Doctors and dispensaries – a “no-no”

It is important for doctors to continue working with patients independent of any relationships the doctor or patients may have with a primary caregiver/primary caregiver business. It is unclear whether a doctor’s association with a referral business will be affected. The transaction between primary caregivers should be wholly seperate from any renumeration to the doctor. Better yet that the patient pays the doctor directly for the examination. If the doctor is shareholder of such a business and primary caregivers/primary caregiver business is a source of revenue, it will be quite problematic. As we seek to restore our “image” with the public, it is necessary to make sure that legitimate doctors are recommending medical marijuana for legitimate patients and that the doctor’s evaluation is independent of any financial dealing with dispensaries or growers.

Stay legal

Also, the doctor is not permitted to see patients at any dispensary. It is unclear whether an office rented or occupied by the referral business would permitted.

Brokering Cannabis Current and Future Risks

As I have repeatedly advised over the last 10 years, brokering wholesale cannabis is not legally protected. In a formal opinion issued yesterday which I have attached, MED states:

Facilitating or brokering a sale, therefore, is not one of the privileges granted to Licensed Transporters by the State Licensing Authority. Finally, only a person that is expressly authorized by the Medical Code, the Retail Code, and State Licensing Authority rules to sell marijuana, either directly to a consumer or patient or by transferring to another licensee, is permitted to do so. Further, a licensee who exercises privileges that are not granted by the State Licensing Authority for that license, may be suspended, fined or revoked for acting outside the scope of their licensed privileges. See §§ 44-11-601 and -901, and 44-12-601 and -901, C.R.S.

This opinion was issued in the context of a transporter’s inquiry, but you can see that MED also made sure to expand the opinion to anyone, not just transporters, who broker wholesale cannabis and cannabis products. Also, this “warning” should be understood to include the risk of criminal prosecution. Anyone who distributes cannabis, in any amount, without being licensed to do so commits a felony(s).

It is my view that there are no regulations that permit wholesale cannabis brokering since the activity necessarily involves profit sharing. However, based primarily on prevalence of the activities in the industry, MED’s cannabis brokering opinion remains limited to transporter licenses. However, the MED is still investigating the matter and determining whether the opinion will be more broadly applied in the future. Until the MED says otherwise, you can still contract with brokers, although I would tread with caution until MED releases a formal opinion on the matter.

Robbery protocol

We have received questions about the robbery protocol for marijuana businesses. In response we have prepared best practices outlining the proper protocol. This robbery protocol is primarily aimed at training employees, but it also contains information for owners and managers so you have quick access to the reporting requirements.

The Protocol:

Preventing Robberies

Employees should take the following daily precautions to try to prevent break-ins and robberies at the facility:
1. Check all security equipment and carefully follow opening and closing procedures to ensure the business is secured in non-business hours.
2. Do not discuss cash levels and security procedures with non-employees.
3. Be alert for suspicious persons loitering around the interior or exterior of the licensed premises.
4. Be alert for suspicious vehicles near the licensed premises.
5. Suspicious activity should be reported to the manager on duty.

Robbery in Progress

If employees encounter an in-progress robbery, the following action should be taken.
1. Remain calm and avoid any action that would jeopardize the safety of personnel or customers.
2. Obey the robber’s instructions, even if it appears that employees or customers cannot be harmed. No amount of money or product is worth the risk of endangering a person’s life.
3. Try to be as observant as possible. Take note of the following:
1. The robber’s physical characteristics, including: race, sex, height, weight, facial features, accents, scars, marks and/or deformities, and right or left-handed.
2. The number of robbers and their clothing description, as well as any names used by the robbers.
3. Description of any weapons used.
4. If the robber uses a note, place it out of sight to retain as evidence.
5. Description of vehicles used and license plates if possible.
4. Inform the robber of any surprises. If someone is expected back soon or if you must reach or move in any way, tell the robber what to expect so they will not be startled.

After the Robbery

Immediately after the robbery, follow the below instructions, in order:
1. Lock the doors once the robbers have left the licensed premises so that they cannot reenter.
2. Check employees and customers for injuries. If anyone is injured, immediately call 911 for medical assistance.
3. Call 911 and give your best description of the events to the dispatch operator including all items above that you observed.
4. Close and secure the licensed premises until the police arrive to preserve the scene of the crime for physical evidence.
5. Each employee (and customer, if cooperative) involved in the incident should write down his/her description of the robber and events. Employees should not confer with other witnesses or compare notes. This should be done as soon as is safe to take advantage of your short term memory.
6. Ask customers and witnesses to remain at the licensed premises to assist with police. If customers insist on leaving, obtain their full name and contact information and permit them to leave once it is safe to do so.
7. The manager on duty should call the owners to inform them of the situation.
8. The owners or managers will report the incident to the local licensing authority and Marijuana Enforcement Division as is required by the marijuana rules.
9. Do not post about the robbery on social media or discuss the incident with others until police have confirmed it is ok to do so. Do not disclose at any time how much money or property was stolen except to police and other staff. If the amount of money is released, it may encourage subsequent robberies or robberies of other marijuana facilities in the area.
10. Cooperate with police as the investigation progresses.

Management: After the Robbery

Management and Owners should be aware of the following marijuana regulations in addition to the above:

1. The Marijuana Enforcement Division R904 requires the following in relevant part:
“Reporting of Crime on the Licensed Premises or Otherwise Related to a Retail Marijuana Establishment. A Retail Marijuana Establishment and all Licensees employed by the Retail Marijuana Establishment shall report to the Division any discovered plan or other action of any Person to (1) commit theft, burglary, underage sales, diversion of marijuana or marijuana product, or other crime related to the operation of the subject Retail Marijuana Establishment; or (2) compromise the integrity of the Inventory Tracking System. A report shall be made as soon as possible after the discovery of the action, but not later than 14 days. Nothing in this paragraph (B) alters or eliminates any obligation a Retail Marijuana Establishment or Licensee may have to report criminal activity to a local law enforcement agency.”
To complete this requirement, email the Marijuana Enforcement Division.
2. Make sure to comply with any local jurisdiction reporting requirements.

MED Eliminates Face to Face Meetings

It has been a strange few weeks for the industry. MED policies are changing quickly and the obligations for the businesses are ever increasing.

Of particular concern is the newfound zeal in the financial investigation area. PEI investors are experiencing extreme and, in my opinion, unnecessary scrutiny. It is no longer enough to show proof of funds that match the intended investment. Instead, the investors are required to prove the source of all of their money, investments, and other sources of income. In one case, a client worth several million dollars was required to show the sources of all of the money even though only a few hundred thousand dollars were to be invested and proof of those funds was provided. Wealthy investors typically have many layers of financial intricacy including trusts, investment accounts, rental income and other complex vehicles to diversify their money. This is posing a very significant burden on any anticipated investor.

Next, MED is prohibiting any interim use of money by a potential buyer of a cannabis business. Many of the businesses being sold are in distress and having trouble making rent, payroll and paying their taxes. Traditionally, we have used interim loans to cover the shortfalls so that the asset still exists at the end of the approval process.  It is unclear whether any such lending will now be permitted by MED.

Finally, MED has now eliminated face-to-face meetings with the investigators and is requiring all applications be submitted at arm’s length. This is problematic because the investigators often head off issues at the application meeting that would not otherwise be anticipated due to constant rule changes. The businesses will now be “flying without a net” and it is imperative that great care be used in preparing any application. This works a particular hardship on the less wealthy entrepreneurs who cannot afford the luxury of legal services and were accustomed to working directly with the investigation team on their applications. But, like always, we have to comply first and complain later. We’ll see how this all shakes out.

House Bill 18-1381

The legislature finally eliminated the requirement that medical marijuana businesses be vertically integrated and sell at least 70% of the cannabis they produce through their designated centers.  House Bill 18-1381 phases out vertical integration and the 70/30 rule in two stages.  A copy of the bill can be found here:

Effective immediately, medical marijuana businesses are only required to sell 50% of the medical cannabis it produces through their designated centers.  Effective 7/1/2019, the medical marijuana centers will no longer be required to produce any of their own medical cannabis.  Carrying the dual burden of a retail store and cultivation operation has been devastating the medical cannabis businesses.  Hopefully, leveling the “playing field” with recreational cannabis businesses will help medical cannabis thrive and continue to focus on and support the medical marijuana patients they serve. It is not yet clear how plant counts and other inventory tracking will be handled since medical cannabis businesses currently cultivate medical cannabis based on the patients who assign the medical marijuana center as their primary center.  I suspect that it will be handled by the tier system currently used for recreational cannabis, but stay tuned.

Hemp and CBD Legality

After counseling several clients on the legal use and production of cannabidiol (CBD), it has become apparent that there is still a lot of confusion surrounding the issue. To help dispel some of the misunderstandings, especially in relation to last month’s 9th Circuit Court of Appeals ruling in Hemp Industries Assoc. v. U.S. Drug Enforcement Administration, we have compiled an overview of the case and its implications on local hemp businesses. The case may raise some concerns about the future of federal hemp and CBD legality.

The case brought by the Hemp Industries Association (HIA) asked the court to review a 2016 Final Rule enacted by the Drug Enforcement Administration (DEA) that may be read to classify CBD as an illegal drug under the Controlled Substances Act (CSA) because it is extracted from marijuana flower. The HIA argued: (1) that the DEA overstepped its authority in making this change; and (2) that because CBD can be extracted from hemp flower, and industrial hemp with less than 0.3% THC is lawful, CBD production is protected by the 2014 Farm Bill and beyond the reach of the DEA.

In the opinion, the 9th Circuit judges dismissed the HIA’s claim on a technicality, stating that because the HIA failed to actively participate in the DEA’s rule-making process they lacked standing to the bring the current challenge. The court, though, did clarify that the DEA’s “marijuana extract rule” does not apply to hemp or hemp-derived products produced in compliance with the Farm Bill. Therefore, hemp producers may continue to extract and sell CBD where it is permitted under state law.

Ultimately, CBD production and the DEA rule can coexist where hemp is grown and processed pursuant to the Farm Bill. However, outside of this interpretation, no formal legal protections have been afforded to CBD and hemp production. The circuitous path of legal precedent surrounding CBD and hemp products raises concerns as to the questionable legality of hemp and CBD. Producers should be cautious and remain vigilant of new developments in this area of the law.

The most recent effort to ensure the future of CBD extractions in the Hemp Farming Act of 2018. Passage of this law would permanently remove hemp and hemp products from the umbrella of the CSA.  However, until that time the future of hemp and CBD production remains uncertain.

If you have any questions regarding hemp extraction or CBD production, or would like to learn more about Hemp Industries Assoc. v. U.S. Drug Enforcement Administration, please do not hesitate to contact our office.

Respecting the Corporate Form for Marijuana Businesses

One of the main reasons we recommend our business-owning clients incorporate their business or form an LLC is for the personal asset protections these business models provide. However, in my years of practice, I have witnessed an alarming number of clients jeopardize their personal assets by failing to adequately separate their business activities from their personal endeavors. When this happens, owners risk “piercing the corporate veil” – meaning they risk losing the liability protections that having an LLC or a corporation provides them. If a business’s corporate veil is pierced, a judge may order the owners’ personal assets be used to satisfy their business’s debts and liabilities. To avoid this unfavorable outcome and maintain your limited liability protections, it is important to abide by the key responsibilities outlined below:

  1. Undertake the Necessary Formalities. Businesses must complete any annual filings required by the state to protect and ensure the longevity of the company. This includes obtaining all applicable permits, licenses, or approvals necessary for legal compliance. All businesses should also create and regularly update their bylaws or operating agreement, and hold annual meetings of the members/shareholders and managers/directors.
  2. Avoid Under-Capitalization. Under-funded businesses have a higher risk of veil piercing because creditors may argue the business exists solely to shield the owners’ assets. Businesses should be equipped with enough resources to both start and continue operations. Funding may come through the owners’ own money, outside investors who become owners, or business loans. Regardless of the method used to accrue capital, the money should be designated to the business, not the owners personally.
  3. Maintain a Written Record of Business Decisions. All business meetings should be documented through meeting minutes, emphasizing any major business decisions reached in the meeting. Additionally, all formal contracts entered into by the company should be signed and kept for at least seven (7) years. These records protect the corporate veil by evidencing the business’s separate existence and operation outside of the owner(s).
  4. Do Not Comingle Business and Personal Assets. Whether arising from loans, shared bank accounts, shared tax returns, or personal use of business assets, failing to separate business assets from personal assets negates the business’s separate identity. All business owners should, at minimum, set up a business checking account and a business credit card, and only use these for business expenses. It is also important to keep business assets, like property and equipment, separate from personal assets. Notably, businesses should not be used as a lender for their owners.
  5. Make Your Business Status Known. Create business cards and email addresses using the business name, and make purchases or receive payments through the business bank account. It should also be made clear when the business, not an individual owner, is acting. When the business enters into an agreement, use the company name and have the owner(s) sign with reference to their corporate designation. By clarifying when the business, not an individual owner, is acting, the corporate veil becomes more resistant to attack.

The most important thing to remember is that there must be a clear distinction between what assets and activities are attributable to the business and which are attributable to the owner(s). If owners cannot prove that the above steps have been followed, it may be determined that the business is operating as a sole proprietorship or general partnership, in which case the owner(s) would lose the limited liability protections inherent in an LLC or a corporation and the corporate veil may be pierced.

Research shows that approximately 50% of “piercing the veil” court cases succeed because business owners fail to follow the corporate formality requirements above. If you have any questions about respecting the corporate veil or what your business can do to ensure it is protected, please let us know.

Marijuana and Parenting

In the past few months we have received numerous inquiries into the crossroads of marijuana use and parenting, especially in relation to child custody issues. Below you will find research and guidance from the Boulder County Child Protective Services on the issue. However, if you have questions regarding marijuana use and parenting in your local community outside of Boulder County, we would be happy to meet with you about information specific to your community.

Caseworkers at Boulder County Child Protective Services receive training on issues involving marijuana use and parenting through Illuminate Colorado is a non-profit company that handles various child abuse problems, including those involving drugs and alcohol, through their program, Smart Choices Safe Kids. This program aims to serve as an educational resource guide for families, individuals, and professionals with funding through grant awards from the Colorado Department of Human Services Children’s Justice Act and the AJL Charitable Foundation.

Marijuana-related recommendations from the Smart Child Safe Kids Programs include:

  1. Not using drugs of any kind while taking care of children in case of emergency;
  2. Never smoking around children;
  3. Keeping all drugs, including medical marijuana, locked up and out of reach of children, while being particularly being careful of edibles and items in refrigerators;
  4. Following state law regulations for home grow operations; and
  5. Never permitting dangerous manufacturing such as hash oil labs in a home where children are present.

While Boulder County Child Protective Services does not take a strict prohibitionist stance on using marijuana in the home, parents should be sober whenever they are responsible for the care and well-being of their children.

If you have more specific questions regarding the crossroads of marijuana use and parenting, please contact us for further information. We wish you all a happy and healthy spring season.

2018 Retail and Medical Marijuana Rule Changes

The Colorado Marijuana Enforcement Division (MED) recently finalized the 2018 amendments to the medical and retail marijuana rules. Several of the new rules include changes to product contamination testing, product packaging and labeling requirements, and the 70/30 Percent Rule, etc. Below you will find a summary of some of the key amendments that became effective this week. Note, however, this summary is not all-inclusive and each business owner should carefully review the amendments to ensure compliance.


  • The definition of “Associated Key License” has been expanded to require and Associated Key license for “any Person who controls or is positioned so as to enable the exercise of control over a Retail Marijuana Establishment.”
  • The definition of “Commercially Reasonable Royalty “ has been altered to apply specifically to intellectual property “with a direct nexus to the cultivation, manufacture, Transfer or testing of Retail Marijuana, Retail Marijuana Concentrate or Retail Marijuana Product.” Additionally, a Commercially Reasonable Royalty now “will not be approved where it could cause reasonable consumer confusion or violate any federal copyright, trademark or patent law or regulation.”
  • An “Exit Package” now must be opaque, but need not comply with other labeling rules.
  • For a plant to qualify as “flowering,” there must now be physical signs of flower budding out of the nodes in the stem, not just its status in a light cycle.
  • “Heat/Pressure Based Retail Marijuana Concentrate” is now defined in the Code.
  • “Marijuana Research and Development Cultivation” has been added and means “a Person that is licensed pursuant to the Medical Code to grow, cultivate, possess, and Transfer Medical Marijuana to a Marijuana Research and Development Facility for limited research purposes authorized pursuant to section 12-43.3-407, C.R.S. A Marijuana Research and Development Cultivation is a Licensed Research Business.”
  • “Support License” has been added to the Code and means “a license for an individual who performs duties that support the Retail Marijuana Establishment’s operations. A Support Licensee is a person with less decision making authority than a Key Licensee and who is reasonably supervised by a Key Licensee or an Associated Key Licensee. Examples of individuals who need this type of license include, but are not limited to, sales clerks or cooks.”

R 200 Series – Licensing and Interests Rule Changes

  • R204G has been added and states a Licensee shall not instruct a third-party to perform any act or conduct on the Licensee’s behalf or for the Licensee’s benefit if the Licensee is prohibited by law or these rules from engaging in such conduct itself. Moreover, a Licensee is responsible for all actions and omissions of any Person acting on the Licensee’s behalf, and a Licensee may be subject to license denial or administrative action based on the acts and/or omissions of any Person the Licensee employs, contracts with, hires, or otherwise engages.
  • R204.5B clarifies that a Commercially Reasonable Royalty Interest Holder who receives a royalty of more than 30 percent is an Indirect Beneficial Interest Owner and holds a Financial Interest in the Retail Marijuana Establishment.
  • In contrast, R204.5C defines a Commercially Reasonable Royalty Interest Holder who receives a royalty of 30 percent or less as an Indirect Beneficial Interest Owner and holds an Affiliated Interests in the Retail Marijuana Establishment.
  • R231.1A has been added and states that a finding of suitability is valid for one year from the date it is issued by the Division. The failure of a non-Colorado resident, who is not already a Direct Beneficial Interest Owner, to obtain a finding of suitability within the year prior to submission of an application to become a Direct Beneficial Interest Owner to the State Licensing Authority shall be grounds for denial of the application.

R 300 Series – The Licensed Premises

  • A Marijuana Establishment and a Licensee must report any plan, act, or omission by any visitor or other person: (1) to commit theft or other crime; (2) to compromise the integrity of the Inventory Tracking System; or (3) that results in injury to any Person on the Licensed Premises or otherwise creates a risk to public health and safety
  • Co-locations of Medical Marijuana Centers and Retail Marijuana Stores, Co-locations of Optional Premises Cultivation Operation and Retail Marijuana Cultivation Facility, Co-locations of Medical Marijuana-Infused Products Manufacturer and Retail Marijuana Products Manufacturer, Co-locations of Medical Marijuana Testing Facility and Retail Marijuana Testing Facility, and Co-locations of Medical Marijuana Transporter and Retail Marijuana Transporter are all permitted under the circumstances listed in M304.1.
  • Pursuant to the new language of R305, any outdoor or greenhouse Retail Marijuana Cultivation Facility must comply with new fencing requirements, including:

(a) The entire Limited Access Area shall be surrounded by a fence that measures at least eight feet from the ground to the top of the fence and is constructed of at least six gauges or higher metal chain link fence or another similarly secure material but may not be wood. All support posts shall be steel and securely anchored.

(b) All entry gates shall measure at least eight feet from the ground to the top of the entry gate and shall be constructed of six gauge or higher metal chain link fence or a similarly secure material but may not be wood.

(c) The fence shall obscure the Limited Access Area so that it is not easily viewed from outside the fence.

(d) The perimeter of the fence shall be surrounded with lights illuminating all sides of the fence for at least 20 feet from the fence. The required lights may be, but are not required to be, motion sensing.

(e) A Licensee may, in writing, request that the Division waive one or more of the security requirements described in this subsection (a) through (d) above, by submitting on a form prescribed by the Division a security waiver request for Division approval. The Division may, in its discretion and on a case by case basis, approve the security waiver if it finds that the alternative safeguard proposed by the Licensee meets the goals of the above security requirements.

  • An RFID tag must be physically attached to every plant being cultivated that is greater than four inches tall or four inches wide.
  • Inventory Tracking System procedures now include, but are not limited to:

(1) Properly indicating the creation of a Production Batch including the assigned Production Batch Number;

(2) Accurately identifying the cultivation rooms and location of each plant within those rooms on the Licensed Premises;

(3) Accurately identifying when inventory is no longer on the Licensed Premises; (4) Properly indicating that a Test Batch is being used as part of achieving process validation;

(5) Accurately indicating the METRC category for all Medical Marijuana, Medical Marijuana Concentrate and Medical Marijuana-Infused Product; and

(6) Accurately including a note explaining the reason for any destruction of plants or adjustment of weights to Inventory Tracking System packages.

R 400 Series – Retail Marijuana Stores

  • A Retail Marijuana Store and its employees are prohibited from selling Transferring more than one ounce of Retail Marijuana flower or its equivalent in Retail Marijuana Concentrate or Retail Marijuana Product in a single transaction to a consumer. A single transaction is now defined to include multiple Transfers to the same consumer during the same business day where the Retail Marijuana Store employee knows or reasonably should know that such Transfer would result in that consumer possessing more than one ounce of marijuana.
  • A Retail Marijuana Store shall not Transfer any Retail Marijuana, Retail Marijuana Concentrate or Retail Marijuana Product to a Medical Research Facility, a Pesticide Manufacturer or a Research and Development Licensee.

R 500 Series – Retail Marijuana Cultivation Facilities

  • A Retail Marijuana Cultivation Facility shall only obtain Retail Marijuana seeds or Immature Plants from its own Retail Marijuana or from another Retail Marijuana Establishment.
  • The Colorado Department of Agriculture’s determination that the Licensee used any quantity of a Pesticide that would constitute a violation of the Pesticide Act or the Pesticide Applicators’ Act shall constitute prima facie evidence of a violation of the Pesticide Application Rule.
  • Contaminated product shall not be transferred and must be destroyed.
  • New guidelines for applications for additional plant counts can now be found in R506E.

R 600 Series – Retail Marijuana Products Manufacturing Facilities

  • The use of Dimethylsulfoxide (“DMSO”) in the production of Retail Marijuana Concentrate or Retail Marijuana Product shall be prohibited and possession of DMSO upon the Licensed Premises is prohibited.

R 700 Series – Retail Marijuana Testing Facilities

  • The MED has clarified that “a Person who is a Direct Beneficial Interest Owner or an Indirect Beneficial Interest Owner of a Retail Marijuana Cultivation Facility, Retail Marijuana Products Manufacturing Facility, Retail Marijuana Store, Medical Marijuana Center, Optional Premises Cultivation, or a Medical Marijuana Infused-Products Manufacturing Facility shall not be a Direct Beneficial Interest Owner or an Indirect Beneficial Interest Owner of a Retail Marijuana Testing Facility.”
  • Moreover, a “Retail Marijuana Testing Facility shall establish policies to prevent the existence of or appearance of undue commercial, financial, or other influences that may diminish the competency, impartiality, and integrity of the Retail Marijuana Testing Facility’s testing processes or results, or that may diminish public confidence in the competency, impartiality and integrity of the Retail Marijuana Testing Facility’s testing processes or results.”
  • The Inventory Tracking System reports from Marijuana Testing Facilities must include the results of any tests that are conducted on Retail Marijuana, Retail Marijuana Concentrate, Retail Marijuana-Infused Product or Industrial Hemp.
  • The language of what constitutes successful or unsatisfactory participation in a proficiency testing event has been revised to read: “Unless the Retail Marijuana Testing Facility positively identifies at least 80% of the target analytes tested, participation in the Proficiency Testing event will be considered unsatisfactory. A positive identification must include accurate quantitative and qualitative results as applicable.”
  • Important changes to Testing Facilities’ Inventory Tracking System and record retention requirements have also been added, including many technical changes. Testing Lab owners should review the R 700 Series for detailed amendments.

R 800 Series – Transport and Storage

  • Except as provided in the Rule R 1600 Series, any individual who transports Retail Marijuana, Retail Marijuana Vegetative plants, Retail Marijuana Concentrate, or Retail Marijuana Product on behalf of a Retail Marijuana Establishment must hold a valid Occupational License and must be an employee or Owner of the Retail Marijuana Establishment.
  • Transport of Retail Marijuana plants other than Vegetative Plants shall not be allowed.
  • Inventory Tracking System-generated transport manifest must be generated for any transportation of Retail Marijuana.
  • Licensees shall ensure that either the multiple Containers placed within a Shipping Container each have an RFID tag, or the Shipping Container itself must have an RFID tag. If the Licensee elects to place the RFID tag on the Shipping Container, the Shipping Container shall contain only one Harvest Batch, or Production Batch of Retail Marijuana, Retail Marijuana Concentrate, or Retail Marijuana Product. If a Shipping Container consists of more than one Harvest Batch or Production Batch, then each group of multiple Containers shall be affixed with an RFID tag.
  • Discrepancies between the quantity specified in a transport manifest and the quantity received by a testing facility will be handled in accordance with R 801J.
  • Products that have failed required testing or are contaminated must be physically segregated and contained in a sealed package to prevent cross-contamination during transport.

R 900 Series – Business Records

  • Business records must include a Waste Log, Surveillance Logs, the Licensee’s Identity Statement and Standardized Graphic Symbol, Testing Records, and all other records required by the Rules.

R 1000 Series – Labeling, Packaging, and Product Safety

*Effective Date. Compliance with this R 1000 Series is mandatory until January 1, 2018. During the period January 1, 2018, to June 30, 2018, Licensees have the option of complying with this Rule R 1000 Series or with the Rule R 1000-1 Series, but must be fully compliant with at least one of those two Labeling, Packaging, and Product Safety Series. Beginning July 1, 2018, this Rule R 1000 Series is repealed, and compliance with the R 1000-1 Series is mandatory.

  • Other than bulk flower, trim, or concentrate, a Cultivation Facility or Products Manufacturing Facility shall not transfer any Retail Marijuana to another Marijuana Establishment unless it has been placed into a Container and labeled in accordance with the R 1000-1 Series, except that the Store shall affix its license number and the date of sale prior to sale to the consumer.
  • A Retail Marijuana Store may, but is not required to, place a Container or Marketing Layer into an Opaque Exit Package at the point of sale to the consumer. The Exit Package is not required to be labeled but may include the Retail Marijuana Store’s Identity Statement and/or Standardized Graphic Symbol.
  • Several important changes have been made to labeling requirements in Section R 1002-1. This provision should be carefully reviewed; highlights include:
  1. Requisite font sizes
  2. Prohibition on using the word “candy”
  3. Information required for every label regardless of the products intended use
  4. Statement of intended use
  5. Required warning statements, including:
  6. “This product was produced without regulatory oversight for health, safety, or efficacy.”
  7. “This product complies with testing requirements.”

iii. “There may be long term physical or mental health risks from use of marijuana including additional risks for women who are or may become pregnant or are breastfeeding. Use of marijuana may impair your ability to drive a car or operate machinery.”

  1. Permissive information, such as the Store’s Identity Statement and/or Standardized Graphic Symbol or other additional information consistent with the requirements of the Rules.
  • Additional Labeling requirements are specified for Inhaled Products, Edible Products, and Skin and Body Products. Some changes include:
  1. The potency statement required by Rule R 1002-1(K.6) for vaporizer cartridges   shall be stated as the percentage of Total THC and CBD, and the number of    milligrams of THC and CBD per cartridge.
  2. Edible Product labels must now include an additional warning stating: “The intoxicating effects of this product may be delayed by up to 4 hours.”
  3. Required Expiration and Production Dates for skin and body products.
  • Revised labeling requirements for seeds and immature plants are included in Section R 1006-1.
  • Revisions to the packaging requirements for products of all intended uses other than immature plants can be found in Section 1007-1, and generally require a child-resistant containers, container and marketing layer labels, and special rules regarding bulk packaging. Packaging requirements for immature plants can now be found in Section R 1009-1.

R 1500 Series – Retail Marijuana Testing Program

  • Retail Marijuana Cultivation Facilities and Retail Marijuana Products Manufacturing Facilities must re-validate their process for contaminant testing every 12 months. After successfully obtaining process validation, a Retail Marijuana Cultivation Facility or Retail Marijuana Products Manufacturing Facility shall subject at least one Harvest Batch to all contaminant testing required by Paragraph (C) of this rule every 7 days. However, the Division may reduce the frequency on ongoing contaminant testing in its discretion.
  • Mycotoxin and Pesticide Contaminant Testing guidelines have been added to Section R 1501C.
  • If a Retail Marijuana Cultivation Facility or a Retail Marijuana Product Manufacturing Facility makes a Material Change to its cultivation or production process or its standard operating procedure manual, then it must notify the Retail Marijuana Testing Facility and have the first five Harvest Batches or Production Batches produced using the new procedures tested for all of the contaminants regardless of whether its process has been previously validated. For example, changing from one growing medium to another is a Material Change.
  • Revised requirements for test batch sample sizes are now included in Section R 1504.
  • Several new Failed Contaminant Testing and Quarantining of Product provisions have been added, including but not limited to: (1) the Division’s authority to implement a quarantine by indicating failed test results and limiting the licensee’s ability to transfer quarantined product, (2) clarification on retesting contaminated products, and (3) revised remediation measures for failed test batches.

R 1600 Series – Retail Marijuana Transporters

  • A Retail Marijuana Transporter shall maintain a Licensed Premises if it: (1) temporarily stores any Retail Marijuana or Retail Marijuana Product, or (2) modifies any information in the Inventory Tracking System generated transport manifest.
  • Only Retail Marijuana Vegetative plants may be transported between Licensed Premises and such transport shall only be permitted due to an approved change of location pursuant to Rule R 206. Transportation of Vegetative plants to a permitted off-premises storage facility shall not be allowed

R 1800 Series – Retail Marijuana Transfers to Unlicensed Medical Research Facilities and Pesticide Manufacturers

  • This is an entirely new section that establishes requirements associated with the Transfer of Retail Marijuana, Retail Marijuana Concentrate, and Retail Marijuana Product to Medical Research Facilities, including requirements for the possession and disposition of Retail Marijuana, Retail Marijuana Concentrate, and Retail Marijuana Product by Medical Research Facilities. If you partake in such transfers, this section should be carefully reviewed.

Medical Code Changes

*The changes listed above to Retail licenses were duplicated in the medical rules as well. The changes below are to medical licenses only.

  • New fees have been added for Marijuana Research and Development Facility Applications and Marijuana Research and Development Cultivation Applications.

M 400 Series – Medical Marijuana Centers

  • A patient’s designation of a Medical Marijuana Center as his or her primary center in accordance with these Rules establishes the center registration requirements set forth in sections 12-43.3-901(4)(e), and 25-1.5-106(8)(f), C.R.S.
  • Regarding notification to former Medical Marijuana Center, a Medical Marijuana Center must maintain a copy of a written or electronic notification that it provided to a patient’s former primary Medical Marijuana Center advising that the Medical Marijuana Center has been designated as the patient’s new primary Medical Marijuana Center. The questions and answers that were formerly required are no longer necessary.
  • Important language revisions have been made to the 30 Percent Rule, including a new definition of total on-hand inventory, which now means “the total amount of Medical Marijuana that a Medical Center received from its dedicated Optional Premises Cultivation Operation or any other Medical Marijuana Center in the preceding 12 months.” Finished Marijuana located at the Medical Marijuana Center’s dedicated Optional Premises Cultivation Operation shall count as on-hand inventory of the Medical Marijuana Center. Other changes to the rule should be carefully reviewed for compliance.

M 500 Series – Medical Marijuana Optional Premises Cultivation Operation: License Privileges

  • A Medical Marijuana Optional Premises Cultivation Operation is authorized to Transfer by donation Medical Marijuana to a Licensed Research Business pursuant to this Rule provided that it does not receive any compensation for the product.
  • A Medical Marijuana Optional Premises Cultivation Operation must only obtain Medical Marijuana seeds or Immature Plants from its own Medical Marijuana or from another Medical Marijuana Business as long as there is first a documented point-of-sale transaction at that OPC Operation’s designated Medical Marijuana Center or Medical Marijuana-Infused Products Manufacturer.
  • An Optional Premises Cultivation Operation shall not possess more plants than its commonly-owned Medical Marijuana Center is authorized to possess.
  • Loose bulk goods (e.g. granola, cereals, and popcorn), liquids, and powders are considered to be per se impracticable to mark with the Universal Symbol.

M 700 Series –Medical Marijuana Testing Facilities

  • New conditions have been added to outline under what conditions a Medical Marijuana Testing Facility is authorized to accept Samples of Medical Marijuana or Medical Marijuana Infused-Product from an individual person for testing.

M 1900 Series –Licensed Research Businesses

  • This is an entirely new section of the medical code and outlines the rules for Licensed Research Businesses. Highlights include: (1) authorized transfers, (2) prohibited acts of the Research Business, and (3) project authorization and approval. This detailed provision should also be carefully reviewed as applicable.

If you have any questions regarding these rule changes or seek further clarification, please do not hesitate to call our office for further assistance.

Personal Cultivation: the risks, consequences and laws.

There is a great deal of confusion about personal cultivation, medical and recreational, and there is a lot of misinformation out there. Many people believe you can do what you want because it is “constitutional.” Many others believe a “red card” with an expanded plant count allows to you cultivate whatever you are allowed. There are several overlapping state and local rules which impact personal cultivation. I write this in hopes that you and your friends will get the true facts and not the “word on the street.” It is my goal that your personal freedom and exercise of your marijuana rights do not result in any legal problems, criminal or civil. Please feel free to share this with anyone you know who could benefit from this information.

Because of the complex ways these constitutional, state, and local laws interact, I wanted to share this summary for your information so that you are as legal as you hope and believe you are in your personal cultivation. As you will see, there are numerous statutes and policies in place to regulate marijuana within the State of Colorado. However, these regulations can be met with diligent and responsible cultivation practices. There are also numerous criminal and civil risks involved in marijuana use, possession, and cultivation that you should be aware of which are included below. If you have any questions about this research or seek additional information not included below, please do not hesitate to contact our office for an appointment. You can also stay on top of these ever-changing laws by following our blog and newsfeed which contains up to the minute information about marijuana issues:

Colorado State Law

Every discussion about Colorado marijuana law starts with the Colorado Constitution, which affords certain, limited medical and recreational marijuana cultivation rights.

A. Amendment 20:

In 2000, voters of the State of Colorado passed Amendment 20 to the state Constitution which effectively legalized limited amounts of medical marijuana for patients and their primary caregivers. Amendment 20 authorizes a patient who has been issued a Medical Marijuana Registry Identification Card, or that patient’s primary caregiver who has been identified on the patient’s Medical Marijuana Registry Identification Card, to possess “no more marijuana than is medically necessary to address a debilitating medical condition.” Colo. Const. art. XVIII, § 14(4)(a). The law sets a presumptive limit on the quantity of medical marijuana a single patient or caregiver may possess by limiting legal marijuana use to “no more than two (2) ounces of a usable form of marijuana; and no more than six (6) marijuana plants, with three (3) or fewer being mature, flowering plants that are producing a usable form of marijuana.” Id. Think of it like this, every one with a medical card has a chronic, debilitating medical condition and Amendment 20 presumes cultivation of 6 plants and possession of up to 2 ounces is enough for any medical marijuana patient.

Currently, primary caregivers may be listed as a “cultivating or transporting primary caregiver for no more than five patients on the medical marijuana program registry at any given time.” Colo. Rev. Stat. § 25-1.5-106(8). Patients, on the other hand, “shall have only one primary caregiver at any given time” and any patient who has “designated a primary caregiver for himself or herself may not be designated as a primary caregiver for another patient.” Id. Absent exceptional circumstances, a primary caregiver may only provide for the needs of up to 5 patients. For a primary caregiver this means the constitutionally presumptive limit for cultivation is 30 plants (6 plants x 5 patients), and 36 plants if the caregiver is also a patient. From a criminal law perspective, cultivation of 6 plants for a patient or 30 plants for a primary caregiver with 5 patients affords the patient and/or caregiver “exception to criminal law” which is a very strong legal defense.

However, should a Colorado medical marijuana patient or primary caregiver cultivate or possess more than two ounces of a usable form of marijuana or cultivate more than six plants per patient, an affirmative defense for medical necessity may apply. Pursuant to the Colorado Criminal Code, “affirmative defense” means that you can and likely will be prosecuted for felony cultivation if you cultivate more than the presumptive limits (30 plants). I know there are people who have cultivated within their red card exception limits, but do not count on “lightning striking twice in the same place.” Law enforcement has grown both more knowledgeable and aggressive in the last few years toward marijuana cultivation. This is likely in response to the lawsuit from our neighboring states for all the illegal marijuana being daily transported out of state.

Returning to the distinction between affirmative defenses and exception to criminal law. Exception to criminal law essentially means that the criminal law does not apply to your cultivation activities. An affirmative defense assumes you have committed a crime, cultivation of more than the presumptive limits, but have a legally valid excuse. One example of affirmative defense is in the case of murder. If someone breaks into your home with the intent to murder you or your family, you may be inclined to use deadly force against the intruder. If you succeed in killing the intruder, you will likely be arrested and charged with murder. At your murder trial, your attorney would raise an affirmative defense for either: (1) defense of self, (2) defense of others, or both. Colo. Rev. Stat. 18-1-706. Regardless of which affirmative defense you and your attorney choose to raise, presenting this type of defense does not negate the fact that you killed someone, but it may provide an excuse or justification to the jury for why you acted in such a manner.

Applying the affirmative defense analysis to the charge of cultivation, let us assume you are prosecuted for cultivating more than the presumptive limits (30 plants) and within the limits of your red card expanded plant court. The DA will present the case that you cultivated more than 30 plants. You will then be able to raise and prove an affirmative defense that “such amounts were medically necessary.” Under Amendment 20, patients or primary caregivers with more than two ounces of marijuana or six plants may raise an affirmative defense in court if they are charged with violating the state law but can show that the amount they possess is “medically necessary to address the patient’s debilitating medication condition.” Colo. Const. art. XVIII, § 14(2)(a). To raise this affirmative defense, a patient or primary caregiver must show: “(I) The patient was previously diagnosed by a physician as having a debilitating medical condition; (II) The patient was advised by his or her physician, in the context of a bona fide physician-patient relationship, that the patient might benefit from the medical use of marijuana in connection with a debilitating medical condition; and (III) The patient and his or her primary care-giver were collectively in possession of amounts of marijuana only as permitted under this section.” Id.

This medical necessity affirmative defense analysis starts with the doctor’s recommendation, which the doctor will be required to justify from medical treatment perspective. This will likely be difficult since the doctor will not likely recall why the recommendation was made and was likely paid more money for the recommendation, rather than recommending additional plants based on medical considerations. You should be prepared to present other evidence about how sick your patients truly are when compared to other medical patients. The key here is to make sure you only cultivate expanded plant counts for the truly ill, not a person who merely paid the doctor more money for the expanded plant count recommendation. In order to establish the medically necessity affirmative defense, you must first present some credible evidence on that issue, for example the expanded plant count recommendation. Colo. Rev. Stat. 18-1-407(1). The courts have interpreted this “credible evidence” to mean that “a properly raised affirmative defense is treated as though it were another element of [the] offense [at issue].” People v. Garcia, 113 P.3d 775, 784 (Colo. 2005). Once you establish the medical necessity affirmative defense, the DA must take on an additional burden to disprove that the affirmative defense beyond a reasonable doubt.

Under Amendment 64, an adult over 21 is permitted to cultivate 6 plants (3 in flower, 3 in vegetative state) and possess 1 oz. of usable marijuana. There are no provisions to cultivate more than 6 plants or to combine your cultivation efforts with others. This is sometimes referred to as a “collective.” This is not typically a legal arrangement and it is highly likely that the collective is diverting marijuana to the black market. It could theoretically be possible to join with a few friends and share in the costs and expenses of a cultivation room. But, it is very important to make sure that no one sells their personal marijuana to anyone and that each set of 6 plants is clearly marked by person and not strain. Should law enforcement investigate they will presume the grow is black market and prosecute each of the cultivators. Any evidence of sale (money, packaging equipment, scales, etc.) will be used to support the DA in making a case that the grow was black market.

B. Colorado Criminal Consequences:

We need to start with the premise that marijuana cultivation is illegal under Colorado law and Amendments 20 and 64 afford only defenses to criminal prosecution. I understand this statement runs contrary to popular thinking, but the criminal laws are still on the books and still vigorously prosecuted. Remember, law enforcement does not like marijuana legalization and will use every means at its disposal to prosecute personal cultivation since they are powerless to prosecute the marijuana businesses.

There are many criminal consequences you open yourself up to if you operate a greater-than-six-plant marijuana cultivation. For instance: (1) To unlawfully dispense, sell, distribute, or possess with intent to manufacture, dispense, sell, or distribute marijuana or marijuana concentrate, or to attempt to do so, is a level 1 drug felony with a mandatory minimum sentence of eight years in prison and a five thousand dollar fine if the amount of marijuana is more than fifty pounds or the amount of marijuana concentrate is more than twenty-five pounds; (2) Unlawfully cultivating, growing or producing more than 30 medical marijuana plants outside of the protections of Amendment 20 is a level 3 drug felony and carries a prison sentence of up to four years. Colo. Rev. Stat. 18-18-406(2-3). If you find yourself in one of these situations, you should contact a skilled criminal attorney immediately.

C. Recent state laws regarding expanded plant counts:

The first of two laws affecting personal cultivation deals with plant count limits regardless of where the marijuana is cultivated (at home, a warehouse, a farm, etc.). The second law affects residential cultivation. Both laws create limits on Amendment 20 and 64. Many people assert that these two laws are unconstitutional and that they have a right to cultivate whatever a doctor permits or that as recreational cultivators they can combine with others and cultivate 6 plants per person without regard to any cap on the total number of plants. Unfortunately, as discussed above, Amendment 20 and 64 do not afford a general constitutional right to cultivate marijuana. The Courts repeatedly stated that the constitutional rights afforded by Amendment 20 and 64 are only the rights to criminal defenses in the context of criminal cases. That leaves the state and local governments free to limit where, when and how much a person is able to cultivate. There have been no serious legal challenges and the current state of the law upholds these local and state cultivation limitations.

Let us begin with state cultivation limitations. Effective January 1, 2017, a new state law prohibits primary caregivers from “cultivating, transporting, or possessing more than thirty-six plants unless the primary caregiver has one or more patients who, based on medical necessity, have an extended plant count.” Colo. Rev. Stat. 25-1.5-106(8.6). A primary caregiver cultivating more than thirty-six plants must register this information with the state licensing authority’s registry. However, even with the extended plant counts, “a primary caregiver shall not cultivate more than ninety-nine plants.” Id. at (8.6)(II)(B)(b). The ninety-nine-plant limit is strictly enforced, as only medical marijuana businesses licensed and properly authorized by state and local governments may cultivate more than ninety-nine plants. Id. at (8.5)(II)(b).

Next, in an effort to prevent marijuana diversion into the illegal market, Colorado lawmakers passed House Bill 17-1220 which sets a statewide limit of twelve (12) marijuana plants per residential home. The new law, which takes effect January 1, 2018, states, “regardless of whether the plants are for medical or recreational use, it is unlawful for a person to knowingly cultivate, grow, or produce more than twelve marijuana plants on or in a residential property.” In this context, “residential property” means a single structure providing one or more independent living facilities and any land surrounding the structure that is owned in common with the structure. Residential properties may be located in, for instance, agricultural or industrial zones where there is an “independent living facility.”

Though the 12-plant limit is the new statewide maximum, exceptions are permitted for medical marijuana patients and caregivers. Patients and caregivers may grow up to twenty-four (24) plants on a residential property with proper state registration and local approval for additional plants. But local governments must approve the additional plants. Local governments are heading in the exact opposite direction and are further limiting, not expanding, residential cultivation. Be advised that if the local plant total is less than 12 or 24 plants, you must comply with the local limitation. It is not possible here to deal with all of the local regulations and it is important to look into local ordinances in order to stay compliant. The rule may be hidden in zoning rules and charts, business licensing provisions and other areas. If you have any difficulty learning about the local limitations, you should consult with qualified legal counsel to make sure you know what is expected from your local authorities. Be advised that violation of this state law can result in criminal, not just civil, prosecution including felony charges.

Federal Law

No discussion of marijuana law would be complete without a discussion about federal marijuana laws and policies. Even though the State of Colorado has decriminalized marijuana use and possession, marijuana is still illegal under federal law. According to the Controlled Substances Act (CSA), marijuana is a schedule 1 drug, making marijuana possession, distribution and use felonies with a mandatory prison sentence. For example, under the CSA possessing fifty (50) marijuana plants carries a sentence of up to five (5) years in prison. Many, many people believe that as long as you cultivate less than 100 plants it is not federally illegal or that you will not be prosecuted. That is completely untrue. Under the CSA, the federal government can prosecute you for a single joint or even a seed.

Up until this point, the federal government has opted not to enforce federal laws regarding marijuana use and possession for operations functioning under state law. However, this choice is left to the federal executive branch (headed by the President) and may be changed at any time. If the federal government chooses to enforce the CSA, it is possible that all marijuana growers and users would be subject to federal prosecution. Such a change in policy could happen with little or no warning.

If you have any questions about this research or seek additional information not included above, please do not hesitate to contact our office. Again, you can stay on top of the legal issues and any marijuana news through our blog and newsfeed:

Stay legal and stay safe.