Colorado Amendment 64 Task Force Report: Opportunities for Existing Dispensaries, Cultivators

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By Anne Holland

The task force responsible for suggesting regulations tied to Amendment 64 – the legalized sale of cannabis to adults – announced its formal recommendations today. True to Colorado’s fairly careful nature regarding cannabis businesses, the task force does not recommend flinging open the doors to all newcomers. However, there are some encouraging suggestions for existing dispensaries, cultivation operations and testing companies in particular.

Following is an overview of the task force’s major recommendations, as well as our take on what it may mean for major industry sectors. (For more details on all task force recommendations and guidelines, here’s a link that includes the full report and a recorded video conference.) State lawmakers will consider these proposals as they develop concrete rules and regulations on the cannabis industry.

Task force recommendations for…

– Only existing dispensary license holders in good standing should allowed to apply for a permit to open an adult-use retail center – or to transition to adult-use entirely (versus focusing on goods and services for patients) – for at least the next year. New permit fees could be higher than $5,000.

– License holders and all staff must reside in Colorado, although financial backers may live elsewhere.

– No consumer may possess more than an ounce of cannabis at a time, so retail transactions will be limited to less than an ounce per purchase. The limits are tighter on out-of-state consumers.

– Retail shops can sell via vending machines, as long as these are inside your establishment.

– If you open a smoking club, you should not be able to allow tobacco smoking on the premises. However, vending machines offering cannabis products should be allowed.

– Local governments should still have a lot of power: municipalities could decide to not allow any retail sales, regardless of state laws – meaning you’d need to keep on the good side of the city council.

Cultivation Operations:

– For at least the next three years, Colorado’s 70/30 supply chain rules should remain in effect. This means dispensaries and adult retailers would have to grow at least 70% of the cannabis they sell. Given the expanded market, we anticipate independent operators would still have a chance to grow their businesses if state lawmakers adopt this suggestion.

– Cultivators may also be subject to a 15% tariff at the point where they transfer their crop to retailers.

– The state should regulate the types of chemicals you use in your cultivation, and probably mandate some sort of lab testing to make sure you stick to rules. If you’ve considered going organic, now is a good time to get serious about it.

– The General Assembly should pass legislation in 2013 allowing the cultivation and sale of industrial hemp. This may be a great area for expansion while you’re waiting for the 70/30 rule to run out three years from now.

Ancillary Businesses:

– Great news for testing labs – the task force is strongly in favor of mandated testing and labeling for potency, and possibly the presence of banned substances. Get involved by joining the “good lab practices task force” that’s expected to launch by Jan. 1, 2014.

– Colorado should be a “baggie-free” zone, and professional packaging should be mandated.

– Edibles makers should be limited to no more than 10mg of active THC per serving. If this rule takes effect, your labels will need to show number of servings per package and “serving size” – just like regular food products. Retail stores would not be able to sell products with both THC and tobacco or alcohol.

– Landlords may be somewhat protected from banks foreclosing on mortgages if your tenant is a dispensary or adult-use retailer. The task force has asked the General Assembly to clarify in a statute that legal contracts should not be voidable if your tenants are operating locally-legal marijuana businesses.