June 24, 2019

Social Cannabis Use Permits, Deliveries, and Out-of-State Investments Are Now Legal


2019 is the first year in office for Governor Jared Polis, who has signed into law measures that were vetoed previously by his predecessor, John Hickenlooper. However, behind the headlines, it is possible that some of the measures that will be going into effect in the coming months or next year may not have an immediate impact on increasing demand significantly.

A report from Westword runs down the numerous pieces of cannabis-related legislation that were passed into law in Colorado this year. Some of the items that have drawn the most attention include House Bill 1230, which will allow social cannabis use permits for businesses and “tasting room” permits for licensed cannabis retailers and dispensaries, and House Bill 1234, which will allow cannabis to be delivered to patients and consumers. On their faces, both measures could drive additional purchasing by increasing opportunities for individuals to consume and allowing them to obtain product more conveniently, respectively.

However, as Westword points out, local governments will have to affirmatively “opt in” to the new laws. In other words, they must pass ordinances explicitly allowing them; by simply doing nothing, local governments will maintain a de facto ban on such activities. According to the Colorado Municipal League, most local governments in the state are still unwelcoming to cannabis businesses, with only 74 of the state’s almost 270 cities and counties – about 28% – allowing some form of sales, whether medical, adult-use, or both, as of the end of 2018.

Additionally, depending on how the rulemaking process shakes out, stringent restrictions on the activities allowed by the two bills noted above could prevent businesses from jumping through the hoops necessary to obtain permits. That has been the case with Denver’s social cannabis use ordinance, which has resulted in only a handful of businesses gaining licenses under the program.

Finally, regarding cannabis delivery, only registered patients will be allowed to receive deliveries in 2020, with such services allowed in the adult-use market beginning in 2021. The pool of potential customers that might take advantage of cannabis delivery will therefore be restricted for at least the next 18 months.

Overall, the measures noted above may very well provide a boost to sales in Colorado’s market next year, though whether it will be a significant and notable one remains to be seen. As alluded to above, state agencies – primarily the Marijuana Enforcement Division (MED) – will have to undertake rulemaking proceedings in order to implement the new laws, with concrete changes to the state’s cannabis landscape unlikely to be in place until 2020.

On the other hand, another piece of legislation signed into law recently is apparently already making an impact on Colorado’s cannabis industry. House Bill 1090, “repeals the provision that prohibits publicly traded corporations from holding a marijuana license.” In general, the bill allows for greater investment in Colorado’s industry from out-of-state sources. While those in favor of the bill argued that Colorado businesses needed increased access to various sources of capital in order to remain competitive nationally, some worried that HB 1090 could lead to further consolidation in the state’s cannabis market.

A recent press release from Medicine Man Technologies appears to give credence to the latter sentiment. According to the press release, Medicine Man has entered into a binding term sheet to acquire Los Sueños Farms, LLC, which it calls, “North America’s largest sustainable cannabis farm,” as well as MesaPur, a dispensary and infused products manufacturing company. The press release goes on to state, “The acquisition of Los Sueños and MesaPur was made possible by the passage of House Bill 19-1090, which was signed into law by Colorado’s Governor Jared Polis on May 29th, opening up Colorado’s cannabis industry to outside investors and enabling increased investment by venture capitalists and private equity firms.”