colorado marijuanaGetty4:20 pm on April 20, 2010, at the University of Colorado in Boulder

The marijuana legalization initiatives passed Tuesday in Colorado and Washington state are completely unprecedented around the world, according to a leading drug policy expert.

Beau Kilmer, Codirector of RAND Drug Policy Research Center and coauthor of Marijuana Legalization: What Everyone Needs to Know, told BI that what happened "was really groundbreaking. No modern jurisdiction has removed the prohibition on commercial production, distribution, and possession of marijuana for non-medical purposes. Not even Holland."

Kilmer explained that while many people think marijuana is legal in Amsterdam, the government has simply decided to not enforce the law against small transactions.

"If you're over 18 you can walk into one of those coffee shops and buy up to five grams," Kilmer said. "Think of it being legal in the front door. However, it's illegal to grow it, distribute it and sell it to the coffee shops in the Netherlands—so it's actually illegal in the backdoor."

Marijuana being illegal keeps prices inflated as an extra price has to be paid to compensate for the risk of arrest and incarceration. The big difference with the initiatives in Colorado and Washington, according to Kilmer, is that the risk cost "goes away with legalization."

Consequently, the wholesale price of the drug will drop and an entirely new system will emerge, but what it looks like depends on how it's regulated.

Over the next year the state liquor board in Washington and the Department of Revenue in Colorado will make key decisions such as how marijuana is taxed, the type of grow operations that will be allowed, how large they can be, and how many commercial producers are allowed in each state.

(Note: In Colorado it will be legal to privately grow up to six plants — with no more than three being mature at any given time — while in Washington it will still be illegal to grow at home.)

"If production moves from basements and backyards to industrial farms and huge greenhouses … we would expect the production cost to plummet," Kilmer said. 

Nevertheless, don't expect the federal government to be quiet. Government agencies including the DEA, IRS, and Department of Justice influence the market.

"It will be interesting to see how these agencies react to this," Kilmer said.

Kilmer noted that the government has a number of options — like signaling that it will target big operations or those who openly advertise their product — and it probably won't completely crack down or be completely hands-off. 

"So much depends on not only the federal response but also the type of production [the state regulations] allow," Kilmer said. "Ultimately that will influence the retail prices and the tax revenues."

Since it will take some time for them to create the regulatory body, it will be at least a year before marijuana is sold in retail establishments. Until then the beneficiaries are individuals who can grow, share, and sell weed in a market that's literally free.

colorado marijuanaGetty

"In the short run you're going to be able to grow your own, give it away, possess it, and there won't be a commercial market," Kilmer said. "That in-and-of-itself is another interesting policy experiment." 

SEE ALSO: What You Need To Know About Getting High In Colorado And Washington >