E-cigarette firm eyes franchising cannabis oil production method as more states legalize pot

As more states approve the medicinal and recreational use of marijuana, an Oklahoma-based electronic cigarette retailer is looking to build a national franchise.

Marijuana is illegal under federal drug laws. But voters in Oregon, Alaska and Washington, D.C., approved ballot measures Tuesday to legalize the recreational use of marijuana, joining Washington state and Colorado. And in more than a dozen other states, medical marijuana is available.

The growing availability of legal pot opens the door for Tulsa-based Palm Beach Vapors to market a method for producing a cannabis oil product that can be inhaled through a common e-cigarette, according to CEO and co-founder Chip Paul.

"This is a wave that's kind of sweeping the nation," said Paul, whose company is looking to patent the method and has already signed licensing deals in California and Colorado for what it calls the M-System. He said he intends to set up franchise locations in other states.

The use of marijuana is currently illegal in Oklahoma, but the market for cannabis products is projected to grow as more states move to legalize it. Advocates plan a big push for legalization initiatives on 2016 ballots in California, Arizona, Maine, Massachusetts and Nevada, according to Ethan Nadelmann, executive director of the Drug Policy Alliance.

Paul was one of the organizers of an Oklahoma initiative petition calling for the legalization of medical marijuana, an effort that ended in August when volunteers failed to gather the needed signatures of more than 155,000 registered voters. The failed petition sought voter approval of classifying marijuana as an herbal drug that would be regulated by the Oklahoma Department of Health. Doctors would have been authorized to prescribe it for a variety of medical conditions.

Cannabis has a history of medicinal use to treat pain or alleviate symptoms such as nausea and vomiting in chemotherapy patients and people with AIDS. Paul plans to launch another petition drive in August 2015.

But Mark Woodward, spokesman for the Oklahoma Bureau of Narcotics and Dangerous Drugs, says the agency is concerned about the inhalation of cannabis oils via e-cigarettes.

E-cigarettes work by heating liquid nicotine into an inhalable mist; cannabis oils and waxes work much the same. Palm Beach Vapors does not buy, sell or ship marijuana but licenses the preparation method and additive that produces a vegetable glycerin base in which cannabis oils remain evenly distributed, which is key to labeling concentrations, similar to the nicotine measurements in e-cigarettes, Paul said.

The company has applied for a patent, and expects the M-System to account for 30-40 percent of its annual revenue by 2018, provided the country continues its march toward wider legalization, Paul said.

Marijuana is still illegal in Indiana, but Nate Renschler, who has a Palm Beach Vapors franchise in Newburgh, Indiana, said that sentiment could change when state officials realize the tax benefits of legalization.

"The whole country is going one way and Indiana is taking two steps back. We'll be one of the last steps to legalize marijuana," Renschler said, noting that the e-cigarette product is still viable regardless of what state it is sold in. He uses the Palm Beach Vapors method to sell hemp oil, which he claims is good for a person's general well-being.

Even though marijuana is not legal in the majority of the United States, Woodward said teens are obtaining e-cigarettes and cannabis oils. "It's an easier way for people, especially our youth, to disguise their marijuana use," Woodward said.

He said investigators for the agency have already intercepted couriers traveling across Oklahoma who have purchased cannabis oils legally in one state with plans to sell it where it's illegal.

"It can be hard to detect," Woodward said.