Among the country’s first states to enact marijuana-friendly
legislation, Colorado legalized medical marijuana via the passage
of Amendment 20 in 2000 and subsequently legalized recreational
(retail) marijuana via the passage of Amendment 64 in 2012.
Due to its robust implementation of these amendments, Colorado
has been at the center of the burgeoning national marijuana
industry. Since 2014, the state has amassed $1.21 billion in tax
revenue generated from marijuana, with the marijuana industry
totaling $7.79 billion in sales between 2014 and
2019.1
Although to an outsider it may seem that all of Colorado is
engrossed in marijuana, local jurisdictions have the right to
control which, if any, marijuana businesses are permitted. This
framework creates a varied legal landscape across the state. All
prospective industry participants must verify if, and which,
medical and/or retail marijuana businesses are permitted in a
locality being considered for business operations.
In addition to applicable local authorities, the Colorado
Department of Revenue Marijuana Enforcement Division
(“MED”) governs the industry statewide. The MED enacts
and enforces statewide commercial marijuana regulations, as well as
provides compliance guidelines and other relevant materials to the
industry.
Business License Types
Each business is authorized to engage only in the type of
activity for which it holds a license. Subject to a few exceptions,
as a general rule, a business may hold multiple licenses, including
multiple license types.
Cultivation
Medical Marijuana Cultivation Facility License –
Permits the cultivation, and certain limited processing, of medical
marijuana for wholesale.
Marijuana Research and Development Facility
License – Permits cultivation and processing of
medical marijuana strictly for research purposes.
Retail Marijuana Cultivation Facility License –
Permits the cultivation, and certain limited processing, of retail
marijuana for wholesale.
Accelerator Cultivator License – A social
equity license that permits, in accordance with the accelerator
program, the exercise of the rights of a Retail Marijuana
Cultivation Facility on the premises of an Accelerator-Endorsed
Retail Marijuana Cultivation Facility Licensee.
Dispensary
Medical Marijuana Store License – Permits retail
sales of medical marijuana to medical marijuana patients and
caregivers.
Retail Marijuana Store License – Permits retail
sales of marijuana to adults twenty-one years of age and older.
Accelerator Store License – A social equity
license that permits, in accordance with the accelerator program,
the exercise of the rights of a Retail Marijuana Store on the
premises of an Accelerator-Endorsed Retail Marijuana Store
Licensee.
Hospitality
Marijuana Hospitality Business License – Permits
on-site consumption of marijuana by patrons on premises that can be
mobile or immobile.
Retail Marijuana Hospitality and Sales Business License
– Permits both limited retail sales and on-site consumption
of retail (but not medical) marijuana by patrons on premises that
cannot be mobile.
Operator
Medical Marijuana Business Operator License –
Permits the holder to operate, in limited or in entire fashion, one
or more medical marijuana business licenses on behalf of one or
more medical marijuana business license holders.
Retail Marijuana Operator License – Permits the
holder to operate, in limited or in entire fashion, one or more
retail marijuana business licenses on behalf of one or more retail
marijuana business license holders.
Product Manufacturing
Medical Marijuana Products Manufacturer License –
Permits the production of medical marijuana-infused products, such
as edibles, concentrates, or tinctures.
Retail Marijuana Products Manufacturer License –
Permits the production of retail marijuana-infused products, such
as edibles, concentrates, or tinctures.
Accelerator Manufacturer License – A social
equity license that permits, in accordance with the accelerator
program, the exercise of the rights of a Retail Marijuana Products
Manufacturer on the premises of an Accelerator-Endorsed Retail
Marijuana Products Manufacturer Licensee.
Testing Facility
Medical Marijuana Testing Facility License – A
laboratory permitted to conduct testing, for both potency and
contaminants, and research on medical marijuana.
Retail Marijuana Testing Facility License –
An entity permitted to conduct testing, for both potency and
contaminants, on retail marijuana.
Transportation
Medical Marijuana Transporter License – Permits
the provision of transportation and temporary storage services to
licensed Medical Marijuana Businesses.
Retail Marijuana Transporter License – Permits
the provision of transportation and temporary storage services to
licensed Retail Marijuana Businesses.
Eligible license holders may also apply for additional permits,
including medical marijuana delivery permits, off-premises storage
permits, centralized distribution permits, research and development
co-location permits, and transition permits (allowing operation at
two separate locations while undergoing a change of location).
Licensing Fees
The MED provides a current list of fees for marijuana business
applications and licenses on its website. Initial business
application and license fees range from $2,500 to $7,000, depending
on the license type. Licensees must also pay yearly renewal
application and licensing fees, with license renewal fees for
cultivation facilities having a tiered increase based upon the
number of plants grown.
Colorado’s recently passed House Bill 20-1424
(“HB20-1424”) provides that social equity applicants for
Accelerator licenses qualify for a reduction in application and
licensing fees; however, the exact figures have yet to be
determined.
In addition to state licensing fees, local jurisdictions may
impose their own local licensing fees. In certain jurisdictions,
local fees will even exceed the state fees.
Social Equity
Studies in recent years have confirmed a common concern in the
industry – that marijuana business ownership is severely
lacking in diversity.2
Although it is likely to conform with such studies, diversity
and inclusivity data specific to Colorado marijuana businesses
remains unclear because Colorado has not been collecting diversity
and inclusivity data in connection with its current application
procedures. MED license applicants are not required to provide
their race or ethnicity while applying,3 making
demographic analysis difficult.
Recently, however, Colorado has made several efforts to support
further marijuana business engagement by those disproportionately
affected by the war on drugs. In May of 2019, the state legislature
passed Senate Bill 19-224, creating
the first accelerator cultivator and accelerator manufacturer
licenses.
While Colorado’s accelerator program officially began in
July 2020, lawmakers have already made further changes to expand
accelerator licensing eligibility through HB20-1424. HB20-1424
extends the start of the accelerator program to January 1, 2021,
and defines eligibility under one of three categories:
- Applicants who have lived in an Office of Economic Development
and International Trade designated opportunity zone or
disproportionately impacted area for at least fifteen years between
1980 and 2010. - Applicants who have direct family with a previous arrest and/or
conviction related to a marijuana offense. - Applicants whose recent household income falls below a level
established by the MED.
Individuals otherwise eligible for a social equity license may
not be rejected on the sole basis of a felony marijuana conviction
within the previous three years. Moreover, in October 2020,
Colorado Governor Jared Polis issued pardons to over 2,000
individuals that had been convicted of misdemeanor marijuana
offenses up to possession of two ounces of marijuana
Residency Requirements
Until recently, Colorado imposed strict residency requirements
on owners and employees of marijuana businesses.
In March of 2020, however, legislators passed House Bill 20-1080
(“HB20-1080”) which removed nearly all of the previous
residency mandates, except that (1) a social equity license
applicant must be a Colorado resident (2) an owner exercising the
rights of an employee of a marijuana business must be a Colorado
resident.
Market Barriers
Although Colorado has removed nearly all of its residency
restrictions and has sought to engage underrepresented populations
through its social equity licensing programs, certain market
barriers still remain.
As investment from outside the state has surged into the
Colorado marijuana industry—doubly so with HB 20-1080 now
allowing publicly traded companies to participate in the industry,
some are concerned that industry consolidation will further reduce
opportunities for participation at the ownership level. Even
without regard to outside investment, the relative maturity of
Colorado’s m industry itself presents significant obstacles as
newcomers face established competition. Privately held companies
have already initiated various mergers and acquisitions across the
state.4
Although its history is already robust and it continues to
experience certain growing pains, Colorado’s marijuana industry
continues to have a bright future. New license and permit types,
new investment mechanisms, and new opportunities for social equity
involvement all should help the industry to continue to
prosper.
Footnotes
- Ricciardi, Tiney. “Colorado Marijuana Sales Hit a
Record $1.75 Billion in 2019.” The Denver Post. MediaNews
Group, Inc., February 18, 2020.
https://www.denverpost.com/2020/02/18/colorado-marijuana-sales-2019/ - McVey, Eli. “Chart: Percentage of Cannabis Business
Owners and Founders by Race.” Marijuana Business Daily.
Marijuana Business Daily, September 14, 2017.
https://mjbizdaily.com/chart-19-cannabis-businesses-owned-founded-racial-minorities/ - Ricciardi, Tiney. “What Is Social Equity in
Colorado’s Cannabis Industry? Regulators Look to Level the
Playing Field for Marginalized Communities.” The Denver Post.
MediaNews Group, Inc., January 30, 2020.
https://www.denverpost.com/2020/01/30/social-equity-colorado-cannabis/ - Mitchell, Thomas. “Denver Marijuana Business Owners
Ready for the Challenges of Big Money.” Westword. Denver
Westword, LLC., November 8, 2019.
https://www.westword.com/marijuana/denver-marijuana-business-owners-welcome-the-challenge-of-public-companies-and-big-money-11543285
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