On Monday, Colorado released emergency rules covering many business-related aspects of selling marijuana for adult use, from packaging and labeling requirements to what it will take to land a license.
The rules, which closely resemble those covering medical marijuana businesses, were issued to meet a statutory deadline outlined in the state’s recreational cannabis law. They can and will change to some degree as officials spend the next four months crafting final regulations. But the state’s initial stab at laying out rules provides a good preview of the eventual business climate for recreational marijuana operations.
Meg Collins, director of the Colorado-focused industry trade group Cannabis Business Alliance, weighed in on the rules and what they mean for existing medical marijuana businesses and entrepreneurs looking to get involved.
Question: What’s your first take on the rules?
Answer: They’re fine. I think they covered all the bases. They are emergency rules, and they address what they need to address. I think this gives a really clear roadmap for what will be the more exhaustive rule-making process. They give everyone a fairly clear playing field in terms of the rules that we’ll see.
Q: What are you hearing from the medical marijuana business community? Is anything controversial?
A: Speaking just for myself and the conversations I’ve had with people in the industry, there isn’t anything that’s a huge red flag. I think the state was very smart strategically to issue emergency rules to meet the deadline but then give themselves time to have a more thoughtful process, as opposed to rushing out permanent rules and shoehorning everything into a short period of time.
Q: Do you expect many big changes when the state releases final rules?
A: We as an industry and the broader stakeholder groups have been discussing regulations and rules since December, so there has already been lots and lots and lots of conversation and discussion already. I think this is the overall platform that will be used in the short-term and going forward. Now, the devil is really in the details though. The emergency rules are very broad…they hit the highlights and serve as a good operating model. But the permanent rules will really dig into the nitty gritty of how these businesses work.
Q: The state plans to give medical marijuana businesses the exclusive right to apply for and obtain a retail license until September 30, 2014, when the process will open up to everybody. Will this be a big advantage for current MMJ business owners?
A: They’ll definitely have a head start, and there are some advantages to already having relationships with the Marijuana Enforcement Division. It’s a good move by the state. When medical marijuana was first approved, the Department of Revenue and the (enforcement division) really had to scramble to put regulations in place and figure out ways to handle the industry. It was a steep and tough and very bumpy learning curve. But having had the experience they’ve had with medical, particularly in the last few years, I think that giving MMJ (businesses) preference as a lead-in to adult use is going to be helpful to the state to ease into this. They knows the players on the medical side and they’ve worked with the medical marijuana folks.
Q: Many observers are deeming the start of retails sales as the next Green Rush. Are most existing medical marijuana businesses looking to tap this market and transition into recreational sales, or are some still on the fence?
A: It depends on how they’re capitalized. Regulatory certainty is a huge factor for businesses when making their plans, and we don’t have that right now. I think many people are sitting on the sidelines. They want to see how things shape up before making a decision. Another unknown in adult-use marijuana is whether it’s going to be heavily taxed. There’s a ballot initiative before voters this fall, and different localities are thinking about imposing their own marijuana taxes as well. I think that is going to factor into the decisions.
What I’m seeing is that people with the wherewithal to do so are positioning themselves to take advantage of adult use. The more experienced operators are being cautious yet positioning themselves to be nimble. I don’t know if we’ll see this wholesale stampede we’ve heard about.
Q: What other challenges will entrepreneurs face in setting up an adult-use marijuana business?
A: We really don’t know what the demand is. It’s really difficult to determine or spitball an estimate. That’s hard for any business. It’s also going to cost some money. Cities are in the process of developing their own rules, so that’s a factor too. But if it’s a well-oiled machine and everyone meets deadlines, it could be somewhat smooth.
In the conversations I’ve had with folks, the phrase keeps coming up that this is a marathon not a sprint. In the early days of building a whole new industry in Colorado and transitioning from medical to legal, we need to be thoughtful and not irrationally exuberant. This is historic. We need a safe, well-regulated, appropriately funded program. That’s what is really important at this stage.