The arrests of 13 budtenders at one of Colorado’s largest marijuana retail chains last week exposed a hole in the state’s regulations for recreational cannabis sales.
The rules stipulate that a retail cannabis store can’t sell more than 1 ounce in a single transaction. But marijuana-focused legal experts say the law doesn’t spell out how much can be sold over the course of a day.
Workers at Sweet Leaf’s eight Denver locations were charged with allegedly selling multiple ounces in separate transactions to the same customer in a single day as part of a year-long undercover investigation by the Denver Police Department.
During the sting, a detective or another buyer went into a store, bought an ounce of marijuana, returned it to a car waiting in the parking lot, then went back in and bought another ounce. The operation netted as much as 16 ounces from a single store in one day.
Some of the budtenders were charged with felonies for selling more than 4 ounces in one day to the same person, and the Colorado Department of Excise and Licensing suspended 26 of the vertically integrated company’s licenses.
Sending a message
While it remains to be seen if the arrests will result in convictions, legal experts say it’s clear Colorado’s compliance enforcement authorities are intent on cracking down on certain business practices deemed as law violations.
“Obviously the state’s trying to make an example out of a relatively large company,” said Rachel Gillette, a Denver-based cannabis attorney with the Greenspoon Marder law firm. “In true law enforcement style, they wanted to send a message to the industry.”
According to Colorado’s current rules for marijuana businesses, “a retail marijuana store and its employees are prohibited from selling more than 1 ounce of retail marijuana flower or its equivalent in retail marijuana concentrate or retail marijuana product during a sales transaction to a consumer.”
Gillette focused on the “sales transaction” language.
“It comes down to, what do you consider a transaction?” Gillette said. “This is where the law gets a little tricky, and this is where clarity in our rules and regulations is very important.”
The state’s current rules don’t say anything about one day or one hour or one week, she added.
Sam Kamin, a University of Denver law professor, said the situation is complicated “because no one of those transactions violate the statute.
“It’s not clear to me what part of the code they violated if they were only selling ounces and selling lots of them.”
The recreational cannabis regulations limiting the sale of 1 ounce per transaction have been around since 2012.
“But what the rules don’t say is that I can’t walk into the business twice a day and buy an ounce,” Gillette said. “It doesn’t give you a time frame.”
She also noted that:
- Recreational marijuana businesses aren’t required to track customer data, including their names, what they purchased and when they purchased it.
- There’s also the possibility a shift change could lead to a different budtender serving the same customer on the same day.
“The (Sweet Leaf) case illustrates that there’s this heightened responsibility for budtenders to police what people are doing,” Gillette said.
“The last thing we need is for budtenders to be facing criminal penalties for doing their job or doing what they think is lawfully allowed.”
Legal experts find it curious that authorities would suspend licenses and make arrests at the end of the year since the limit of 1 ounce per transaction will offer more clarity in less than two weeks.
According to new regulations that go into effect Jan. 1:
“A retail marijuana store and its employees are prohibited from transferring more than 1 ounce of retail marijuana flower or its equivalent in retail marijuana concentrate or retail marijuana product in a single transaction to a consumer.
“A single transaction includes multiple transfers to the same consumer during the same business day where the retail marijuana store employee knows or reasonably should know that such transfer would result in that consumer possessing more than 1 ounce of marijuana.”
Gillette says the new rule is “much more specific.”
“The reason they’re changing the rule is because clearly it wasn’t accomplishing the task or the policy behind it,” she added. “Clearly, the intent of this law is to prevent people from buying product then reselling it.
“We want to make sure people don’t just keep buying ounces, then take them to Kansas or wherever.”
Scrutiny and diversion
Kamin said the Sweet Leaf situation highlights the need for proper training and supervision in marijuana businesses.
“Even if this conduct isn’t illegal, it’s really bad,” he said. “If you’re a manager and you see your budtender sell the same person 16 ounces in a day, you should fire that person.
“Even if it’s not illegal, it’s going to bring a lot of scrutiny that’s going to be bad for business.”
Kristi Kelly, executive director of the Denver-based Marijuana Industry Group, said there’s a difference between how the rules are written and how they are interpreted in light of the Cole Memorandum.
That Obama-era memo guides state law on both recreational and medical marijuana, emphasizing the importance of preventing diversion of marijuana out of states with legal cannabis programs.
Kelly explains to her members they need to be doing whatever they can to prevent diversion.
“One of the grounding conversations we have is what can we do as an industry,” she said. “How do we keep (cannabis) out of the hands of the people who aren’t supposed to have it?”
Bart Schaneman can be reached at [email protected]