6/20/11 meeting with Dan Hartman/MMED, practical issues

Yesterday I met with the Director of the Medical Marijuana Enforcement Division to answer the numerous questions I receive from the businesses we represent. The issues and the answers are set forth below:

1. Transfer of “banned” businesses to new jurisdictions:

Will there be continued operation of the transferred business based on prior 7/1/10 compliance? Yes, as long as there is local approval. Mr. Hartman recommends that the “banned business” request withdrawal of the application, along with an explanation of the banned/transfer reason. If the application is not withdrawn, it must be denied. Then, once the transfer and local approval are complete, you can request that the withdrawal of the application be rescinded. Once the rescinded application is reinstated, you may resume operation.

Also, if the banned/tranferred business is sold before the transfer is complete, the business will not be able to operate. Mr. Hartman’s reasoning is that this provision is designed to help people who suffered local ban, not speculators who seek to profit from this unfortunate situation.

Further, both the MMC/MIP and OPC must be transferred, not the OPC only.

2. Security system and other ongoing compliance issues:

Are there approved providers? No, and there will not be any. Mr. Hartman states that the specifications are published and must be followed. As long as the specifications are followed, the provider of the service is not relevant. He did state that ADT appears to be ready to supply MMC/MIP/OPC security needs.

What if the system is not in place yet? This will be ok, as long was you have something in place and are under contract by 7/1/11to meet the specifications.

What if the system is not adequate, will there be a chance to correct it? Yes.

Does the security system have to have its own room? No, as long as the DVR(s) is locked in a secure box, bolted into the wall, floor, etc.

3. Point of Sale system:

Are there approved providers? No, but various companies are prepared for compliance, (MJ Freeway is one example). Mr. Hartman advised that “a big chief tablet” is ok, as long as you are tracking the necessary information. What the state requires will be published shortly and I will send out an email link to this information.

4. Employees deemed unacceptable by MMED:

Will there be an opportunity to terminate the employee if deemed unacceptable? Yes.

5. Ongoing construction, permits, etc.:

Does all construction work need to be completed by 7/1/11? No. You must be making a concerted effort to complete the work and permits should be requested by 7/1/11. However, if the local licensing authorities require the work to be completed and deny you for this reason, the state will not interfere and will enforce the denial.

6. License fees:

What are the licensing fees? These are not set, but MMCs will be less than the application fee, OPCs and MIPs will be more (perhaps even double). The license will be good for one year and will begin when the state notifies you that the fee is due and payable.

7. Key employees:

What is a key employee versus support? The answer is “case by case” and the answer will turn on how the employee is used, whether there is any contract with employee in place (key), and the businesses decision to classify someone as an “independent contractor” will have little or no bearing.

Also, payment of growers “by the pound” will be under serious scrutiny. If that is the arrangement, Mr. Hartman advises that this arrangement makes the grower an owner and the business will be required to revise its ownership structure, corporate documents, etc., accordingly. Mr. Hartman advises that you should pay the grower a salary and that bonuses are ok.

8. Business under denial/appeal, i.e., City of Boulder:

What is the state going to do about businesses locally denied (not banned), where an appeal is pending and the local licensing authority permits continued operation? This is a tricky one. The state will honor the continued operation order until such time as the business prevails or appeals to the district court. An order from the district court permitting continued operation will be required. The license will be issued by the state as a “provisional license” and the state will await final outcome of the case.

Further, Mr. Hartman advised that he will be speaking with the City of Boulder to discuss this matter (and others). Stay tuned, as I expect this policy to change (for better or worse) once the situation between the City and the State is further clarified.

9. Transactions of businesses:

Do all of the various sales, mergers and tranfers of MMBs have to be completed by 7/1/11? No. However, be reminded that any transfer requires (1) local approval; (2) state approval, including a meeting with the parties with MMED before the sale/merger/transfer occurs. Simply put, you need MMED’s blessing before the transaction can occur.

10, Sales below cost/free:

Does the “sales below cost or for free” provisions of HB1043 preclude the incentive programs, i.e. “buy one get one, free pre-rolled,” etc.? No, and there will be new rules developed in connection with the industry to help clarify this situation.

However, Mr. Hartman advised that MMED will take a very dim view of businesses “flooding” the market with cheap meds to drive out other businesses. Beware.

11. Independent contractors, i.e., trimmers, growers, etc.

What do independent contractors, vendors, etc., need to file with MMED? Everyone needs some sort of license to handle meds. If you are an employee, the employee application needs to be completed. If you are a vendor, the vendor application:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251721405112&ssbinary=true

If you are an independent contractor, i.e,, trimmer, etc., you need to complete an occupational license application. It is unclear what this means. If you fall into this category, we can schedule a meeting with MMED to discuss your situation.

Again, the relationship between the individual and the MMB will be viewed by its substance, not what you call it. Be careful.

12. Contracts between MMC and MIP:

Is there an approved contract, recommended language or necessary inclusions for the contracts between MMCs and MIPs? No. The contract should deal with the amount paid for the trim, the weights to be delivered, the parties, etc. Also, be advised that the parties cannot pay “in product.”

13. Inventory and MIP sales:

Does the trim, etc., sold to MIPs count against allowable inventory, 70/30? Yes and no. If the MMC sells trim to the MIP, i.e., 10 lbs, and the MIP makes the infused product and provides all of the infused product to the MMC, then no. However, if the 10 lbs. sold to the MIP is then used to make infused products sold to other MMCs, even if 1/2 of the infused product goes back to the selling MMC, then all 10 lbs. counts against the selling MMCs 70/30 inventory numbers. Be aware that this is somewhat different from prior information provided by MMED.

14. MIP issues, misc.:

Does the use of alcohol in infused products require a liquor license required? Not as far as MMED is concerned. However, Mr. Hartman advised that the Liquor board may have a very different view and a big problem with this. I suggest a candid discussion with the liquor board be had before proceeding further with alcohol infused product manufacturing.

Does the liquid weight versus MMJ weight count against an MMC’s allowable inventory? This was not a clear answer. In general, no. However, if the MIP product is clearly labled “2 ounces, 1 gram, etc. MMJ in each product,” Mr. Hartman advises that he would have no choice but to count it against allowable inventory.

What about MIPs in jurisdictions with no MIP approval process, i.e., Fort Collins? If there is no local approval, there will be no state approval. Sorry to all the Fort Collins’ MIPs.

15. Expanded plant and ounce recommendations:

Is a MMC ok to honor the recommendation and incorporate patient center assignments of this variety into its allowable inventory? Yes.

Does the MMC have any duty to investigate the propriety of the recommendation? No. However, Mr. Hartman advises that the expanded plant recommendations will be under great scrutiny by the Department of Health and that doctor recommendations patterns are likely to be tracked. In these cases, the doctors will be required to medically justify the recommendations. Be advised that this is going to be a big deal

If patient designates “self and MMC” can both the patient and MMC grow 6 plants? This answer was not clear. In general, yes, but it appears that this issue has not been considered by MMED and is likely to see revision in the near future.

16. Sales Taxes:

What is the form of monthly reporting to MMED? This will be handled by the sales tax folks, not the MMCs/MIPs. However, monthly, not quarterly payments are required.

17. Other:

Does a scale need to be attached and incorporated into the point of sale system? No.

Can someone own a % of both a MMC and a doctor referral business even if no $ is exchanged between MMC and the doctor referral business? No. Mr. Hartman believes this is not appropriate. I am not sure if his opinion will be legally supported, since the only prohibition is payments from MMCs to doctors/doctor referral businesses.

Can investors receive a % of the profit? Yes, but there are then deemed owners, not investors and must follow all of the MMC/MIP ownership rules (residency, felony rules, and local/state approval of their ownership).

Can existing MMC’s apply for new retail locations in 2011? No. New OPC locations in 2011? No.

How is the MMC going to verify patient center assignment? MMED and the Department of Health are working on this. For now, keep track yourself, including accurate records

What will MMED do about MMCs/MIPs currently in litigation between partners for pending licensees? Mr. Hartman will issue the license provided both parties are license eligible. So, if the litigation is between owners with felonies and owners without felonies, the license will be denied. The same is true for residents and non-residents. Mr. Hartman wants notice of the lawsuit and periodic status reports. He does not want copies of pleadings.

Lifetime drug felony; reiteration: 35 day rule

CRS 12-43.3-307(1) (h) states that a license shall not be issued to a “person who has discharged a sentence in the five years immediately preceeding the application date for a conviction of a felony or a person who at any time has been convicted of a felony pursuant to any state, federal law regarding the possession, distribution, manufacturing, cultivation or use of a controlled substance.” This change added “manufacturing” and “cultivation” to the license prohibiting offenses and did not limit the lifetime prohibition.

However, the state may grant a license to “an employee if the employee has a state felony (not federal) conviction based on possession or use of a controlled substance that would not be a felony if the person were convicted of the offense on the date he or she applied for licensure.” I anticipate this was amended to: (1) ensure that employees were specifically included in the prohibition portions of this section; and (2) to recognize the reclassification of marijuana charges from felonies to misdemeanors. I assume that the reclassification would have to be in the state where the conviction was entered. This means that if the conviction was in Florida and is still a felony in Florida, but not in Colorado, it is still a felony for purposes of licensure.

Finally, I want to take the opportunity to re-clarify the “35 day” rule based on ongoing confusion. Up to this point, the State prohibited selling to new patients who were not in possession of their card (see, MMED’s 9/27/10 Memorandum regarding its position on the 35 day rule, http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251659488306&ssbinary=true).

CRS 12-43.3-402(5) was changed to state that “the employee of the medical marijuana center making the sale shall verify that the purchaser has a valid registration card… or a copy of a current and complete new application for the medical marijuana registry administered by the Department of Public Health and Environment that is documented by a certified mail return receipt withing the preceding 35 days and a valid identification card that matches the name on the registration card.” The “certified mail return receipt” is the green postcard that is signed by the Department mailed to the sender, not the USPS receipt for paying the certified mail postage fee. Also, in such a case, the employee must contact the Department of Public Health and Environment to determine whether the purchaser’s application has been denied. This section does not apply to license renewal applications and these patients must have their card.

New MMJ regulations, HB 1043

Despite partisan bickering regarding other issues facing Colorado, the legislature passed HB 1043 with virtually no opposition (what a change from last summer!). Please understand that HB 1043 amends CRS 12-43.3-101 et seq. (HB 1284) and the two documents should be read together to fully understand MMJ business and caregiving regulations.

In any event, the following is a summary of the new law applicable to MMJ businesses:

1. Pending licensees will be able to continue to operate while local and state licensing authorities are completing the pending application process;
2. There will be no new licenses issued until 7/1/12, i.e., another 1 year moratorium;
3. Businesses issued their licenses will be apply to apply for changes to the license, a new license or license type (i.e., size of center). It is not clear whether this means the licensed businesses can add OPCs or MMCs. I will speak with the state and let everyone know what “change” and “new” mean to MMED;
4. Pending licensees in “banned” municipalities can apply for a new license with a local licensing authority and transfer to the new location. Good news for all those folks who encountered fear, ignorance and local politics! It is unclear how this will actually work and whether the business can continue to operate post-transfer. I will speak with the state and let everyone know;
5. MMCs (not MIPs) can sell up to 6 clones to patients and up to 1/2 of the # of plants that exceed 6, based on a doctor’s recommendation. The definition of clone or “immature plant” is 8″ x 8″ in a 2″ x 2″ container and has nothing to do with rootedness;
6. The 2 year residency requirement only applies to owners and no longer applies to employees;
7. MMCs can sell to patients with an application, ID and recommendation while the state is processing the application (no more 35 day rule), However, the MMC is required to call CDPHE and confirm that the application has not been denied. Also, MMCs cannot sell to a patient with a renewal application, only a new application;
8. MMCs can use an automated dispensing machine. I am not sure why anyone would want to, since patient loyalty and customer service is what will distinguish success from failure;
9. Laboratories must obtain an occupational business license (according to MMED, the same applicant licensee requirements will apply) and CANNOT have any interest in a MMC or MIP;
10. No sales below cost or giving MMJ away unless it is to a patient who has been determined indigent by the State. This means no more “give aways” or “two for one” deals. Spread the word, so that this practice is ceased and everyone is on the same page;
11. An OPC can provide MMJ to more than 1 MMC, as long as the holder of the OPC is a common owner of all of the MMCs. What this really means is that multiple MMC locations, commonly owned, can use one OPC facility;
12. MIP products must be sealed and labeled. It is not yet clear what the label will say or whether the packaging must conceal the product inside;
13. The bill confirms that MIPs can never sell MMJ and are limited to growing up to 500 plants (there is a business need waiver process for more than 500 plants); and
14. No agricultural zoned cultivation. It is unclear whether the “no agricultural zone” issue applies to PCs or patients. I will look into this; and
15. MMCs can trade MMJ in equal amounts, but the MMJ cannot be “re-traded.”

Regarding primary caregivers:

1. The PC must register with the State the location of the cultivation and provide registration information for the PC’s patients;
2. The PC must comply with local regulations, including zoning. For instance, Boulder only permits care/cultivation for 1 patient in a residential zone. This provides the local governments some “teeth” for their widely different primary caregiver rules;
3. PCs may delegate duties to another PC, provided that the original PC maintains an ongoing relationship with the patients.

1st lawsuit against MMED successful

It has been awhile since my last blog. As you may have guessed, I am working hard on MMC/MIP compliance issues, including numerous meetings with the new director of the Medical Marijuana Enforcement Division, Mr. Dan Hartman. Over the last several months working with Mr. Hartman and his predecessor, Mr. Matt Cook, I have developed an insight into how MMED may address each situation. This allows me to understand how MMED is “thinking” and help predict future rules and changes.

In any event, there are times when we must stand up for our rights and challenge the laws as written and as interpreted by MMED. Accordingly, in December, I filed the first lawsuit against MMED based its denial of a client’s MMC business application. The lawsuit was over whether an applicant must file an MMC business application by 8/1/10 or “within 30 days of receiving local approval.” The statute provided for both, alternative, filing deadlines. MMED determined that only the 8/1/10 filing deadline was applicable and issued a cease and desist order. However, “the law is the law” and MMED entered into a settlement which accepted the application filing and my client was permitted to open their business. While not every case will be successful, it is always important to try.

2011 MMJ Update

As most of you know, DOR has drafted various rules regarding regulation of MMJ businesses. Public comment is invited and there is hearing scheduled on 1/27 and 1/28. For those of you who do not have a copy, you can view the document at:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251678551504&ssbinary=true.

Next, further legislation is being proposed for MMJ businesses, caregivers, doctors and patients. The bill, HB 11-1043 is attached in PDF format. A summary of the proposed changes include:

1. Only owners of MMCs and/or MIPs will be subject to the 2 year residency requirement;
2. MIPs that cultivate their own medicine will be limited to 500 plants;
3. Primary Caregivers can work with more than 5 patients upon the granting of a waiver from the Department of Revenue. This class of Primary Caregiver will be licensed (there may be fees…) and would be able to transact with the patients of another Primary Caregiver of the same class (more than 5 patients). This section does not appear to be well thought out and is likely to be substantially revised;
4. Primary Caregivers licensed to serve more than 5 patients will be required to register the cultivation site with the Department of Revenue, disclose the patients they are working for and comply with zoning and building regulations. This appears to be limited to PCs who received a waiver to care for more than 5 patients, but could likely include all Primary Caregivers. This could result in elimination of home-based cultivation;
5. MMCs will be permitted to sell MMJ below cost or give MMJ to indigent patients. It is unclear whether this will impact the 2 oz. per patient inventory limits;
6. MMCs will be permitted to sell clones. According to the recent Dept. of Revenue rules (see above) clones are treated as plants and subject to inventory limits (6 plants per primary center assignment) and cannot be sold to patients;
7. MMCs will be able to “trade” medicine in equal amounts with another MMC, but not “re-traded.” It is unclear whether this will be included in the 30% allowable sales;
8. The prohibition for owners with a felony drug conviction in their lifetime will be reduced to a conviction within 5 years of the completion of the sentence;
9. The location of the Optional Cultivation Premises will no longer be confidential;
10. Multiple MIPs will be permitted to operate from a single facility by obtaining a “manufacturing facility license.” It is unclear how this will be enforced, fees, etc.;
11. Patients will be permitted to purchase medicine while their application is being processed (no more 35 day waiting period);
12. Labeling of medicine is going to be addressed; and
13. Doctor’s with “conditional” licenses will be permitted to request that they be able to recommend MMJ.

Finally, I trust that all of you are prospering in the New Year and that you are currently in compliance with the rules governing your business. Be reminded that compliance will be measured from 7/1/10 and you should not expect any leniency if you are not compliant at all times.

MMJ Division/Matt Cook update

I have been corresponding with Mr. Cook on various legal issues that continue to arise. I wanted to share with you his responses.

1. Is the sale of the 30% inventory from MMC to MMC retail or wholesale? A: Wholesale and that normal business records must be kept. I suggest that you verify both local approval and timely filing of the state application with any MMC you deal with. Make a copy of any licensing if possible.

2. Can MMCs sell to caregivers on behalf of the caregiver’s patients? A: No, unless the patient is homebound AND has a waiver from CDPHE.

3. If you failed to meet the 9/1 certification deadline, can you continue to operate? A: No. However, if you met the 7/1 local approval/pending local approval deadline and filed the state application by 8/1, you are still considered “established” and do not forfeit your application fees. Nonetheless, you must cease operation until the state rules on your application.

4. Will there be a license fee(s) in addition to the application fee(s)? A: Yes. The license fees will be set in the spring. Start saving your money (what little you have) now!

5. Does the 2 year residency requirement also apply to employees and managers? A: Yes. As you know, I do not necessarily agree with this, but that is the state’s interpretation until a district court judge rules otherwise. You should also assume the felon criminal conviction rules for owners applies equally to employees and managers.

6. Can municipalities impose a different standard for who is permitted to own a MMJ business? A: No, it is the state who decides this issue. For instance, Fort Collins enacted an ordinance prohibiting someone from owning a MMC/MIP if the have a felony within 10 years of the completion of the sentence (the state limits this to 5 years).

7. Can municipalites use a different standard of measurement for the distance between MMCs, schools, day cares, etc.? A: No, the “pedestrian access” standard set from in CRS 12-43.3-308(d)(II) will be applied.

7/1/10 or 7/1/11? Which is it?

Confusion continues to guide the MMJ industry. Many of you have attended presentations by Mr. Matt Cook, the head of the state’s MMJ business regulation division. At these presentations, Mr. Cook repeatedly states that the bill goes into effect on 7/1/11 and that local regulations apply until then. I have spoken with many MMJ business people who take this information as the gospel truth and intend to continue with their businesses in their current form until 7/1/11. Many such businesses are “grow only” or “retail only” operations that have been locally approved (or not). Many are owned by people who have not resided in the state for two years, have a felony drug conviction or a felony conviction less than five years old or all three. In my discussions and correspondence with Mr. Cook (see prior blogs), it appears that continued operation of a MMJ business without strict compliance with HB1284 until 7/1/11 could be a serious problem.

Let’s examine the idea that you have until 7/1/11 to comply with HB1284. If the bill does not take effect until 7/1/11, is there any requirement to apply to the state by 8/1/10? Can you refuse to pay the $7500-$18,000 application fee until July 2011? When you list your optional grow premises, can you tell the state that you plan to get around to it before July 2011? When you list a drug felon or out-of-state resident as an owner or employee on your application, will you be able to address this issue sometime before 7/1/11. Finally, when you certify, under penalty of perjury, on 9/1/10 that you are growing 70% of your own MMJ, can you tell the state that you are planning on doing this, but currently are buying all of the MMJ from various growers?

The point of this exercise is to point out that compliance with HB1284 appears to be immediate. If it were otherwise, none of the provision of HB1284 would apply, including the 8/1/10 application, the license/application fee, the 9/1/10 certification, etc.

Based on the information we received from Mr. Cook and our reading of HB1284, we suggest immediate compliance with HB1284. If you follow this advice, the worst that can happen is that you ran an HB1284 compliant business for one year longer than necessary. However, if you defer your compliance until July1, 2011, you may find that your application is denied or, worse, that you may face criminal prosecution for operating a business without the benefit of HB1284 protection. In our view, it is better to be safe than sorry.

Post 7/1/10, the hangover from Black Thursday

Well, it was one hell of a tough road getting from the enactment of HB1284 through “Black Thursday.” All of you who hustled to get their businesses in order are amazing, resourceful, ingenious people and I am proud to represent you.

Now that it is 7/2, I want to make clear the following points:

1. You must be growing and selling only your own MMJ. The 9/1/10 certification does not act as an extension of the deadline for this requirement. Late last night I received clarification from Mr. Matt Cook that the effective date for growing and selling your own MMJ is 7/1/10. Do not jeopardize your hard work by purchasing MMJ from any one other than another established MMC, which has local approval for both its grow and retail operations. Don’t take any one’s word for their own legality – do your own due diligence.
2. Do not continue employing any people with drug felonies, concerning criminal histories (lots of misdemeanors, less-than felony drug convictions, etc.), people with a felony within five years of completing the sentence or anyone who has not been a Colorado resident for two years prior to 7/1/10 (see, prior blogs).
3. Do not operate your business at all unless you are locally approved and/or have applied for local approval for both the grow and retail aspects of your business. If you are a MIP, you can only continue operating if you have local approval/applied for local approval. If your MIP does not grow its own MMJ or you do not have local approval/applied for local approval for growing your own MMJ, you must have a written contract for purchase of MMJ with an established MMC. Please note that the MMC must be locally approved/applied for local approval for both the grow and retail aspects of its business in order to be able to sell 30% of its MMJ to your business. You may contract with up to 5 such businesses.
4. After 7/1/10, the MMC can only possess 2 ounces and grow 6 plants for the number of patients who have assigned the MMC as their “primary center.” As stated in previous blogs, you must convert all patients who have assigned any of the persons associated with your business to be their primary caregiver over to the MMC as their primary center. Use the state’s Change of Primary Caregiver form (there is not MMC primary center assignment form yet available) and make sure to properly complete, notarize and mail to the Department of Health and Department of Revenue, attn. Mr. Matt Cook, certified mail/return receipt requested. Remember – if you have zero patients who have assigned the MMC as their primary center, you may possess zero ounces of MMJ and may cultivate zero plants.
5. You should download the newly minted Dept. of Health patient application for use in acquiring new patients or use the Change of Primary Caregiver forms to assign current patients at the time of sale of MMJ from your MMC. You do not need to continue using any “temporary caregiver” forms (which were never legal anyway, see prior blogs). The forms may be downloaded from: http://www.cdphe.state.co.us/hs/medicalmarijuana/forms.html.
6. Begin preparing for the 8/1/10 Department of Revenue MMC/MIP application and save a substantial amount of money for the as-yet undisclosed application and license fees.
7. Please keep careful and accurate records regarding both your cultivation and sale of MMJ. Remember, the state’s microscope for your business will be applied beginning on 7/1/10!
8. For all of the primary caregivers – you must only have five patients, must provide other caregiving services (see prior blogs) and charge only the cost of producing the MMJ. You must notify the Department of Revenue who the five patients are that you intend to continue as their primary caregiver and give notice that you are no longer willing to act as the primary caregiver for the remaining patients. List all of the patients accordingly. Send the letter certified mail, return receipt requested.

Stay legal and stay safe. Please contact us with any questions

The course of MMJ business over the last year

Over the last year, we have seen an explosion in the MMJ business. At first, it was a few brave souls who simply undertook to provide medicine to a few patients without regard to profit or large scale operations. However, once the Obama adminstration announced that MMJ would not be a federal law enforcement priority, a great many people began exploring the MMJ business. Unfortunately, most of the entrepeneurs were advised, not by my office, that the MMJ business was a “grey area” and that you could do virtually anything you want as long as the MMJ is sold to patients. This was not the case and there was little or no legal protection for these businesses. As a result, the primary business model was acquiring a few patients to justify a commercial grow operation primarily in residences or in places unknown to local governments. The MMJ was then sold wholesale to dispensaries. Selective prosecution by law enforcement gave these growers and dispensaries a feeling of relative safety in their MMJ business activities.

Quickly, the MMJ business was booming and Westword magazine capitalized by permitting large scale advertising of this fledling industry. A few business were blatant in catering to “recreational patients” and adopted names like “Dr. Reefer.” The Denver Post then got into the act by taking an active role in criticizing the MMJ industry, including by referring to dispensaries as “pot shops” and publishing photographs of young people smoking marijuana. This created a public perception of MMJ as a front for recreational drug use. The legislature quickly responded with threats to eliminate the MMJ industry with the help of law enforcement.

In the following months, many attempts to create regulations for the MMJ industry were attempted and a rash of local moratoriums on MMJ businesses were enacted. A long and arduous process soon followed. From the outset, the legislature made clear that responsible and tightly regulated businesses would be the only survivors.

In the spring, various drafts of the proposed regulations were completed and it was clear that commercial growing and wholesale sales of MMJ would be prohibited. However, the growers were advised, again not by my office, that the regulations would not pass and that business as usual would be fine. This was not the case.

In May, HB1284 was completed and required a single business, the Medical Marijuana Center, was created. The MMC was required to grow and sell all of its own medicine and the commercial grower was legally eliminated. This wreaked havoc in the MMJ business community, as the grower businesses far out numbered the retail businesses. Felons and out of state residents were also eliminated creating further havoc in the industry.

Now comes “black thursday,” July 1, which is the effective date of HB1284. All businesses must be locally approved for both the grow and retail aspects of the MMC in order to continue operating after July 1. “Shotgun weddings” of growers and dispensaries are occurring in a matter of days or hours as people struggle to comply with the July 1 deadline. In many cases, these business marriages are doomed to fail. I predict law enforcement will ramp up its efforts to squash out non-compliant businesses and less than half of the existing MMJ businesses will survive. The final chapter of this story will be written over the next several months. Let us hope that the patients are not the ones who suffer along with the fate of the businesses that support them.

7/1/10 “Black Thursday”

Try as I might, I cannot possibly get to all of you before Thursday (I have tried!). Accordingly, I am writing this blog in an effort to address various issues that appear common to most MMJ business people.

1. 7/1/10 is the effective date for all MMJ businesses going forward. I understand that Mr. Matt Cook has told some of you that you have until 7/1/11 to comply. This is not the case. I have spoken with Mr. Cook and corresponded with him on several occassions. In his correspondence he makes clear that your MMC and/or MIP application will be evaluated using the 7/1/10 date. For those of you seeking to add a retail or add a grow after 7/1/10, Mr. Cook advises that both aspects of the MMC must be locally approved on or before 7/1/10.
2. There is no one year state moratorium. However, there is a defacto moratorium in that you cannot operate after 7/1/10 unless you were “established”/locally approved for both the grow and retail location(s) before 7/1/10. Otherwise, you cannot operate until both local and state approval are obtained.
3. Hash is going to be considered an “infused product.” The distinction provided by Mr. Cook is that green stuff in a bag is for MMCs, everything else is for MIPs.
4. There can be no deliveries except in the narrow circumstances provided in HB1284.
5. One grow can supply a MMC with multiple locations and common ownership.
6. One grow cannot supply MMJ to mulitiple MMCs not wholly and commonly owned by the same people. NO INDEPENDENT CONTRACTOR GROWS NO MATTER WHAT ANYONE IS TELLING YOU!!!
7. The residency, “no felony w/i five years of completion of sentence” and “no felony drug convictions ever” standards apply for owners, employees and managers of the MMC. The criminal background issues apply equally to investors.
8. The 70/30 rule applies on 7/1/10 and the certification is due 9/1/10. Again, in evaluating your application and 70/30 certification, the state will look back to 7/1/10.
9. MIPs must be locally approved by 7/1/10 to be considered established under HB1284 even if there is no such licensing procedure locally available.
10. The MIP may, but is not required to, grow its own MMJ using a locally approved OPC or may contract, in writing, with up to 5 MMCs to purchase the MMJ for use in making the products. The MIP MMJ cannot be resold to any other business or person, but the MIP can sell its products to any MMC.

I know how hard it is out there. Better to be on the sideline and do it right, then be further down the road doing it wrong. Remember, doing it wrong can result in delay, denial, permanent bar from future MMJ business or removal of any protection from criminal prosecution.

Stay legal, stay safe.