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.

Definitions

  • 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: www.marijuanalawscolorado.com.

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: www.marijuanalawscolorado.com.

Stay legal and stay safe.

Out of State Ownership 101 for 2017

As you may know, the Colorado legislature approved out of state ownership participation for medical and recreational marijuana business starting in 2017. This sea change was precipitated by the lack of banking and other proper lending. Under the new rules, out of state investors can now receive profit in exchange for investment. The basic parameters are:

• US Citizenship is required for each and every owner;
• At least one of the owners must be a one-year Colorado resident and if even one of the owners is out of state, the ownership group is limited to 15;
• Intellectual property profit based licensing agreements, employee profit sharing and institutional investors are classified as Indirect Beneficial Owners. However, with regard to intellectual property licensing, the fee must be “commercially reasonable.” It is not clear what “commercially reasonable” means, but a conservative approach is advised until MED establishes benchmarks;
• A Qualified Passive Investor is a person who is both passive with respect to the operation of the business and owners less than 5% of the business; and
• All owners, in or out of state, must first be approved by MED. The criteria for approval is not yet clear, but you should expect similar criteria for current ownership including regarding felony convictions and good moral character. Since MED approves people using criminal background checks, this out of state ownership does not contemplate large corporate ownership or ownership by publically traded companies.

The application process begins 1/1/17 and the application is not yet available. It will require a meeting which meetings are currently being scheduled approximately 12 weeks out. Approval will occur within 90 days after the meeting.

I counsel that any agreements for out of state ownership continue to include MED and local approval as contingencies for becoming effective. We have no idea what MED will approve or deny at this point.

Out of state investment in the Colorado marijuana business.

The State of Colorado has introduced a bill regarding marijuana ownership rules. SB 16-040 has passed the Colorado House and Senate and is now awaiting signature by the Governor. These changes would impact any new applications occurring on or after January 1, 2017. The changes apply to both medical and retail licenses.
These changes are generally beneficial to marijuana business owners, since they would allow marijuana businesses to obtain more funding from out of state lending sources. The bill creates three types of funding relationships: direct beneficial interest owner, indirect beneficial interest owner, and qualified limited passive investor.

Direct Beneficial Owner:
A direct beneficial interest owner is a person who owns part of the business. This could include members, managers, officers, and directors. Businesses can have as many direct beneficial interest owners as needed as long as the individual has been a resident of Colorado for at least one year. Non-residents can be direct beneficial interest owners as well, but need to receive a finding of suitability from the MED. Such investors include institutions like banks and insurance companies.

Indirect Beneficial Owner:
Indirect beneficial interest owners are permitted economic interests, and would include situations like intellectual property royalties, employee profit sharing, or institutional investors. Businesses may take advantage of qualified limited institutional investors, but those investors may own only 30% or less of the marijuana business. The bill does not specifically provide for the residency requirements of indirect beneficial owners, but it is likely that the MED will use a standard similar or less rigid than that for direct beneficial owners.

Qualified Limited Passive Investor:
Qualified limited passive investors are passive investors with less than 5% share in the business. The state licensing authority will run a limited background check on these individuals, and may conduct a more thorough investigation if needed. The MED will create regulations regarding these individuals, and the specific qualifications are not included in the bill. The intent is for these to be the most minor form of investor, presumably requiring the least review and lowest requirements. These investors must be United States citizens, but do not need to have any Colorado residency.
These three categories will allow new businesses to receive startup funds from out of state investors and be generally more permissive of different ownership structures. The hope is that this will benefit Colorado businesses and reduce the amount of illegal out of state money introduced.

Conclusion:
The opportunity for out of state investment is beginning to open up. Since this is new, it is likely that the MED will struggle with defining the above categories and the approval process. As always, proceed with great caution and a conservative approach to such investment.

Be sure to read the full proposed changes here:
http://www.leg.state.co.us/Clics/clics2016a/csl.nsf/fsbillcont3/53F678C55E0B703987257F2400644D67?Open&file=040_enr.pdf

Marijuana DUI, do’s and dont’s

During the holidays DUI enforcement increases dramatically. Unfortunately, this large net will inevitably capture cannabis users who were not driving while impaired. As most of you know, in a last minute political compromise, the Colorado legislature passed a marijuana DUI law that creates an inference that a person with 5 ng. of THC in their blood is DUI. Such levels are common, even considered low, for regular cannabis users.

Moreover, the 5 ng. threshold is dubious science at best and, in many scientific circles completely wrong. These cases are defensible on many levels including attacking the science of a 5 ng. threshold and also whether cannabis even impairs driving at all.

However, an ounce of prevention is worth the expense of mounting a defense. Here are some tips to help you or your friends who use cannabis:

1. Do not travel with cannabis in the car. The smell of cannabis is the most likely cause of the police officer’s suspicion;
2. If you do travel with cannabis in the car, place it in a scent proof container (glass or other such container) in the trunk. It is illegal to have cannabis in an open container in the car and the police have a right to search your car if arrested;
3. Do not smoke in the car;
4. Do not consent to a search of the car;
5. Do not admit to consuming cannabis. If the officer presses you, tell him or her,“I have friends that are attorneys and they have told me not to answer these types of questions.” Do not lie. Simply repeat this phrase. Most juries will hold the lie against you, but may also have heard you should not answer these types of questions;
6. Do not do roadside tests. They are voluntary and you will not lose your license if you refuse. This includes the “following the pen with your eyes test.” The police will not be fair in evaluating your performance and it will be used against you; and
7. You do not have to do the blood test. However, if you refuse the DMV will take action against you for refusing. This action includes two months of no driving (not for work, the doctor or any other reason). You will get your license back after two months, but you must have an ignition interlock on your vehicle for two years. It only tests for alcohol, but it is expensive and a real pain in the rear. Additionally, you will need SR-22 insurance for one year and you will have to complete 12 alcohol and drug classes. Finally, please be advised that if you refuse the blood test the fact that you refused CAN be used against you at trial.

Finally, there is one important and creative way to protect yourself if you regularly use cannabis. Go to your primary care doctor and request a blood test that includes testing for THC. Then take the results back to your doctor and ask him or her if they believed you to be impaired when you made the request. Let the doctor know you just came from work or some other task in which you were fully functional. See if the doctor will confirm, in writing, that despite your positive result for THC you were not impaired in their medical opinion. This will provide you with a baseline for your normal THC level and that you were not impaired at that level. Then, if you take a blood test in the context of a DUI charge, you will have a baseline upon which to defend yourself. Perhaps you could ask a co-worker or friend to confirm that you were not impaired in the time just before or after the blood test.

« Previous PageNext Page »