Authored by: Craig Small, Hoban Law Group

Published By: Cannabis Law Report

 

The federal republic nature of the United States of America requires that each state in the nation simultaneously cooperate and compete in all aspects of our society and the marijuana industry is no exception. Each state is perpetually in a free market arms race with the other states to concurrently balance the need to protect the social values of its constitutes and support the free-enterprise competitive edge of its industry. As the marijuana industry matures, we see each state taking turns making marijuana industry chess moves in reaction to the other states’ last move. Some moves are minor En Passant pawn shifting to adjust and improve existing marijuana regulations and other moves are complex opening moves like the Botvinnik Variation of the Semi-Slave Defense (I had to look it up) to catch up to established marijuana regulatory systems

Colorado’s latest move in this arms race is to introduce two new chess pieces to the playing board and overhaul an existing chess piece that needed to evolve. On Wednesday, May 29, 2019 Governor Jared Polis signed three bills into law to increase the viability and competitiveness of Colorado’s marijuana industry:

  • Part 1: Regulated Marijuana Delivery (HB19-1234);
  • Part 2: Marijuana Hospitality Establishments (HB19-1230)
  • Part 3: Publicly Licensed Marijuana Companies (HB19-1090).

Last week in Part 1: Regulated Marijuana Delivery, I discussed the key points and opportunities that the Regulated Marijuana Delivery statutes offer to Colorado marijuana business establishments and consumers; both medical and recreational. This week I will discuss Part 2: Marijuana Hospitality Establishments.

 

Marijuana Hospitality Establishments

Like Colorado’s Regulated Marijuana Delivery law, the Marijuana Hospitality Establishments law provides a regulated, safe and efficient solution to another long-standing problem Colorado marijuana consumers face. Once a consumer possesses marijuana where can that consumer safely consume their products? Unlike alcohol, Colorado’s marijuana laws, state and for the most part local, specifically prohibit marijuana consumers from consuming marijuana in areas open to the public which includes virtually all locations, including bars and restaurants. All that was left was private residences and a few private business options.

This poses a substantial challenge to Colorado residents that do not own a home and out of state visitors. Most landlords do not prioritized marijuana use by their tenants over preservation of their rental property and leases often contain restrictions on the type of marijuana use allowed on the premises if marijuana use is allowed at all. Out of state visitors face even more challenges as most hotels, motels, VRBO and Airbnb providers prohibited marijuana use on the premises completely.

Enter Marijuana Hospitality Establishments. This new set of marijuana business licenses will create the marijuana variant of alcohol establishments albeit with marijuana specific restrictions and procedures and provide a marijuana consumption location open to the public; including mobile options.

 

What are the key points?

  • Two new state licenses will be created: a Marijuana Hospitality Establishment and a Retail Marijuana Hospitality and Sales Establishment.
  • Both licenses operate in the same manner, but a Marijuana Hospitality Establishment is a stand-alone consumption location whereas a Retail Marijuana Hospitality and Sales Establishment is designed to incorporate a Retail Marijuana Store and permit marijuana sales in addition to onsite marijuana consumption. For ease of reference I collectively refer to both these licenses as “Establishments”.
  • The Establishments may operate in conjunction with a retail food establishment by designating an isolated portion of the premise for marijuana use but not in combination with an alcohol beverage, fermented malt beverage or special events liquor permit license.
  • The Establishments shall not engage or permit the sale or exchange for remuneration, including good will free samples, of marijuana on the premises.
  • A Marijuana Hospitality Establishment may be mobile if the proper registration and security requirements are met; i.e. GPS tracking, route logging, surveillance cameras, ventilation systems, etc.
  • A Marijuana Hospitality and Sales Establishment is still subject to all the same transactional limits as a Retail Marijuana Store.
  • Local municipalities will have the opportunity to ban Establishments within their jurisdiction or allow these businesses to operate and implement time, place and manner restrictions on their operations.

 

What is the opportunity?

The addition of Marijuana Hospitality Establishment and Marijuana Hospitality and Sales Establishment licenses is the penultimate answer to the question asked by almost all Colorado marijuana consumers, “I just bought marijuana…. now where do I go?” Although it does not exactly take marijuana to that holy grail standard to regulate marijuana like alcohol, it certainly substantially bridges the gap between alcohol and marijuana consumption options in Colorado.

However, the opportunities these licenses present are not equivalent to each other. For Retail Marijuana Stores, the addition of a Marijuana Hospitality and Sales Establishment license is a tremendous boon to the industry and consumers as it allows existing Retail Marijuana stores to merely add consumption location services to their existing “baked in” sales services (bad pun intended.) All Retail Marijuana Stores should investigate this option and, if the local jurisdiction permits these activities, invest substantial capital to add a comfortable and fun consumption option to consumers after they have completed their sales transaction. In the era of the Green Rush, this will mark a new wave of benefits to the marijuana adjacent construction industry to build out competitive consumption locations tailor suited to the various niche and boutique markets that constitute marijuana consumers.

For local jurisdictions this is a more palatable solution than a Marijuana Hospitality Establishment as it only requires minimal additional codes to permit already licensed and regulated Retail Marijuana Stores to add one more service to their already existing brick and mortar operations.

For the Retail Marijuana Hospitality Establishment license this is more of a lateral move than a step forward. Prior to this law coming into effect some local jurisdictions, most notably Denver, already allowed marijuana consumption establishments to little or no effect. Denver only has two establishments and one of them seems to be cycling in and out of operation. Having a state license for an activity that was previously permitted under local jurisdictional codes anyways does not add much transformative value.

However, there is value in the State licensing authority explicitly authorizing the co-location of food establishments and marijuana consumption establishments in the sense that state approval of this relationship may render local jurisdictional approval of this relationship more palatable. Some local jurisdictions in Colorado have leaned more heavily on the State licensing authority to do the heavy lifting as it pertains to vetting marijuana industry businesses and individuals rather than allocating local authority resources to do these same tasks. Perhaps this higher-level trust relationship will flow back down into Marijuana Hospitality Establishments being permitted on a local level as long at the state vets the licensees.

Where the Marijuana Hospitality Establishment license really brings value is in legitimizing a grey area of the law surrounding marijuana consumption in private mobile locations. For years, the “party bus” model has accepted alcohol use, but local jurisdictions have been reluctant to accept them as it applies to marijuana use. There are marijuana party buses out there; however, their legality has been a source of conflict between the operators and municipalities. With this new license, the State of Colorado has green lit the marijuana party bus model on a state level and it remains to be seen how local jurisdictions will react. Like brick and mortar Marijuana Hospitality Establishments I do believe there will be more local jurisdiction scrutiny whether to permit these operations or not but less call to prohibit these mobile licenses as they do not create more brick and mortar locations that some members of the public find objectionable.

I am running out of space but don’t sleep on the value the mobile Marijuana Hospitality Establishment license bring to public sporting events, concerts, venue activities, etc.

 

Conclusion

 Between Regulated Marijuana Delivery and the Marijuana Hospitality and Sales Establishment consumers are finally reaping the rewards for their patience. Regulated Marijuana Delivery laws have bridged the “last mile” between retail sales and the consumer and Marijuana Hospitality and Sales Establishments and, to a lesser degree, Marijuana Hospitality Establishments bridge the “last mile” between retail sales and safe and exciting marijuana consumption locations. The consumption location dilemma has always existed and was a hotly contested area of politics when Colorado implemented its medical and retail marijuana industry regulations. We lost that battle in 2010 and again in 2013 but as time has gone by Colorado has demonstrated marijuana legalization can be implemented and regulated in a safe manner. The marijuana industry has gained public acceptance and governmental support and we are now seeing the fruits of our labors.

 

Stayed Tuned for Part 3: Publicly Licensed Marijuana Companies.

 

Craig Small is a Senior Attorney at Hoban Law Group. Mr. Small is a Past President of the Boulder County Bar Association and is an active member of the Colorado Bar Association and the National Organization for the Reform of Marijuana Laws.

This article has been prepared for informational and general guidance purposes only; it does not constitute legal or professional advice. You should not act upon the information contained herein without obtaining specific professional advice. No representation or warranty (express or implied) is made to the accuracy or completeness of the information contained in this publication. Hoban Law Group, its members, employees, and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based thereupon.