Minnesota needs a bulldog regulator to oversee nascent cannabis industry

When Gov. Tim Walz appointed Erin Dupree to be his first weed czar, I sent a facetious text to a Walz administration official, asking if they would soon put a 3M executive in charge of water quality. Dupree is a cannabis consultant and had been owner of a small THC store in Apple Valley called Loonacy (no, really). 

My point was that just as 3M’s role contaminating east metro water would seem to disqualify one of its employees from being an environmental regulator, so too a THC saleswoman might not be the best person to regulate THC products.

This person objected, saying the better analogy would be a farmer appointed commissioner of agriculture. 

I found it to be a revealing exchange, even before Dupree was forced out less than 24 hours later when reporters found she’d been advertising illegal THC products and owed money all over town. 

It was revealing because my correspondent assumed I’d take for granted that a government regulator should work hand-in-glove with an industry like agriculture for the best outcomes. 

Indeed, Walz’s own commissioner of the Department of Agriculture was previously head of government affairs at Minnesota Farmers Union, just as a former 3M executive was head of the Minnesota Pollution Control Agency under former Gov. Tim Pawlenty. 

This was an open acceptance — embrace, even — of what’s called “regulatory capture,” which is when the regulated industry has so much influence over the regulators that they evade the rules intended to protect the public’s health and welfare, or use the rules and friendly regulators to thwart competition. 

As far back as 1892, Richard Olney, a corporate attorney who would later become attorney general, advised a railroad executive: 

Regulatory capture thwarts good policy by privileging private interest over public welfare, sure, but it also tends to create cynicism among everyone involved — including the voting public. Which in turn allows right-wing opportunists to argue that there’s no point in regulating in the first place. The banks own the regulators, the thinking goes, so let the market rule. 

“Just as physicians once believed that the only effective way to treat infection was to cut it out surgically, it is commonplace today to believe that capture can only be treated by ‘amputating’ the offending regulation,” write Harvard’s Daniel Carpenter and David Moss, editors of a book on regulatory capture. 

But we shouldn’t surrender so easily. 

Public minded professionals who consistently enforce clear regulations provide an important public service, including a relatively stable banking system, safe air travel and collapsing rates of exposure to second-hand smoke. 

When it comes to Minnesota’s marijuana industry, we should temper our celebration of our newfound freedom — and the potential for the lucrative flowering of a new industry — with the substantial risks of legalization: Use by children; addiction; product impurities and toxins; tax evasion; and organized crime. 

These issues cry out for a strong regulator, not an Apple Valley weed shop owner, which is why I’m heartened that Walz is apparently taking his time and looking for someone with regulatory — as opposed to merely industry — experience.

That’s a low bar, however. 

The regulatory agency will also need to psychologically separate itself from the economic fortunes of the regulated industry. 

There will be the urge to root on industry, to get caught up in the hype of dynamism and growth, watching with wonder as the sales and tax revenues go higher and higher and Minnesota produces its first legal weed billionaire or whatever.

In my experience as a reporter in Nevada, this is how gambling regulators operate there, busy cheering on the industry, all in a lather as they wait for the inevitable lucrative revolving door job offer from one of the resorts or the gambling law firms that bill $1,000 per hour.

It’s obscene, especially given the stakes.

But even if our weed regulators can dodge that trap, they must also avoid what legal scholar James Kwak calls “cultural capture.” 

That’s when the regulator grants deference to the regulated industry because of intangible factors, like identity (our kids go to the same schools); status (she’s a brilliant entrepreneur and I want her to like me); and relationships (I’ve met her and she seems eminently Minnesota nice, and she would never put poison in her products).

To bring this full circle: Some deep thinking and execution about regulatory matters would be quite useful for the Walz administration because once they’ve figured out legal weed, they ought to move on to another important challenge, and one that’s beset with regulatory capture: farm pollution.