On May 2, 2019, the Colorado legislature passed House Bill 1230, authorizing new hospitality spaces in which marijuana may be sold and consumed onsite as an exemption to the “Colorado Clean Air Act,” a state law that prohibits public indoor smoking. Colorado Amendment 64 legalized recreational use of marijuana since 2012, but it also prohibited “consumption that is conducted openly and publicly.” Because most hotels and rental properties ban smoking, this caveat severely limits options for tourists, medical marijuana patients, and residents who are left without a safe, responsible place to consume after legally purchasing it.

HB 1230 requires the state licensing authority to promulgate regulations governing new hospitality licenses and spaces and gives municipal governments a choice to opt in authorizing the operation of marijuana hospitality establishments. Starting on or after January 1, 2020, the Marijuana Enforcement Division (MED) may grant dispensaries tasting room licenses similar to how the state Liquor Enforcement Division regulates breweries and alcohol sales. Other businesses including hotels, restaurants, concert venues, art galleries, and yoga studios may apply for private consumption licenses and limited marijuana sales at their property. Mobile lounges, typically used by cannabis tour companies, could also be granted licenses without the sale of marijuana.

What Stakeholders Are Saying

Under MED’s rule-making authority, Deputy Director Dominque Mendiola clarifies that there will be two different types of “hospitality establishments” where patrons can either BYOC (bring your own cannabis) to consume on site or visit businesses that include both sales and consumption at the same place. MED Director Jim Burack states the department will also implement “accelerator licenses” or “micro licenses,” which allows ganja-preneurs who have lived in low-income areas of Colorado to use facilities of larger companies to research and create their own cannabis products. These micro business licenses presumably have lower regulatory hurdles and would help efforts to diversify the industry.

The Green Solution, the second-largest Coloradan dispensary opposed HB 1230, citing concerns over inexperienced customers who would sample products in sample rooms and drive under the influence. This argument against new social marijuana permits evokes the Temperance movement’s call to prohibit the manufacture, sale, and consumption of nearly all alcoholic beverages in the early twentieth century. The state policy that no business allowing marijuana use is able to sell alcohol remains intact.

Our Takeaway

More cities and states are jumping on the bandwagon to create social marijuana consumption venues. Las Vegas, West California, Massachusetts, and Colorado’s approval of social use licenses will open new business opportunities for entrepreneurs and attract more investors whose fears are assuaged by more clear regulatory guidance. Yet, local government’s broad authority over social consumption licensing rules will determine whether entrepreneurs can pursue this niche social use sector to get their businesses off the ground.