Lawmakers Approve Big Changes to Marijuana Industry Rules

Marijuana dispensaries could start resembling convenience stores now that lawmakers have passed a bill that would significantly change industry regulations.

State legislators only considered a few bills related to cannabis this year, but the one they passed, Senate Bill 24-076, would have wide-ranging effects. Dispensaries would be allowed to sell non-infused items for consumption, such as snacks, soft drinks and candy (but not tobacco), as long as they don't exceed 20 percent of the store's overall sales. The bill would also open up Colorado marijuana growers to more plant-breeding opportunities and streamline a handful of licensing and production processes.

"This is a great example of the state finally regulating marijuana like alcohol," says Marijuana Industry Group executive director Truman Bradley. "The ability to sell food and drink in a dispensary is something that customers have been asking for since dispensaries became legal. Nothing in this bill is going to wildly change the fortunes of the cannabis industry, but these are small and important steps toward right-sizing bloated regulations."

Governor Jared Polis hasn't yet signed the bill, but he's expected to.

A late amendment to the measure tightens the state definition of a social marijuana licensee in qualification areas connected to income and past arrests. The original bill was also stripped of several parts that would have further loosened commercial marijuana activity, including rules around testing for aspergillus, a specific kind of mold, and reduced testing allowances for growers.

"The bill has changed dramatically from when it was introduced to what passed. Part of that is just the political process," Bradley says.

Bradley's organization, one of the state's largest marijuana trade groups, was a driving factor behind the bill. Although he wishes more of its original language remained, Bradley believes the positive outcome will still help Colorado's struggling marijuana industry, and that SB 76 lays the groundwork "for much bigger changes that are absolutely critical."

Other language in the bill would allow marijuana growers to sell seeds, clones and genetic material with less than 0.3 percent THC to "authorized' consumers in and outside of Colorado. The practice was acknowledged as federally legal in a 2022 memo from the Drug Enforcement Administration, which considers immature cannabis plants as industrial hemp, but is still illegal for licensed growers in Colorado, where all new genetic marijuana material must be entered into a tracking system and cannot technically come from other states.

"Prior to this bill, people who were in the industry couldn't buy and sell clones, but those who weren't licensed or in the industry could," Bradley points out. "This dramatically opens up the ability to bring seeds and clones into the regulated market, and that's important, because there are new strains coming out all the time that have medical benefit and are also popular on the recreational side."

What makes a purchaser of genetic material "authorized" and other aspects of the bill would be ironed out in rulemaking hearings this summer by the state Marijuana Enforcement Division.

The bill also streamlines licensing for owners of multiple marijuana businesses, changes license renewal from an annual requirement to once every two years and, starting in 2027, allows the MED to track marijuana production without individual tags for each plant, a rule that has engendered many complaints from business owners regarding what they view as unnecessary expense and waste.

Once signed, the bill would remove a labeling requirement for marijuana that failed contaminant testing at one point but passed after remediation. According to Bradley, MIG was pushing for language that would have forced the state Department of Public Health and Environment to create a scientific basis for each type of marijuana contaminant test, but that was taken out of the bill during the amendment phase.

The measure would also nix a state ban on marijuana businesses from applying for tax credits in state-designated enterprise zones, an initiative brought up by Polis earlier this year.

Social equity advocates were able to push through their amendment on May 7, just one day before the 2024 legislative session ended. Currently, a marijuana business owner can qualify for a social equity license — and the reduced application fees, potential grants and licensing priority that come with it — if they have a past arrest for marijuana, but a conviction isn't required; having an immediate family member with a marijuana arrest would also qualify. Soon convictions will be required for primary applicants, and the sibling qualification has additional criteria, as well.

Low income is also a potential qualifier for a social equity designation in Colorado, but the bill will add additional measures, such as proof of participation in government programs for low-income individuals.

According to cannabis and social equity lobbyist Samantha Walsh, additional changes to social equity qualifications could be made during MED rulemaking.

"You actually have to have participated in low-income programs, so you can't get in through taxes. ... It's too easy for people to manipulate their income. Some [business owners] can choose to take no income but get paid through investments," Walsh says. "An arrest with no conviction was another way. More privileged people are able to evade conviction in a system because they have access to greater legal resources. That's not something you see predominantly with poor people or people of color.

Under the bill, owning three or more marijuana business licenses would disqualify applicants from the social equity program. Walsh says this language was included to prevent established business owners from taking advantage of social equity program resources, which are intended to help entrepreneurs from communities impacted by the drug war.

According to Bradley, MIG didn't take an official position on the amendment. Overall, he's pleased that marijuana businesses have more opportunities to make money, but says that he and his fellow industry members still have a lot of policy and regulations to dissect.

"Newer states coming online have made a much larger departure from the Colorado model than the states that legalized immediately after us," he adds. "There's still a lot of work to be done."