Opening a Medical Marijuana Dispensary

It’s easier to open a dispensary in Colorado than a brewery.

Not only is there no federal licensing or regulation (other than it being illegal, of course), there are no state license or regulations for legal production and sales of medical marijuana. Many local governments have not created rules to deal with dispensaries, much less a licensing process. In some counties it is as easy as leasing a space and beginning operations. Others require a neighborhood notice period, and city approval. Either way, it’s certainly not the 14 government agencies we have to deal with as a start-up brewery.

Some of that will change as of today. There is a one year moratorium on all medical marijuana businesses in Colorado, including dispensaries, infused product manufacturers (bakeries and similar operations), and grow operations. In addition, new regulations and a state licensing process for medical marijuana businesses will now govern all existing and new businesses.

Colorado voters passed an amendment to the state constitution in 1999 legalizing medical marijuana. The last couple of years saw a dramatic increase in the number of patients registering as users, as well as an increase in dispensaries and grow operations. The increase was the result of a memo from the United States Department of Justice directing law enforcement personnel to refrain from enforcing federal law against people in “clear and unambiguous compliance with existing state laws concerning medical marijuana.”

Colorado's new state law tries to spell out what dispensaries and other medical marijuana businesses can and cannot do, the steps they need to take in order to open, and who is allowed to own and operate such a business (not surprisingly anyone with a felony may not own, operate, or even be employed by a medical marijuana business). The new legislation was, however, thrown together hastily, and there continue to be a lot of holes. For example, dispensaries will now have to grow 70% of their own marijuana, but will infused products manufacturers also have to meet the same requirement? It’s not clear.

The department of revenue will be responsible for promulgating regulations to deal with medical marijuana, as they do for alcohol, and for setting up a licensing system, by the end of next month. The new state law also allows cities and counties to come up with their own regulations or to outright ban any medical marijuana business.

While medical marijuana is not a legal libation, many of the forth coming regulations and requirements will be based on rules for alcoholic beverage businesses. This is an extremely interesting area of developing law. Are the state’s alcohol codes an adequate basis for new codes related to medical marijuana? One is a legal substance for anyone over the age of 21, the other requires a medical condition and doctor prescriptions.

State and local governments are being faced with new issues, and it will be interesting to see how they deal with them. Will the waters become as muddy as they are for alcoholic beverage businesses? Or, will the regulations be more clear given the hindsight of dealing with other legislation?

Keep in mind that this is still very much illegal federally, another issue which we’ll discuss next week.