7 Rules for Colorado's New Marijuana Industry

Pot vending machines? Perhaps, under new recommendations from a governor-appointed task force on regulating legalized marijuana.
by | March 11, 2013 AT 10:00 AM
AP/Ted S. Warren

As one of two states that legalized recreational marijuana use last year, Colorado is facing an unprecedented challenge: building a regulatory framework for an entire industry, from scratch. It's tougher even than when Prohibition was repealed, experts say. At least back then policymakers could build off the old model. For officials in Colorado (and in Washington, the other state to decriminalize pot last year), there's no such regulatory foundation at all.

Now Colorado has taken its first step toward constructing that framework. A task force appointed by Gov. John Hickenlooper on Wednesday released recommendations for what the system should look like. Under Amendment 64 as passed by voters last November, the state must begin issuing licenses to businesses to grow and sell marijuana by Jan 1., 2014, and the regulatory framework must be in place months before that date.

Many of the task force’s recommendations share similarities with Colorado’s existing medical marijuana system, which Governing explored in its August 2012 cover story. For instance, the same enterpise should oversee the drug’s production from seed to sale. A new enforcement division should be established to police the industry. Sales taxes should be funneled to particular programs. Products for sale should warn about any potential health hazards. Basic, common-sense stuff.

But the report also includes some new recommendations. Here are some of the ones that caught our eye:

1. Only existing medical marijuana businesses should be licensed for recreational growth and retail in the first year.

Hold off on any predictions of a burgeoning green business boom, at least in the short term. Amendment 64 included language to favor existing medical marijuana operations, the task force concluded, such as reducing their licensing fees for recreational growth and retail start-ups. The task force took that language a step further in recommending a one-year “grace period” that would limit granting recreational licenses to medical marijuana shops. This would help smooth the transition, the task force reasoned, because medical marijuana businesses are already operating under a similar regulatory model.

It was also done with an eye to Washington, D.C., where the Justice Department still hasn’t decided whether to try to stop outright marijuana legalization in Colorado or Washington. “It allows the state licensing authority to manage the transition and expansion from medical to adult-use marijuana in a predictable, orderly, and controlled manner,” the task force wrote, “reducing the likelihood of federal scrutiny of Colorado’s new adult-use marijuana industry.”

2. Let out-of-state visitors purchase marijuana in Colorado – up to a point.

The prospect of ‘pot tourism’ -- people coming to a state solely for the purpose of buying a drug that’s illegal where they live -- is simultaneously one of the biggest fears and biggest opportunities in marijuana legalization. On the one hand, if Colorado becomes a hotbed for interstate marijuana distribution, the federal government could come knocking. On the other hand, ganja tourism could mean big bucks for the state.

The task force noted that Amendment 64 allowed any adult over 21 with “government-issued” ID – not only Colorado-issued ID – to purchase marijuana. The amendment also set a one-ounce possession limit. The task force recommended that state lawmakers set an even lower limit for sales to out-of-state visitors, suggesting one-eighth or one-fourth of an ounce. They figure that lower limit should cut down on people coming into Colorado just to stock up on weed.

3. Don’t let people throw away their unused marijuana.

It might sound silly, but there are serious concerns that underage adolescents would go scrounging around in marijuana centers’ dumpsters hoping to find something green, the task force wrote. So they recommended that the state establish a very specific process for discarding any unused cannabis materials from a business’s premises. One suggestion was using the same method that law enforcement uses when they seize illegal narcotics.

4. Pot vending machines? Maybe.

They might not appear in office buildings or sports stadiums anytime soon, but in a world of legalized marijuana, specialized vending machines pumping out packaged brownies or one-eighth ounce bags of potent cannabis isn’t so far-fetched.

As far as the task force is concerned, individual vendors should be allowed to decide how they want to sell. If that means pot vending machines, so be it. The task force advised the state legislature not to pass a law one way or the other.

5. Figure out a way to separate medical marijuana business from recreational marijuana business.

This one is dicey. Existing medical marijuana businesses, understandably, might want to expand their market share while still maintaining a medical branch. But Amendment 64 clearly stipulates that the two industries should remain distinct.

It appears to have been a tricky question for the task force, which included a number of options. One would allow a medical marijuana business to fully and seamlessly transition to a recreational operation when it applies for a recreational license. Others would set clear parameters for businesses that want to do both, such as keeping their medical grow houses separated from the recreational ones.

The bottom line? Keep the medical and recreational industries divided and make it easy for businesses to figure out where the line is.

6. Use new revenue from recreational marijuana sales and licensing to fund the enforcement division.

So the strength of the regulatory system depends in part on the strength of the industry being regulated. Using pot revenues to fund pot enforcement also means that Colorado taxpayers aren't footing the bill to pay for legalized weed. Makes sense.

But it’s noteworthy because the state’s existing medical marijuana system operates under the same rule – and has run into some cash flow trouble. Fewer dispensaries have been licensed than were originally expected, and that forced the state legislature to fill a $5.7 million hole in the medical marijuana enforcement office’s budget last year. So it will be interesting to watch if the new recreational division encounters the same problem.

7. Just Say No to state production.

The concept of the state government growing and selling marijuana itself, in an effort to stem any illicit sale or use of the drug, has been floated by some legalization advocates. But the task force dismissed state production at the onset of its report, concluding that Amendment 64 clearly envisioned a private industry regulated by the government.