Will Higher Sales Limits Raise Colorado's Limp Marijuana Hospitality Scene?

Cannabis business owners and state officials hope that raising sales limits at hospitality lounges and weed bars will help the struggling industry grow, but a handful of stakeholders believe they're missing the bigger picture.

Colorado legalized recreational cannabis in late 2012, but over a decade later there are just five venues and mobile lounges now operating with hospitality licenses across the state. Social consumption licenses for businesses interested in allowing cannabis use weren't created at the state level until 2019, and just two local governments, Denver and Adams County, currently allow and process pot hospitality business applications.

The state Marijuana Enforcement Division added an extra rulemaking meeting to the fall schedule after seeing "a significant interest in public comment" regarding social pot consumption, according to MED executive director Dominique Mendiola, who presided over a public hearing Monday, October 16, to discuss ways to improve Colorado's cannabis hospitality sector.

While many of the suggested changes to hospitality rules center on raising sales limits for cannabis bars, there is only one such business in the state. During the hearing, several people questioned the direction of the new rules and asked the MED to create temporary cannabis event permits or allow current hospitality venues to serve freshly made infused edibles, neither of which are allowed under Colorado's hospitality laws.

"I think it's critical for the industry. I think it's critical for people working in other industries," cannabis events organizer Stephen Woolf said of temporary cannabis event permits. "We're pretty much putting ourselves into a box and allowing all of the industries around us and other states to build up what we have set the foundation for. We had the greatest opportunity to be the mecca of cannabis hospitality, and it is withering to dust in front of us."

Woolf and Denver chef Dave Hadley are currently weighing their lobbying and political options as they try to persuade the state to create new event licenses for cannabis consumption, but MED rulemaking probably won't be the route. During the hearing, Mendiola and several of her colleagues said that according to the Colorado Attorney General's Office, creating such a license would require legislative action, as would allowing freshly made cannabis-infused food to be served.

"That is something we have heard more about and see as specifically a statutory matter, not an area we have rulemaking authority around," Mendiola said, adding that freshly made infused food "is specifically banned in the 2019 social consumption bill."

Throughout the hearing, cannabis entrepreneurs and would-be event holders continued peppering regulators with calls for event permits and new food regulations, but the industry and MED officials both recognize the role of local control and enforcement. In Denver, the majority of cannabis events take place at unlicensed venues; just one lounge and three pot-friendly tour services are now operating under the local hospitality rules. Denver's licensing department has recently cracked down on unlicensed cannabis events, too, arguing that they aren't legal under state and city laws. But several business owners trying to obtain local hospitality licenses have complained about Denver's restrictive ventilation, building plan and location requirements.

State laws currently ban the sale of freshly made food infused with cannabis — all edibles must be tested and pre-packaged before sale — while pot hospitality licensees are also banned from selling liquor.

Although most of the industry members in attendance admitted that sales limits are hardly the largest challenge for cannabis hospitality in Colorado, they don't want the opportunity to pass by. According to the MED, industry proponents were responsible for the issue showing up on its radar, and the department sees the sales amount as part of an "incremental approach" to help businesses succeed.

According to Joshua Davis, owner of Colorado's only operating lounge allowing sales, raising the limit would make a significant difference for his business and other potential venues with micro-sales licenses. His cannabis bar, JAD's Mile High Smoke, is located in unincorporated Adams County, just outside of Denver, while two venues within the City of Denver are actively pursuing hospitality and sales permits, too.

"If we're going to have the two different types of models, we've got to have equality between the two of them," Davis told MED officials at the meeting. "I'm here to tell you [the current limit] is not enough. You're literally asking me to run a race with only one leg while everyone else gets two legs."

Cannabis hospitality businesses currently fall into two tiers in Colorado: lounges operating under a bring-your-own model and establishments allowing sales. That second category is similar to a bar setup, with visitors ages 21 and up allowed to buy up to two grams of cannabis flower, 0.5 grams of hash, or an edible with ten milligrams of THC, with one transaction allowed per patron and all product required to be consumed or thrown away on site before they leave. Venues that don't have sales allow visitors to bring cannabis in amounts up to the state possession limit of two ounces.

There is just one licensed cannabis venue operating under the bring-your-own model: the Coffee Joint, a small lounge in Denver that allows edibles and electronic vaping, but no smoking. Three mobile lounges in Denver operate under the same model.

The MED previously suggested that hospitality businesses with sales permits be allowed to sell up to one ounce of flower, eight grams of concentrates or edibles containing 100 milligrams of THC, amounts similar to Colorado's daily sales limits at recreational dispensaries. The MED's updated suggestions cut the flower and concentrate limits in half but kept the 100-milligram limit for edibles sales. Customers would also be able to start a tab at cannabis bars to allow multiple product purchases before their transactions close and take their leftovers home.

Allowing cannabis vending machines in hospitality venues, previously part of the MED's suggestions, was cut from the updated draft after the department learned such a change would require lawmaker approval.

Former state representative Jonathan Singer, who introduced the 2019 social consumption bill, appeared at the hearing on behalf of the Boulder Chamber of Commerce. Speaking in favor of raising the hospitality sales limit, Singer criticized Colorado's implementation of cannabis hospitality since he left office in 2021.

"There's been a lot of frustration that we haven't seen these licenses actually take hold for what was envisioned. We need to treat it like the drug it is and not the drug some people fear it to be," he said. "Let's take a tighter look at ensuring that we're doing the right thing in the right place, and aligning this with what has already happened in our thriving restaurant and bar industries."

New rules that would create a lane for cannabis-friendly spas were also proposed by the MED. While the current hospitality regulations require video surveillance in consumption areas and cut off infused-product sales at ten milligrams of THC, the department is considering making exceptions to both rules for permitted cannabis spas with licensed massage therapists.

The MED will hold one more rulemaking meeting and is accepting written comments from the public before submitting a final draft of regulations on October 30, with the new rules taking effect on January 8, 2024.