Canada still waiting for cannabis consumption spaces – with exceptions

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Image of a person smoking cannabis.

Lit Research in Toronto holds a cannabis research license from federal regulator Health Canada. (Photo courtesy of Lit Research)

As Canada enters its fifth full year of adult-use legalization, one type of marijuana business has been largely missing in action: legal cannabis consumption spaces, which remain relatively rare.

Although authorities have issued outdoor cannabis consumption licenses for events such as music festivals, Canada’s provincial governments have been slow to create a legal framework for permanent marijuana consumption spaces – if they have addressed the issue at all.

As a result, Canada’s market for cannabis consumption lounges is underdeveloped in comparison to U.S. jurisdictions such as California and Nevada, where such businesses are becoming part of the regulated industry landscape.

“Right now, cannabis consumption is still operating within a gray area,” said Susan Dupej, a postdoctoral fellow at University of Guelph’s School of Hospitality, Food & Tourism Management who studies marijuana tourism in Canada.

Although Dupej knows of a few Canadian cannabis consumption businesses, “they’re doing it because they’re smart people, they are able to maneuver around the regulations in order to offer these spaces.

“So when the inspectors come around, there’s really nothing to say – they’re not operating in any incorrect way.”

Dupej is also co-founder and president of the not-for-profit Canadian Cannabis Tourism Alliance.

She said the overall lack of legal consumption spaces is a missed opportunity in terms of Canada’s cannabis tourism potential.

“I think that Canada needs to act quickly on seriously thinking about what kind of consumption regulations can we put into place?”

Provinces slow to regulate consumption sites

Recreational marijuana legalization was led by the federal government, but regulation of smoking and vaping in most places falls to Canada’s provincial and municipal governments, which have been slow to move the needle on cannabis consumption spaces.

None of Canada’s three biggest adult-use marijuana markets have formally approved permanent consumption lounges to date.

Ontario cannabis consumers spent a projected 1.8 billion Canadian dollars ($1.3 billion) on legal cannabis in 2022, according to Seattle-based cannabis data firm Headset.

Although the Ontario government held an early 2020 consultation on consumption lounges, it didn’t publish the results, the province’s Ministry of the Attorney General confirmed to MJBizDaily. (The consultation was obtained by CBC News under freedom-of-information laws.)

“No changes to the cannabis framework are expected at this time,” a spokesperson for the Ontario attorney general told MJBizDaily in a statement.

In Alberta, with projected cannabis sales of CA$796.4 million in 2022, the provincial government has left the door open to regulating consumption spaces, but it hasn’t gone further.

Alberta does allow temporary designated cannabis consumption spaces at festivals and events, however, and there has been interest in regulating consumption spaces at the municipal level.

British Columbia (projected 2022 cannabis sales of CA$668.1 million) has made more concrete progress toward cannabis consumption businesses: The B.C. government recently completed a consumption-space consultation and is in the process of deciding its next steps.

George Smitherman, president and CEO of industry group Cannabis Council of Canada (C3), said provincial cannabis regulators have been preoccupied with managing distribution and retail.

“It’s interesting to note that in several different jurisdictions in the country, regulators are seemingly turning their attention a bit more to the opportunities related to consumption lounges,” Smitherman said.

Consumption businesses find a way

The lack of provincial regulations hasn’t stopped some Canadian marijuana entrepreneurs, with a scattering of businesses involving cannabis consumption spaces of some kind.

In the hamlet of Mossleigh, Alberta, Serena Donovan operates MaryJane Manor, a boutique hotel with a licensed cannabis store on-site. (Donovan also operates a nearby micro-cultivator, Because You Cann.)

Donovan said the entrances to the hotel and the marijuana store are separated to satisfy Alberta’s cannabis retail regulator.

Guests are allowed to consume cannabis in their rooms as well as in indoor and outdoor lounge areas.

“I made the executive decision very early that we’re not going to put TVs in rooms,” Donovan said.

“I don’t want it to be a traditional hotel where you come, you check in, I give you your keys, and you retreat to your room until you leave – I want you to pay attention to the people that you’re with, whether that’s people that you’re bringing, or people that you’re meeting on the property.”

MaryJane Manor’s marijuana store is unusual, but it’s not the only hotel to accommodate cannabis in Canada: Online listings show a scattering of cannabis-friendly hotels, resorts, short-term rentals, inns and bed-and-breakfasts.

In Toronto, Lit Research is a Health Canada-licensed cannabis research facility with a focus on consumer sensory testing that effectively functions as a consumption space.

Founder Al Shefsky said some other cannabis research facilities do consumer testing under less-than-ideal conditions.

“After doing a deep dive into the regulations,” he said, “I thought it would be possible to create more of a lounge-type setting, with the objective of getting this real-world sensory data to basically help the industry, to help (licensed producers) get real consumer feedback and to create a space where they could deepen their connections with consumers.”

Lit Research does research on behalf of licensed producers who can send the facility cannabis products before they hit the market for consumer testing.

Producers can pay to use the lounge for consumers and budtenders to test their products.

In between testing events, cannabis consumers can walk in and sign up for research studies – usually in exchange for an administrative fee.

They fill out an intake form to help Lit gauge their experience level.

“It’s important to understand the individual that you’re dealing with and what their experience and what their tolerance is, if you want to avoid any unpleasant experience for them,” Shefsky explained.

On top of federal regulation by Health Canada, the facility is subject to Ontario law that generally prevents smoking and vaping indoors.

“Because of our Health Canada research license, and because of the activities we’re conducting here, we’re exempt from that Smoke-Free Ontario Act in this facility,” Shefsky said.

“We built out this space with a lot of air exchange equipment that keeps the air fresh in here.”

Another consumption space, Behind The Bend Cafe and Lounge in Grand Bend, Ontario, is located in back of a licensed retail store.

The venue includes an outdoor patio – presumably to get around the province’s general prohibition on smoking in enclosed spaces.

Political incrementalism

Marijuana tourism researcher Dupej said cannabis consumption spaces represent “a very important element of this federal legalization that has been left out,” and “shouldn’t be a gray area.”

“This also poses problems for tourists as well, coming to Canada, not knowing that they’re not allowed to consume in certain spaces or that laws are not the same across the country,” she added.

Dupej believes that once one province regulates on-premise cannabis consumption, others will follow.

“All the provinces are watching one another to see who’s going to make the first move when it comes to regulations around consumption.”

C3’s Smitherman previously served as the Ontario health minister who spearheaded the Smoke-Free Ontario Act, robust provincial anti-smoking legislation that took effect in 2006.

In light of that law, Smitherman said, he believes that “indoor (cannabis) consumption, at least, is going to be easier to imagine in noncombustible form. ”

“Not every cannabis enthusiast is naturally going to be aligned with that, I think,” he continued.

“But, on the other hand, it can also be a strong potential support for the edibles and beverages categories, which I think are a bit underrepresented so far amongst sales in Canada.”

Like Dupej, Smitherman observed that Canadian provincial governments tend to follow the leader.

Incrementalism is part of Canadian political culture, the former politician added.

“I find it’s always easier to implement something when there’s a precedent – especially if it’s gone well; that has the effect of significantly de-risking something for others.”

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.