New Licensing Rules for Legalized Marijuana Businesses

New Licensing Rules for Legalized Marijuana Businesses
30 Nov 2015

The Colorado Marijuana Enforcement Division (“MED”), the state agency responsible for regulating Colorado’s legalized Medical and Retail (recreational) Marijuana industries, promulgated new licensing rules that take effect on November 30, 2015. The rules contain several important changes for licensed marijuana businesses and will require operational adjustments for those businesses to remain in compliance. The new regulations include topics such as cultivation production management, mandatory product testing, universal symbol marking and permitted economic interests. This article highlights key aspects of the rules and describes recent insights from Colorado’s marijuana regulators on how they fit into the state’s broader priorities.

In early November 2015, prior to the effective date of the new rules, national and international stakeholders gathered in downtown Denver for a marijuana management conference hosted by the City of Denver. At the conference, Andrew Freedman, Governor Hickenlooper’s Director of Marijuana Coordination, and Lewis Koski, the Director of the MED, provided a current snapshot of Colorado’s regulated marijuana market. There are approximately 2,500 marijuana business licenses throughout the state, 22,000 licensed industry employees and 600,000 marijuana plants in the state’s seed-to-sale inventory tracking system. Mr. Freedman and Mr. Koski discussed the new MED rules in the context of the state’s major regulatory priorities, which include the prevention of criminal activity in the regulated system through cultivation production management, protecting public health and safety through product testing and standardization of laboratory practices and prevention of marijuana use by minors through improved product marking and labeling.

As noted at the conference in Denver, the MED rules effective November 30, 2015 contain several updates impacting Medical and Retail Marijuana businesses. First, the production management rule, applicable to Retail cultivation facilities, provides that only one Retail cultivation license is allowed per licensed premises. Previously, a Retail Marijuana grow facility could have multiple cultivation licenses at the same premises. Under the new rule, multiple cultivation licenses at the same location will collapse into one surviving license upon the first annual renewal, along with the facility’s maximum authorized plant count. In contrast, Medical Marijuana grow facilities do not have similar regulations for production management.

Second, the MED’s mandatory testing program, which is new for the Medical Marijuana industry, establishes sampling and product testing requirements for potency, homogeneity, contaminants, and microbials. The program contemplates ongoing internal testing for cultivation facilities and products manufacturers, and the MED may require a licensee to submit a sample for testing at any time. Mandatory testing requirements were previously in place for Retail Marijuana establishments and become effective for Medical Marijuana operators on July 1, 2016. The rules also provide procedures for Medical Marijuana testing facilities, a new type of license, to align with Retail Marijuana testing.

Third, the new universal symbol regulations require marijuana businesses to: (a) physically mark, stamp or otherwise imprint a universal symbol on Medical and Retail edible products and (b) place the universal symbol on packaging and labeling for all types of Retail and Medical Marijuana products. The symbol is a red or black diamond (for packaging/labeling or on-product marking, respectively) with the text “THC” in capital letters and an exclamation point. Businesses must comply with the new universal symbol requirements for on-product marking, packaging, and labeling starting October 1, 2016.

Finally, the rules establish “permitted economic interests” as a new form of authorized financial interest in Medical and Retail Marijuana businesses. Permitted economic interests, which are agreements with non-owner individuals for a convertible right to ownership, represent a new source of financing for marijuana licensees. The rules include several requirements for the content of the agreement and the MED’s vetting of the associated individual.

Overall, the new rules address recent trends in market demand, consumer advocacy and an emphasis on public safety. Businesses operating in the Medical and Retail Marijuana industries should expect the regulatory structure to continue evolving, and must be aware of changes in the laws and regulations to remain in compliance. Businesses and stakeholders should closely monitor all state and local developments in the coming months.

John E. Jennings is a regulatory attorney at Ireland Stapleton Pryor and Pascoe, PC. He works with businesses of all sizes on licensing and regulatory matters. Prior to joining Ireland Stapleton, Jennings served as the Hearings Manager for the City of Denver’s Department of Excise and Licenses. He can be reached at 303-628-3636 or jjennings@irelandstapleton.com.

What is written here is intended as general information and is not to be construed as legal advice. If legal advice is needed, you should consult an attorney.


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