CRUMBLING BARRIERS

While medical cannabis was legal in Colorado prior to 2009, it was in that year that cannabis businesses took off in the state. Colorado has achieved national recognition by the huge profits it has made from legal cannabis industries and by the extraordinary efforts that Colorado government has put into grooming the industry to be the national leader for mainstreaming cannabis. While other states may permit both legal medical and retail cannabis, none have achieved the level of integration that Colorado has to date.

It is noteworthy to see the passage of House Bill 16-040 which allows ownership by out-of-state citizens of Colorado cannabis businesses. A mainstay of Colorado cannabis law has been that an owner of a medical or retail cannabis business license must have been a Colorado resident for at least two years prior to applying for a cannabis business license. Section 12-43.3-104 has been amended to simply say that in order to be an owner you must either be a one-year resident of Colorado or a United States citizen on the date of the application submitted on or after January 1, 2017. The new law also says that the owner cannot be a “publically traded company.” The law also requires the controlling interest in the company be held by Colorado residents.

According to Section 12-43.3-307.5 the law was changed in part to help the cannabis industry get funding for expansion and growth. The legislature has determined that this funding can now flow from investors who live outside of the state of Colorado. Previously there have been investments in the industry by people from out of state. This law though sets statutory guidelines and requirements governing ownership by these investors. Remember cannabis is still a fledging industry finding its way and looking for answers for its growing pains.

“Cannabis commerce is like any other industry, expanding Colorado cannabis business is a step in the right direction.”

The Colorado legislature has designated new names such as “Direct Beneficial Interest Owner” which is a “person” or “closely held business entity” that can own a share of a cannabis business. An “Indirect Beneficial Interest Owner” means a holder of an allowable interest in a cannabis business (such as an employee who can benefit from the profits of a company under an employee benefit plan). A “Qualified Limited Passive Investor” means a natural person who is a United States Citizen and is a passive investor who owns less than a five percent share in a cannabis business.

The legislature cites that one reason for this expansion is the need for “access to legitimate sources of capital helps prevent the opportunity for those who engage in illegal activity to gain entry into Colorado’s regulated . . . cannabis market.” This is essentially the same argument the legislature used to prohibit out-of-state investors; protecting against out-of-state money in order to protect against illegal influences on the industry.

This is a historic step towards crumbling barriers to the acceptance of cannabis into our everyday life. Cannabis commerce is like any other industry, expanding Colorado cannabis business is a step in the right direction.