Colorado's billion-dollar marijuana industry is about to welcome some deeper pockets into the game, but first it needs to create rules to play by.
With just over five months to go until a new law expands marijuana business investment opportunities to publicly traded companies, venture capitalists and private equity firms, the Marijuana Enforcement Division has called upon dozens of marijuana industry regulators, attorneys, business owners and other stakeholders to help figure out how these new investors and owners will be able to operate in this state.
House Bill 1090 was signed by Governor Jared Polis in May, and officially becomes a law in November. However, some pot-industry players are ready to encourage public funding and acquisitions now, according to the MED, which is reminding those hungry potrepreneurs to hold on for a few more months.
"HB19-1090 represents a new framework for ownership, investment, disclosure, and background vetting of licensed marijuana businesses. However, passage of HB19-1090 was only the first of many steps necessary to implement this new framework," MED director James Burack wrote in a June 21 letter to marijuana business owners. "In addition to approval by the legislature and Governor, there are numerous additional steps necessary to fully implement the changes in HB19-1090. Such steps include emergency and permanent rulemaking and updates to the Division’s processes, programming, forms, budget, and staff."
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Currently, publicly traded companies and most passive outside investors are banned from owning Colorado marijuana companies. Since many people active in Colorado's pot industry thought this put them at a disadvantage to other states that allow public funding (not to mention Canada, where commercial marijuana is legal), they pushed for the law to open up investment opportunities. Not all of this state's pot players were on board with the change, though; smaller operations and social-equity activists were concerned about the potential for consolidation once larger investors were allowed in the state.
Now companies are already champing at the bit to make moves under the new rules. Colorado-based Medicine Man Technologies has already announced three pending acquisitions once the law takes effect, including a medical marijuana cultivation in Colombia and North America's largest outdoor marijuana farm, Los Sueños Farms in Pueblo. According to Medicine Man Technologies CEO Andy Williams, there will soon be many more deals among large marijuana businesses in Colorado.
Williams, who sits on the MED's 22-person rulemaking group for HB 1090, advocated for rules allowing faster mergers between marijuana companies at a recent meeting. "Colorado has a chance at being a capital in this industry again," he said. "We need to speed up. We have to have a faster market for this industry."
Although his company is in binding agreements to purchase several marijuana companies, Williams estimates that it could take up to seven months to finish the purchases because of the necessary filings with the state Department of Revenue. "This is not about trying to impose more requirements on this industry," he added.
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Another issue discussed during the MED's first rulemaking hearing was industry access, and how to keep the barriers to entry from increasing as bigger money backs commercial marijuana. With applications and audits potentially costing thousands of dollars and taking months to finish, LivWell Enlightened Health legal strategist Dean Heizer told fellow committee members that he was worried that diversity could suffer, and pushed for initiatives to help potential business owners raise funding.
"We need to find ways to make it easier to raise capital and easier to get in this business," Heizer said.
A new micro-marijuana business license would allow people from low-income areas of Colorado to use the facilities of established pot companies as they research and create their own marijuana companies, which they would completely own. Like HB 1090, the details of micro business licenses still must be ironed out in MED rulemaking.
Additional meetings to discuss HB 1090, as well as rulemaking hearings to implement legislation allowing marijuana social use, delivery and other new developments, will take place throughout the summer and fall.