Yesterday, Governor Polis signed into law three significant bills that will have major impacts on the Colorado cannabis industry. These bills will require additional rulemaking by Colorado’s Marijuana Enforcement Division before the new laws are implemented. If you have any questions about the impact of these new laws on your business, contact McAllister Garfield at your convenience.
House Bill 1090 is generally referred to as the “Public Company” bill because it allows public companies to own Colorado marijuana licenses for the first time. The law creates new ownership concepts of Controlling Beneficial Owners (10% or more ownership who require background checks) and Passive Beneficial Owners (less than 10% ownership who generally do not require any background check unless there “reasonable cause”). The law also gets rid of the old limit of 15 out of state owners on cannabis licenses. Moreover, the law expands opportunities for private equity funds to own Colorado marijuana licenses. However, the new law also creates a new, expanded concept of Indirect Financial Interest Holders that may require landlords, IP licensors, lenders and other indirect participants in the industry to be disclosed and potentially checked by the MED. This law goes into effect on November 1, 2019. The MED will establish a working group to meet over the summer and develop regulations.
Marijuana Hospitality Establishments:
House Bill 1230 creates two new licenses: Marijuana Hospitality Space, and a Marijuana Hospitality and Sales Establishment. For Marijuana Hospitality Spaces, consumption is allowed at Retail Food Establishments (excluding those with liquor licenses), but sales are not allowed. For Marijuana Hospitality and Sales Establishments, licenses will permit the on-site consumption of retail marijuana sold onsite at a store, cultivation, or manufacturer licensee, and these licenses are allowed at Retail Food Establishments (excluding those with liquor licenses). These license types prohibit the distribution of free samples, the consumption of alcohol, or the smoking of tobacco.
At the state level, these new licenses may be issued on and after January 1, 2020. However, local governments have to opt in to allow these licenses and can require additional or more stringent requirements.
HB 1234 creates a marijuana delivery license for the first time in Colorado. Delivery permits may be obtained by medical marijuana centers and transporters starting January 2, 2020 and by retail stores and transporters on January 2, 2021. Deliveries to customers cannot be done at the same time as deliveries between licensed premises. Any person delivering marijuana must possess a valid occupational license, be trained, and be a current employee of the center, store or transporter. Deliveries are only allowed to private residences. When using an online platform for marijuana delivery, the platform must require the individual to choose a retail marijuana store before viewing the price.
Local governments must authorize delivery in their jurisdiction and may also choose to allow delivery, but prohibit licensees from other jurisdictions from delivering in their jurisdiction.
These new laws mark a major turning point for the Colorado industry. Each will have profound and long lasting impacts on the industry. McAllister Garfield has received numerous inquiries from public companies trying to figure out how to get into the Colorado market. Moreover, delivery is also likely to create many new opportunities and challenges for the industry. If you have any questions about these new laws, please contact us.
Sean T. McAllister, Esq.