Ontario slams door on dispensaries, but marijuana lounges see glimmer of hope

By Matt Lamers

After the Ontario government slammed the door on marijuana retail entrepreneurs, the province left the door open — ever so slightly — for the eventual licensing of cannabis-consumption lounges.

Ontario’s cannabis legalization framework, released earlier this month, called for government-run stores, the shuttering of existing dispensaries and a limit on consumption to inside private homes.

But the province included the possibility that lounges could have a legal future in Ontario, though probably not in time for the planned launch of adult-use sales next July.

If approved, the lounges would open a new line of business for cannabis entrepreneurs within the province. They also could give adult-use sales a boost among out-of-town visitors and some locals who need a place to consume their legally purchased product.

Moreover, a green light from Ontario could encourage other provinces to follow suit.

Andrew Rudyk with the Ministry of the Attorney General told Marijuana Business Daily that Ontario’s “cautious approach” involves the consideration of licensed cannabis lounges.

He said the province is “consulting more on those decisions yet to come – this includes potential licensed establishments for consuming cannabis.”

“We plan to continue consulting with municipal partners, the Alcohol and Gaming Commission of Ontario, the enforcement community and other stakeholders about the possibility of introducing designated establishments and venues where recreational cannabis could be consumed after legalization has been implemented,” he said.

Legal gray zone

Ontario’s 10 existing marijuana lounges have operated in a legal gray area for decades, mostly owing to the fact that they don’t dispense cannabis and the courts have a hard time convicting people for possession.

Jonathan Sherman, an associate in the cannabis group at the Cassels Brock law firm, sees licensing for consumption in designated public spaces as a logical step forward.

“I think this is the next logical evolution of legalization in Canada. And when you look at the rules proposed by Ontario, you’re only able to consume cannabis in a private dwelling place, which creates a number of issues for individuals in cities like Toronto, where you’re living in condominiums and there might not be a space that you can consume cannabis legally, properly and safely,” he said.

“So I think the government looking at this is just the next evolution of regulation in Canada.”

Jacquie Richards, also a lawyer at Cassels Brock law firm, said some jurisdictions that legalized marijuana are reconsidering strict consumption rules.

Richards pointed to Colorado and Nevada, which initially limited cannabis consumption to private residences. That created problems for out-of-town visitors in particular who didn’t have a place to consume their legally-purchased cannabis.

Denver voters in November approved cannabis consumption in public places, and regulators have allowed businesses to submit applications to open marijuana clubs. But the city hasn’t approved any yet. In Las Vegas, local regulators are keeping an eye on Denver’s experience before taking action on the issue of lounges.

“Jurisdictions that have legalized cannabis so far have begun to see the need to allow consumption in places other than the home. I’m not confident as to how and when Ontario will follow suit, but I do see that as a logical next step,” Richards said.

Richards, however, warned that changes to allow lounges or other nonresidential locations for cannabis use are unlikely to be in place when legalization kicks in July 1, 2018.

Making their case

The case for legalizing lounges in urban environments boils down to four issues, according to proprietors and their supporters:

• Limiting consumption to home-use creates problems for people with lots of neighbors. Half of Toronto lives in condominiums, high rises or town houses, for example.
• Landlords will have to grapple with cannabis consumption if it’s only allowed in residential homes. Smoking is rarely allowed in rental units, and most users will probably prefer to smoke MJ in leaf form because edibles won’t be legal by next summer.
• Visitors will struggle to find a space to consume their legally-bought cannabis.
• Consuming cannabis in any form in the home in the presence of children raises health and safety issues.

“Legalizing lounges is the solution to the consumption problem in urban settings,” said Abi Roach, the owner of Hotbox lounge, one of seven such cannabis establishments in Toronto.

“When people aren’t allowed or able to consume in their own homes or in lounges, what’s going to happen? You’re pushing people out onto the street,” said Roach, who has operated Hotbox since 2003. “You’re creating more problems than you’re solving by not having proper consumption spaces.”

Jodie Emery, a marijuana activist and the owner of Cannabis Culture—a news site, lounge and dispensary business—said whether lounges have a future in Ontario might ultimately come down to legal and grassroots action among supporters.

“Lounges have existed without licensing for a very long time, and if the government is going to refuse to issue licenses, I imagine they will continue to operate unlicensed and continue to be asked to be licensed.

“If marijuana is going to be legal, marijuana users need a place to gather together,” she said. “It’s a matter of time.”