreational use, and a larger number - a very large number of states allowing medicinal use, how does the deo deploy to fight what still is a schedule 1 drug? >> the thing is that we have limited resources. however, we work closely with state and local police departments. the states may have legalized marijuana, but, you know, we can work with the state and local police departments and we can take those cases, federal and prosecutor at the federal level.

>> we are going to continue the conversation with hillary and michael when we come back. one of the things that makes the federal system workable is a rough harmony, but when the laws require diametrically imposed ideas about enforce: can it last? the business of pot is tonight's "inside story".

federal system workable is a

welcome back to "inside story", where we have been talking about the business of marijuana. we are talking from hillary and michael, who used to be with the drug enforcement agency. >> meb nebraska and s suing over marijuana laws, will this be a problem. >> it could. i advise client, what is enemy number one - it'suably not in my backyard neighbour. i don't think that nebraska and oklahoma will be the last states to say hey, federal government, you need to enforce the controlled steps act. for those of us in the union that don't want to legalize. >> and there - there the rub, isn't it. if you are a d ex a agents, and there's a map of the united states that breaks the country into regions, how do you run an office that is keeping track of the movement of what still is an

illicit substance by federal law, where it can be grown with full approval of the state in jurisdictions. >> the thing is we do a good job in terms of tracking the movement, distribution of marijuana, most of it is - well, all of it at the federal level is illegal. we have some coming in from mexico, from other countries. so we do a good job in terms of tracking, and pursuing, you know, drug traffickers that distribute illegal drugs. and, again, we do have task forces, we have a lot of intelligence resources, fusion centers, where we have information regarding the most of marijuana, and then the local police departments have been tracking it significantly, especially that which emanates out of colorado. >> well, to use that as an example, these places have been heavily regulated at the local level.

and there's a lot of chain of possession laws, so that you can't divert a couple of hundred plants to somewhere else and not have anybody know about it. if they keep their close clean like that, can they stay out of the deo's focus if they have a local law is making it legal. that? >> the thing is it's not being highly regulated. i would disagree with that. the issue with colorado if they are not regulating, it's getting into the hands of children. it's costing state borders. dispensaries... >> i'm not saying the fence ris, but the fact of the matter is that marijuana is being diverted, and the impact on

adolescents, that are using a lot of stuffs, marketed towards the kids. coming up with deserts, cannedry, the edict. lots of police departments in the sounding states have reported issues with marijuana crossing over, being used illegally. it's a problem, and to answer your question, it's not going away soon. this will be an issue that will be first and foremost in the eyes of the federal government and many state governments. >> hillary, have legal dispensaries been trying hard to keep the product from being diverted into the wrong hands. does that play into whether said.

>> absolutely, and the guideline is the department of justice memo from august 29th, outlining federal priorities, i disagree they are not heavily regulated, it's to the contrary. the cost of doing business is sky high because they are heavily regulated. and via tracking software and big brother tactics to keep an eye on the profit is to ensure that rules accommodate prohibition about marketing to minors, states have been sensitive to that. when a state legalizes, they have the responsibility of educating the public about driving while intoxicated. there is that responsibility there, and i think states and entrepreneurs are doing their best to meet that large task. >> i would totally disagree with that. i think that, you know, the dispensaries are not doing a

good job in terms of educating people as to, you know, the issues with marijuana, and keep in mind that marijuana is no longer an innocuous job. it's not the woodstock job where the t.h.c. levels are 1%. we have t hc that is 30%, and it's no longer an innocuous drug. the fact of the matter is that it causes a lot of issues with adolescent children that are using it, and it impairs their cognitive skills, and just like with marijuana, with alcohol and tobacco, for every tax dollar of revenue that we are paying, we here in the united states spend $10 in terms of social

cause, with accidents and health care. >> michael, former chief of intelligence operation with the deo and hill ary, thank you for your insights. if you would like to get into the conversation at home send us your thoughts@ray suarez news. i'll be right back with some final thoughts.

there came a point in the battle over same-sex marriage, where the federal law took act of rapidly growing laws.

taxation, ipp her tans and housing followed where the law was heading. with marijuana, for now it's washington state, colorado and the district of columbia where sparking up for enjoyment is legal. it looks like there'll be more in the coming years. add in medical marijuana states, and it's a matter of time before the internal contradictions that see federally charted banks unwilling to do business, or business owners unable to deduct the cost of doing their business because irs follows federal law will push for a truce denver, ol impia, the white house and capitol hill. once it follows, will it follow that the u.s. as a whole will back off half a century of marijuana prohibition. thanks for joining us on "inside story". see you next time, i'm ray

afghan government forces are advancing on the southern district after the taliban took control of it. ♪ ♪ hello i am nick clark and this is al jazeera live to doha. also ahead on the program. a surprise move the three-year sentence of a well known human rights lawyer is suspended. burkina far so issued an arrest warner for blaise compaore in the death of a rival. spaling stu