Colorado's marijuana industry could open its doors much wider to corporations and underrepresented demographics in ownership if two legislative measures pass this year.
A bill that would allow publicly traded companies to own Colorado marijuana business licenses and lessen investment restrictions passed its first committee hearing in the state legislature Monday, March 4, while State Representative Leslie Herod is expected to push another bill later this year addressing social equity in the pot industry.
Publicly traded companies are currently banned from holding a Colorado marijuana business license, and out-of-state pot business owners are limited to fifteen people per business. Sponsored by state representatives Matt Gray and Kevin Van Winkle, House Bill 1090 was originally intended to reflect a similar bill from last year that would've allowed publicly traded companies to own marijuana business licenses. Although last year's measure passed the legislature, it was eventually vetoed by previous governor John Hickenlooper, who called the move premature and cited the plant's Schedule I federal status.
But Governor Jared Polis hasn't just been supportive of the effort; according to Gray and Van Winkle, Polis and his staff actually suggested expanding the bill to allow even more investment opportunities in Colorado's pot sector. And that's just what they've done in the seven weeks since introducing the bill January 14.
"Last year, the previous bill met an interesting fate with the governor we had at time. ... This year, we had the governor himself come to us and say, 'I like what you're doing, but let's do a little bit more,'" Gray told his colleagues before HB 1090 went up for a vote in the House Finance Committee. "We've expanded access to these companies beyond simply authorizing these companies to be a publicly trade company, but also to access private equity as well."
Supporters of the measure have pointed to states like California and Florida, as well to Canada (where marijuana is federally legal), which allow publicly traded marijuana companies. According to Marijuana Industry Group director Kristi Kelly, Colorado is behind the curve in this regard.
"These [Colorado companies], they're being valued at a sixth of what their counterparts in other states are being evaluated at," she told the committee. "Our members do not see this as an issue of big business versus small business. All capital in Colorado is coming at a higher cost to these businesses, if it comes at all."
But opposition to the bill includes some marijuana companies. Terrapin Care Station representatives have argued that the bill would further violate federal law. And Jason Dunn, the U.S. Attorney for the District of Colorado, recently told Colorado Public Radio he was worried that the bill would allow for more illegal activity by opening up financing opportunities for a federally prohibited industry.
In response, the bill's sponsors and several marijuana industry operators assured the House Finance Committee that opening the state's pot industry up to publicly traded companies, passive investors and more private equity opportunities would not create an easier road for illegal activity.
"If you're a little nervous about this idea about bringing public investment in, don't feel uneasy, because we're not the first legislature to do this," Van Winkle said, adding that the state's limited-gambling industry has gone through similar obstacles and allows publicly traded companies. "We're looking at highly vetted, safe, clean capital investment to come into the state of Colorado."
HB 1090 passed through the committee unanimously. The bill will move to the House Appropriations Committee, although a hearing date hasn't been scheduled.
Future Social Equity Efforts
An amendment approved before the committee vote added a stipulation that publicly traded companies in Colorado's marijuana industry should create an "increased need to asses barriers of entry for minority- and woman-owned businesses" as well as a stipulation that publicly traded companies in Colorado's marijuana industry must address social-justice issues related to prohibition. The amendment says some of the issues will be addressed by allowing more ex-convicts to apply for business licenses and cutting licensing fees and other economic challenges faced by marijuana business applicants without significant financial backing.
However, the amendment is non-binding and was introduced to put industry stakeholders and lawmakers on notice. "There is no new rule that comes out of it, but it is an acknowledgment for everyone who is involved in this process that we need to improve," Gray says.
Although the amendment isn't mandatory, an upcoming bill from Herod is expected to address a number of social equity issues, such as industry startup fees and pot license distribution processes. During the hearing on HB 1090, Herod, who chairs the House Finance Committee, asked representatives from LivWell, Native Roots and the Green Solution — the three largest dispensary chains in the state — if they would voluntarily comply with her diversity objective. All of them said they would.
"I wanted to ensure that those leading the industry would make a commitment to equity in the industry, on the record, and I thought they did that," Herod explains. "This industry is very expensive to get into right now. If you don't have a million dollars, then you can't open a dispensary. There are a few measures that I am considering right now to address this."
Herod says she's looked at marijuana equity policies from other states with commercial pot, such as California. Her bill could try to create a system of micro-licenses that allow marijuana entrepreneurs to create products or services for larger, established pot companies; she's also considering different financing models for local and state regulatory fees, though she hasn't consulted the state Marijuana Enforcement Division yet.
With more towns and counties currently banning marijuana businesses than allowing them, pot entrepreneurs have limited opportunities to launch in Colorado. Herod hopes more towns will come online to give marijuana startups a shot outside of Denver, where competition is thick.
"That could give the opportunity to go into a newer market, as opposed to doing something like in Denver, where it's pretty expensive to get into the industry," she adds. "I would love to see someone with a micro-license do that, work with well-known companies and then eventually launch their own business."
Herod's social-equity bill will be introduced later this year, she says.