Oregon cannabis testing lawsLast week, at the request of Governor Kate Brown and in collaboration with the Oregon Liquor Control Commission (OLCC), the Oregon Health Authority (OHA) issued yet another set of temporary rules for Oregon marijuana. The rules, which apply to both the medical and recreational programs, do three notable things:

  • relax certain potency testing requirements for processors;
  • remove the prohibition on certain solvents (butanol, propanol and ethanol); and
  • allow producers (growers) to test multiple strains of flower in a single batch.

The rules took effect immediately, and remain valid through May 30, 2017. For a comprehensive summary, go here.

Oregon has the toughest pot testing requirements in the country, and that hasn’t changed. By way of comparison, a recent study found that most California weed would fail under Oregon’s rigorous testing standards. These new, temporary rules still contain robust concentration limits and a sweeping ban on pesticides. Although many pot merchants were hoping for more, they will have to adapt; the state has held the line.

We recently touched on the perfect storm created by the tough testing rules and laboratory bottleneck, and we wrote that the rollout of a state cannabis program is an uneven course. We have also commended the state at various points for collaborating with industry stakeholders and making adjustments on the fly. We admire the commitment to public health in Oregon, but only time will tell if these rules have given pot businesses room enough to breathe.

Going forward, we predict strong revenue opportunities for processors who can get their product through, particularly after January 1, when only OLCC licensees will be able to sell into the recreational market. Today, the testing strictures and a shortage of licensed processors in general have caused shelves to thin out in certain dispensaries around the state. Some retailers stockpiled processed products prior to the October 1 testing deadline, but that inventory is fleeting.

We expect the legislature to take a close look at the testing rules when it meets again in February, especially if these administrative tweaks do not fully right the ship. By February, a greater number of OLCC licensees will have entered the system, which in turn will give a fuller picture as to how these rules are working. For now, if you ingest any state-sanctioned cannabis in Oregon, it is going to be clean.

Cannabis real estate lawyersThe Denver Post ran a story Sunday on the high rents marijuana businesses have to deal with nationwide. In Portland, for example, rental property that typically goes for five dollars per square foot goes for three times that amount for cannabis businesses. Though rents for cannabis businesses in Washington and Colorado are stable, they are still well above the market rate. Real estate investors looking to lease to cannabis businesses are gambling that this trend will continue.

There are several things pushing up cannabis rents, many of which are discussed in the Denver Post article, all of which decrease the available supply of cannabis real estate. Any property with an existing deed of trust or mortgage held by a financial institution runs some extra risks. The vast majority of mortgages contain a clause mandating that the property only be used lawfully. If a property has a cannabis business use on it, the bank can call the loan in default and accelerate the principal so it’s all due immediately and giving the bank right to foreclose if the borrower cannot find alternative financing. Many cannabis businesses are at locations with mortgages now, and banks are tacitly accepting the businesses so long as the legal climate doesn’t change. If the legal climate does change and federal law enforcement becomes a real threat, the banks holding notes on cannabis properties could well use the legal changes as their opportunity to call their note in default, either getting their money back or allowing them to foreclose. Because of this threat from banks, most cannabis businesses prefer to lease property owned outright (without any bank note), and most landlords with financed property prefer to lend to businesses that are federally legal.

The hodge-podge of state and local cannabis regulations also tends to drive up the price of cannhodgepodgeabis business real estate. State laws that limit how close cannabis businesses can be to a school, a park, a church, or another cannabis business also limits the number of properties available to cannabis businesses. When you add in local zoning codes that often push cannabis businesses to heavy industrial areas and building codes that often require cannabis production facilities to have full fire suppression and air quality systems in place, the list of available properties for the marijuana industry plummets even further. With so many marijuana businesses fighting for so few spaces, it is no wonder real estate prices skyrocket.

Finally, there is still a ton of money being invested into cannabis real estate from out of state and foreign investors. Many marijuana licensees lack sufficient capital to build out growing facilities, and they look to turn-key real estate opportunities, often with deferred rent, where they are expected to pay out the nose when they start making revenue. These higher-priced turn key facilities tend to increase the price ceiling even for landlords that only offer bare warehouse space. Hardly a day goes by where one of my firm’s cannabis business attorneys does not get a call from someone on the East Coast asking us about cannabis real estate opportunities in Washington, Oregon, or California. Even public companies are involved in the turnkey cannabis real estate market, including Innovative Industrial Properties, Inc., a cannabis related REIT that did an IPO on the NYSE just a few days ago.

So, is the upward trend in cannabis real estate likely to continue? Real estate investors are showing signs of skepticism. Innovative Industrial Properties didn’t have the strongest IPO, raising $67 million when it hoped for $175 million. The media has tended to blame President-elect Trump’s choice of Jeff Sessions to run the Justice Department, which is a real concern for everyone, but there may be other factors at work.

In Washington State, cannabis businesses that are renting warehouse space in heavily populated King and Pierce counties are facing fierce competition from outdoor growers from eastern Washington. Outdoor grown marijuana has long been perceived to be inferior to indoor-cultivated product, but outdoor growers are rapidly developing techniques to increase the quality and consistency of their products. The continued trend toward oils and other concentrates also puts downward pressure on the relative value of crafted indoor product.

Outdoor spaces, especially in rural counties, tend to be significantly cheaper than urban or suburban warehouse space. If more growers see those areas as real alternatives, warehouse prices may fall. And even if the Trump-Sessions administration makes policy choices that decreases the availability and increases the price of cannabis real estate, the long-term trend is still toward legality, with cannabis looking more like other businesses. As the cannabis industry “normalizes,” we should expect  lease rates for cannabis businesses to fall more in line with lease rates for other businesses. Real estate investors should be careful not to overpay based on their assuming the current cannabis leasing market will last forever.

What are you seeing out there? What are your thoughts on where cannabis real estate is heading?

Cannabis LawyersThis is proving to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. As a result of the overwhelming success of many cannabis initiatives this November, all the remaining states in this series have legalized the adult use of recreational marijuana.

With four states remaining — Alaska, California, Oregon and Washington — we deviate from our regular format of ranking the actual states and we instead turn to the District of Columbia. This post will examine the District’s cannabis laws and focus on how the federal government has made implementing those laws in D.C. so difficult.

Our state rankings are as follows: 5. Alaska; 6. Massachusetts;  7. Maine; 8. New Mexico; 9. Nevada; 10. Hawaii; 11. Maryland; 12. Connecticut; 13. Vermont; 14. Rhode Island; 15. Kentucky; 16.Pennsylvania; 17.Delaware; 18. Michigan; 19. New Hampshire; 20. Ohio; 21. New Jersey; 22. Illinois; 23. Minnesota; 24. New York; 25. Wisconsin; 26. Arizona; 27. West Virginia; 28. Indiana; 29. North Carolina; 30. Utah;  31. South Carolina; 32. Tennessee; 33. North Dakota; 34.Georgia; 35. Louisiana; 36. Mississippi; 37. Nebraska; 38. Missouri; 39. Florida; 40. Arkansas; 41. Montana; 42. Iowa; 43. Virginia; 44. Wyoming; 45. Texas;  46. Kansas;  47. Alabama;  48. Idaho; 49. Oklahoma;  50. South Dakota.

Washington D.C. 

Recreational Marijuana. On November 4, 2014, voters in Washington D.C. approved Initiative 71, allowing individuals 21 and older to legally possess, use, purchase, or transport up to two ounces of marijuana within the District. The initiative also permits individuals to legally possess, grow, and harvest up to six marijuana plants in their principal residence, with no more than three flowering plants at one time. However, the initiative did not directly address cannabis sales. Instead, Initiative 71 called for the city council to draft regulations for marijuana retail sales.

Those regulations were never drafted due to interference by the federal government. Congress possesses budgetary oversight for Washington D.C. and it has used that spending power to frustrate Initiative 71’s implementation. In December 2014,  U.S. Congressional members included a rider in the U.S. federal spending bill prohibiting the use of federal funds towards any efforts to implement Initiative 71. Despite this, D.C city officials and the mayor pledged to move forward with legalization. Eventually, members of Congress actually threatened D.C.’s mayor with criminal penalties for implementing legalization.

Amidst legal uncertainty, legalization in D.C. nonetheless went into effect in February 2015. The threats by Congressional members were somewhat effective though because the D.C. City Council has yet to create regulations necessary for a truly functioning legal recreational marketplace in our nation’s capital. In D.C., cannabis is legal to possess and cultivate, but not to buy or sell. The District’s recreational marijuana market has operated in this “gray area” since cannabis was legalized. With Republicans now controlling both our nation’s House and Senate, our cannabis lawyers do not see the Washington D.C.’s betwixt and between situation changing anytime soon.

Medical marijuana. Washington D.C.’s medical marijuana market is currently operational after years of delay. Voters legalized medical marijuana in 1998. But just as it did with Initiative 71, Congress stalled the process by limiting D.C.’s use of federal funds to get its medical cannabis program off the ground. Cannabis dispensaries did not start selling medical marijuana in D.C. legally until 2013. Washington D.C.’s Department of Health summarizes its medical cannabis program as follows:

All qualifying patients have the right to obtain and use marijuana for medical purposes when his or her primary physician has provided a written recommendation that bears his or her signature and license number. This recommendation must assert that the use of marijuana is medically necessary for the patient for the treatment of a qualifying medical condition or to mitigate the side effects of a qualifying medical treatment.

Unlike many states, D.C. does not have a list of qualifying conditions, meaning that doctors have the freedom to recommend cannabis for a wide range of medical conditions.

D.C. patients and recreational users are both limited to two ounces of cannabis. But unlike recreational users, cannabis patients may purchase cannabis at a dispensary. A 2013 Amendment to D.C.’s medical cannabis law prohibits more than five marijuana dispensaries from opening in the District. The mayor has authority to expand that number to eight. The D.C. City Council recently implemented new regulations requiring the city’s dispensaries to submit cannabis to labs for testing. These rules are intended to protect consumers from ingesting dangerous additives that can be found on cannabis.

Bottomline. For years, the federal government has taken a generally hands-off approach to the states legalizing both medical and recreational cannabis. So long as an individual state’s legalization regime complies with the dictates of the Cole Memo, the federal government typically stays away. This has not been the case in our Nation’s Capital, as federal lawmakers are simply more concerned with cannabis legalization in their own backyard. Though Washington D.C. now has a workable medical marijuana program, we see the battle over its recreational marijuana program getting only more heated as the Trump administration and a Republican Congress take over. If D.C. were a state, it would definitely rank within our top ten for cannabis, but that may change for the worse, and soon.

cannabis lawyer

President Obama has an interesting perspective on the cannabis issue. He’s right, legalization isn’t a panacea — few things are. However, legalization would improve an array of things, as our marijuana laws are all over the map in the United States. Some states have extreme consequences for very small amounts of marijuana (such as prison time and high fines), others have medical cannabis programs, while others provide legal brick and mortar stores where you can legally purchase a wide range of cannabis products. These drastically different laws and consequences make one thing clear: we need standardization of marijuana laws for the country as a whole. Testing legalization out in some states is a great way to begin, but ultimately we cannot stop there.

What’s more, without standardization and legalization, we leave room for racial profiling, we prohibit some from being able to access much needed medicine, we provide fuel to the drug cartel fire, and we hold our country’s economy back from garnering huge tax revenues. President Obama is correct: cannabis should be legalized and regulated. Treating marijuana in this way would allow for standardization across all states, provide revenue for our economy, begin to diminish the power of illegal drug cartels, and put a stop to one major way in which racial profiling is carried out.

Legalization and standardization are good for us all. It may not be a panacea, but it’s a very good place to start.

Cannabis lawyersOf the many states that voted on marijuana reforms in 2016, Arkansas – #40 in our State of Cannabis series – is for me the most intriguing. This November Arkansas voters approved an amendment to the state’s constitution to allow medical marijuana use by qualified patients and to authorize medical marijuana dispensaries and cannabis cultivation facilities for that purpose. The ballot measure, known alternatively as Issue 6 and as the Arkansas Medical Marijuana Amendment, passed by a 53% to 47% vote. This is an almost exact reversal of the vote that rejected a different medical marijuana initiative in 2012.

Issue 6 is fairly progressive, at least by the standards of some states’ very restrictive medical marijuana laws. Qualifying conditions for cannabis in Arkansas include a long list of afflictions, including catch-all categories for ailments that cause chronic pain, nausea, seizures, or muscle spasms. The amendment authorizes use of cannabis flower, vapor, wax, and oil by qualified patients. The amendment officially takes effect in 120 days, during which time state authorities are to develop necessary rules and regulations. Once implemented, patients will be able to obtain registrant cards from their physician.

Interestingly, Issue 6 was originally not the only medical marijuana proposal on the ballot in Arkansas this year. Issue 7, which would have created a similar but distinct program, was slated to go before voters until the Arkansas Supreme Court struck it from the ballot in October after invalidating thousands of signatures, bringing the amendment below the ballot access threshold. Issue 7 would have added several more ailments to the list of cannabis qualifying conditions, including anorexia, asthma, and autism. It also would have authorized home cultivation of medical marijuana, which is not permitted by Issue 6.

Ironically, the signature challenge was brought by a pair of attorneys who advocate complete cannabis legalization. Despite their support for cannabis reform, they worried inclusion of Issue 7 on the same ballot as Issue 6 would risk failure of both initiatives by causing voter confusion. Though advocates of Issue 6 described the Arkansas Supreme Court’s decision to strike Issue 7 from the ballot as “bittersweet” at the time, the success of Issue 6 should please both parties, especially since several conditions not specifically listed as cannabis eligible under Issue 6 may nonetheless fall into one of its broad symptom-based categories.

Issue 6’s convincing victory at the ballot box should be heartening to advocates of marijuana reform. Arkansas’ embrace of medical marijuana may serve as a model for other conservative states and may help anchor what middle-of-the-road solutions for those states going forward. Issue 6’s success reflects the broad, bipartisan nature of the trend towards cannabis reform. To illustrate, both solid red Arkansas and true blue California approved liberal cannabis laws in 2016 by similar margins. Issue 6 passed with about 53% of the vote and California’s Proposition 64 passed with about 57%. In the same election, however, these two states had near opposite outcomes in the presidential race: Arkansas went to Trump with 60% of the vote and Clinton won California with a 61% majority, highlighting that cannabis reform is oftentimes not a Democrat-Republican issue. Arkansas is yet one more sign that we as a country are on the precipice of a tipping point towards general acceptance of cannabis.

California CannabisSince Proposition 64 passed earlier this month, there have already been reports of dispensaries selling recreational cannabis to adults without a physician’s recommendation. However, for those who believe they are now able to walk into a California dispensary and legally purchase recreational marijuana, they will be sorely disappointed.

The catch-22 of Prop 64 is that though adults in California can now legally possess, use, and transport recreational cannabis, there is currently no place in the state to purchase the cannabis as licensed medical dispensaries are not allowed to sell recreational cannabis (i.e. to adults over 21 who do not have the required physician’s recommendation to purchase medical marijuana). And though out-of-state residents can legally purchase recreational cannabis under Prop 64, they too are out of luck until state licensing begins, as currently licensed medical dispensaries may only sell medical cannabis to California residents.

Under Prop 64, dispensaries are required to apply for a “retailer” Type 10 license, which will be issued by the Department of Consumer Affairs, for the retail sale and delivery of marijuana or marijuana products to customers. The state is required to issue licenses by January 1, 2018, but at this time no license has been issued. Not only are dispensaries not allowed to sell recreational cannabis without a license, they will be penalized for operating without a license on top of any criminal penalties. Specifically, Prop 64 provides:

A person engaging in commercial marijuana activity without a license required by this division shall be subject to civil penalties of up to three times the amount of the license fee for each violation, and the court may order the destruction of marijuana associated with that violation in accordance with Section 11479 of the Health and Safety Code. Each day of operation shall constitute a separate violation of this section.

At this time, the only options for consumers to obtain recreational cannabis are to grow their own for personal use or share among each other free of charge. But to grow a plant you first need seeds or a clone, which you still can’t buy legally without a physician’s recommendation, so you’ll need to find a bud to give you the bud. The result could be the start of a sharing economy among California cannabis users while we wait for the state to get its regulated system in place.

The California state legislature is also considering allowing current medical dispensaries to temporarily sell recreational cannabis through a “special, conditional, time-restrained license” until formal state licenses are issued. We will alert you if that happens and we will continue to keep you informed of all things legal related to the ever-changing California cannabis landscape.

 

Cannabis business lawyersWe’re in that time of year when at least some of the licensed cannabis producers in Washington tend struggle. A short-term glut of marijuana on the market makes it harder to stand out and make sales, and businesses that aren’t competitive on price or quality get left behind. I bring this up because it is also the time of year when financiers come to my firm’s cannabis business lawyers looking for a way out of deals they fear will never pay off.

“Financiers” in the Washington marijuana system generally refers to debt investors that get a set interest rate of return rather than a profit-interest in a business. Mark Cuban once said that only a moron would start a business on a loan, but the limitations on out-of-state equity ownership leave many newish cannabis businesses cash-strapped, so they turn to debt. We have also seen that many of the creditors involved in the local marijuana industry are not seasoned small-business investors. They are people looking to take advantage of an industry that seems to be printing money. Debt feels less risky than equity, so they throw some money into a cannabis business or two, believing they will be able to get 10%-20% interest annually.

Because so many of these investors are new to small business investing, many don’t protect themselves. Lenders have a lot of tools to make sure they get paid. Security interests in real, personal, and intangible property provide avenues for seizing assets. Marijuana inventory is complicated to secure, but most marijuana businesses have at least some high dollar capital equipment. Personal guarantees from major players put personal assets on the hook as well, and signed confessions of judgment make the process of obtaining a judgment on the debt significantly easier. Most loans do not involve all of these protections, but most smart lenders are not willing to provide completely unsecured capital to brand new businesses without any way to get a return if the business folds.

If you are one of those unsecured investors and the cannabis company to whom you loaned money defaults on your loan, what can you do? If you want any chance of recouping your investment, you really only have two options. First, you can renegotiate the debt. In most well-drafted promissory notes, an uncured event of default causes the debt to accelerate and mature. This means that if your cannabis borrower misses a payment and doesn’t make a late payment by the cure date, its entire debt becomes due. Once this happens, it is just a matter of negotiating an extension on the note. During that extension, you as the creditor have significant leverage to extract concessions from your cannabis borrower, such as personal guarantees, security interests, or even pledges of ownership interest in the cannabis company. The reason you as the creditor have leverage is because your only other viable option would be to obtain a judgment against the borrowing company and that judgment will likely be a nightmare for your borrower. If you are wiling to brave the legal fees and get a judgment against your borrower, you can then use that judgment to begin levying on the cannabis business’s assets as though you had a security interest in the property to begin with. In most states, once you get the judgment, at least some of what you spend collecting on it, including your attorneys’ fees, will be collectable as well.

Companies that owe debts to third parties and realize that they are about to go under sometimes look for ways to avoid paying the debt. This is a good time to bring up fraudulent transfers. As defined in most states, a fraudulent transfer occurs in a few different ways, the most common of which is when an insolvent debtor transfers property without receiving a reasonably equivalent value in the exchange. If an “insider” — someone connected to the company like a director or a director’s spouse — is involved in the transaction, showing fraudulent transfers becomes far easier. For example, if a debtor  company has a bunch of equipment and transfers it to the company owner’s brother, that is potentially a fraudulent transfer, and the property can be clawed back for creditors.

The stickiest situations come when there are multiple debts. A company is not necessarily breaking any laws if it chooses to pay one creditor before it pays other creditors. Unless the creditor is an “insider,” the company can generally choose which of its debts to pay unless it is in a formal bankruptcy (probably not available to marijuana businesses) or a state receivership proceeding. In certain circumstances, multiple debt investors have signed promissory notes in which the company promises not to pay the notes proportionally and not to provide any payment preference. If the debtor company does pay one holder disproportionately to the others in that circumstance, the creditor left-behind may be entitled to a clawback of the payment.

These collections matters don’t usually end with either side truly happy. Attorneys make some money, and investors can often recoup a portion of their investments, but debt litigation against a business is an unpleasant affair. If you are looking to lend to a cannabis company, make sure you know what your plan is if things turn south. It’s better to have a security interest up front than it is to fight the company and other creditors in court to get the right to levy.

lease-agreementIn states with legal cannabis programs, most licensed cannabis businesses fall into three broad categories: producers, processors and retailers. Some states offer more exotic classes of licensure for activities like testing, research and even wholesaling marijuana, but a substantial majority of pot entrepreneurs are trading in the basics. Whether you are on the landlord or tenant side of the transaction, though, marijuana leases are anything but basic.

Unlike with standard commercial leases, pot landlords and tenants must account for the status of federal prohibition, the strictures of state-level programs, and the peculiarities of local zoning laws. These considerations are separate and distinct from baseline commercial lease considerations, which can themselves be complex and run into the dozens of pages. Without getting too far into the weeds, here are ten items to consider specifically in your marijuana lease.

1. Profit Sharing. We have seen many, many pot leases drafted by parties where a landlord agrees to take a cut of business profits over and above base rent. This type of transaction is typically frowned upon by regulators, who may view anything beyond ordinary, arms-length payments as de facto license ownership, subject to disclosure and vetting. Both parties should check local rules before entering into any sort of profit sharing arrangement, even if it is a small percentage of rent overall.

2. CSA Indemnity. Savvy landlords will often push for an indemnity requirement from tenants on general liability issues. The experienced marijuana landlord will also require indemnity on the specific issue of civil forfeiture under the federal Controlled Substances Act. This stipulation requires a marijuana tenant to defend a landlord and absolve the landlord of wrongdoing if the federal government takes enforcement action against the landlord for renting to the pot business.

3. Licensing Cooperation. Most marijuana licenses are tied to locations. A marijuana tenant will want to ensure that its landlord is obligated to assist if new administrative rules impose unforeseen requirements on them during the lease term. If a tenant is forced to move, the chances it will be able to drag its license from one place to the next are low. And if the property contains any peripheral attributes relevant to cannabis licensure, like a state-approved water right, the tenant will also want to ensure that the landlord is obligated to maintain that feature.

4. Access. States have strict rules about who may enter onto a marijuana licensee’s premises, and when. The right of the landlord to enter onto a premises should be clearly outlined, and it should dovetail with the provisions contained in any relevant statute or administrative rule regarding entry by anyone other than the licensee.

5. Occupancy and Commencement Dates. A typical cannabis lease will provide that a tenant will abide by all state and local laws, which includes a requirement not to begin any marijuana related activity on the premises prior to licensure. Sometimes, this creates a chicken and egg problem for a tenant, who needs a lease to get licensed, and also needs a license to operate under its lease. The parties should plot out a realistic timeline for licensure, and discuss whether rent will be abated or reduced prior to licensure.

6. Outs. Both parties will want a series of cannabis-specific “outs,” or escape clauses, drafted into the lease. These outs may accrue in situations ranging from federal law enforcement action, to local cannabis license denial. The landlord may also want outs for a tenant’s noncompliance with state or local cannabis laws.

7. Environmental Concerns. This is a big one in production and processor leases. Landlords and tenants will want to address fertilizers, herbicides and pesticides used and stored at the premises, along with the disposal of cannabis products and byproducts. States have both general environmental laws and cannabis specific laws that govern these issues and a properly drafted cannabis lease will take them into account.

8. Lease Term. Commercial leases often extend five or ten years at minimum, and a tenant may have one or more options to renew its lease beyond the initial term. In cannabis, parties tend to agree to shorter lease terms with fewer renewal options, because of the uncertainty inherent in cannabis laws and markets. Each party should weigh its desire for contract stability against the risk of market disruption, before committing to a term.

9. Dispute Resolution. The default rule in commercial leasing is that disputes are settled in court. Landlords are accustomed to expedited court proceedings designed to deal with FED (“forcible entry and wrongful detainer”) and courts are well versed in the summary eviction process. With cannabis, however, there are compelling arguments to be made for arbitration when it comes to contracts, including leases.

10. Federal Illegality. As with any cannabis contract, a well drafted cannabis lease should stipulate that federal illegality is not a valid defense to any claim arising from the lease, and that the parties waive the right to present any such defense related to the status of cannabis under federal law. Otherwise, a court could throw out the lease entirely, causing some serious headaches.

The above list is not exhaustive, and every marijuana lease will be different, depending on the parties, activity, state and location. Above all, it is important to note that marijuana leases, like other marijuana contracts, are unusual agreements that require expert attention.

Colorado Cannnabis

Even in states and cities where recreational cannabis is legal, consuming cannabis with others anywhere but in one’s own home is usually problematic. If you want to consume a beer with a friend, you can easily do so at a bar or a restaurant. There are no comparable places for cannabis. The citizens of Denver are trying to change this, but their efforts are being constricted.

On November 8, 2016, the people of Denver by a slim margin voted for Initiative 300 to allow private businesses to offer space for their patrons to consume cannabis. In an apparent effort to counter this vote, the Liquor Enforcement Division of the Colorado Department of Revenue recently approved a rule prohibiting businesses with a liquor license from applying for permits under Initiative 300. This rule means bars and restaurants that serve alcohol cannot also allow their patrons to use cannabis on-site.

In spite of this Liquor Enforcement Division rule, social cannabis consumption in Denver will still be allowed in certain designated areas. Establishments that wish to operate a business that permits its customers to consume cannabis on-site must first approval from a relevant local neighborhood association and then a permit from the City of Denver.

Yes on 300 Initiative explains the reasoning behind this initiative as follows:

In Denver we’ve legalized the purchase and possession of cannabis for adults but have not provided them with a safe and private place to consume it away from city sidewalks, parks and places where children congregate. The City of Denver Cannabis Consumption Pilot Program is a responsible approach to solving this problem that won’t remedy itself. It will provide designated spaces in certain City-permitted business establishments where adults 21 and over can consume cannabis in accordance with the Colorado Clean Indoor Air Act and out of view of the public. The problem stems from the fact that many residents of Denver live in HOA or landlord-controlled properties that disallow cannabis use on the premises, while more than 70 million tourists come to Colorado each year, also with no place to go. This has led to a 500% increase in public consumption tickets issued in Denver since the passing of Amendment 64 in Colorado, with African-Ameri­­cans being arrested at a rate 2.6 times higher than whites.

Yes on Initiative 300 then explains how the initiative will work in practice:

To remedy this, the City of Denver Cannabis Consumption Pilot Program is designed to mutually serve the interests of both cannabis consumers and Denver neighborhoods by requiring a prospective permit holder to garner formal support from an eligible neighborhood organization prior to applying with the Denver Department of Excise and Licenses. To allow neighborhoods the ability to slowly step into this new territory, the proposed permits could be issued for a short duration of time, such as for a single event, allowing for a phased integration of this program that adjusts to current unknowns as they are realized and best practices are developed. Neighborhood organizations will have the ability to mandate certain restrictions on the businesses to ensure they operate in a manner that is most appropriate for the neighborhoods in which they operate, empowering neighborhoods to be part of the process and set high standards of responsibility for cannabis consumers and cannabis consumption permit holders.

In addition to having to contend with the Colorado Liquor Board banning restaurants and bars from participating in the benefits from Initiative 300, it also is likely to face additional legal hurdles. Colorado Amendment 64, which legalized recreational marijuana in Colorado, states that “nothing in this section shall permit consumption that is conducted openly and publicly or in a manner that endangers others.” Supporters of Initiative 300 contend that it does not conflict with Amendment 64’s prohibition against open or public consumption of cannabis because consumption at a private business is neither open nor public. It is expected that opponents of the initiative will mount legal challenges to it by arguing that consumption in private businesses is “open” and “endangers others” in violation of Amendment 64. If these opponents succeed with their legal arguments regarding conflicts between Colorado Amendment 64 and Initiative 300, Initiative 300 will cease to apply because a state level Constitutional Amendment (Amendment 64) supersedes local law (Denver’s Initiative 300).

Denver’s Initiative 300 is nationally important because it is unique in making Denver the only major US city to allow for cannabis consumption spaces. And by way of one example, Washington state expressly forbids these types of cannabis consumption spaces by making it a felony for businesses to allow for cannabis consumption. Alaska’s marijuana laws allow for cannabis consumption spaces, but a recent legal opinion from the state Attorney General has halted cannabis clubs in Alaska. We will be monitoring what happens with Denver’s cannabis consumption spaces and reporting back on developments there.

Alaska cannabisThis is proving to be a big year for cannabis. As a result, we are ranking the fifty states from worst to best on how they treat cannabis and those who consume it. Each of our State of Cannabis posts will analyze one state and our final post will crown the best state for cannabis. As is always the case, but particularly so with this series, we welcome your comments. As a result of the overwhelming success of many cannabis initiatives this November, all the remaining states in this series have legalized the adult use of recreational marijuana. This week we head north to Alaska, which we rank number 5 among the states for cannabis.

Our previous rankings are as follows: 6. Massachusetts;  7. Maine; 8. New Mexico 9. Nevada; 10. Hawaii; 11. Maryland; 12. Connecticut; 13. Vermont; 14. Rhode Island; 15. Kentucky; 16.Pennsylvania; 17.Delaware; 18. Michigan; 19. New Hampshire; 20. Ohio; 21. New Jersey; 22. Illinois; 23. Minnesota; 24. New York; 25. Wisconsin; 26. Arizona; 27. West Virginia; 28. Indiana; 29. North Carolina; 30. Utah;  31. South Carolina; 32. Tennessee; 33. North Dakota; 34.Georgia; 35. Louisiana; 36. Mississippi; 37. Nebraska; 38. Missouri; 39. Florida; 40. Arkansas; 41. Montana; 42. Iowa; 43. Virginia; 44. Wyoming; 45. Texas;  46. Kansas;  47. Alabama;  48. Idaho; 49. Oklahoma;  50. South Dakota.

Alaska

Recreational Marijuana.  The history of marijuana legalization in Alaska goes back to 1975 when the Supreme Court of Alaska decided Ravin v. State. Irwin Ravin was charged with possessing cannabis for personal use. He claimed his arrest violated his privacy rights under Alaska’s Constitution. The court agreed, holding that the right to privacy enshrined in the Alaska Constitution allowed Ravin to consume cannabis in his own home and went on to discuss the health significance of marijuana consumption:

Given the relative insignificance of marijuana consumption as a health problem in our society at present, we do not believe that the potential harm generated by drivers under the influence of marijuana, standing alone, creates a close and substantial relationship between the public welfare and control of ingestion of marijuana or possession of it in the home for personal use.

On November 4, 2014, Alaskan voters approved Ballot Question 2, legalizing the recreational sale and use of marijuana. Under this law, adults over the age of 21 may possess up to one ounce of cannabis and six cannabis plants but only three plants may be mature and producing flower.

The initiative created the Marijuana Control Board to oversee the legal recreational market in Alaska. The Board issues six different types of licenses:

  • Retail Marijuana Store
  • Standard Cultivation Facility
  • Limited Cultivation Facility
  • Marijuana Product Manufacturing Facility
  • Marijuana Concentrate Manufacturing Facility
  • Testing Facility

Alaska’s recreational market has been slow to develop, with retail sales only recently beginning in October. For more information on Alaska’s recreational market, check out the following:

Medical Marijuana. Voters approved the Alaska Medical Marijuana Initiative in 1998, but the initiative did not create legal dispensaries for patients to purchase cannabis. Instead, patients could either grow their own cannabis or appoint a caregiver to grow on their behalf. As such, Alaska has no legally sanctioned medical marijuana market. That combined with protection for the home use of marijuana in the Ravin decision has allowed for a thriving illegal cannabis market. This is likely to change now that Alaska’s recreational cannabis market is now operational. This makes Alaska different from states like Oregon, Colorado, and Washington, all of whom had independent medical marijuana markets operating when recreational cannabis was legalized. Alaska’s medical marijuana market is almost non-existent and it’s likely that both medical and recreational users in Alaska will purchase their cannabis from retail marijuana stores.

Bottomline. Alaskans have had a right to use cannabis in the privacy of their own homes since 1975. The medical marijuana market was never truly operational, but Alaskans are finally getting a chance to legally purchase marijuana as retail stores start to open. For its long legalized cannabis history and, more importantly, its legalized recreational cannabis present, Alaska lands at number five in our rankings on how the states treat cannabis.