About Mario Torres
Mario is an active member of Brazeau Seller Law’s CannaLaw group. He has worked on several cannabis industry matters in Canada, including transactions involving licensed producers of cannabis under the Cannabis Act, licensing agreements, employment matters, and retail store licensing in Ontario. In addition, Mario has worked on transactions and operations in the cannabis sector in Latin America for Canadian clients. He is also a founder and Co-chair of the Meritas Latin America and Caribbean Regional Cannabis Practice Group.
About Meritas Meritas is a global alliance of independent, market-leading law firms that provides legal services to companies looking to effectively capture opportunities and solve issues anywhere in the world. Clients benefit from local knowledge, collective strength and new efficiencies when they work with Meritas law firms. The personal attention and care they experience is part of Meritas’ industry-first commitment to the utmost in quality of service and putting client priorities above all else. Founded in 1990, Meritas has member firms in 251 markets worldwide with over 8,000 dedicated, collaborative lawyers.
Meritas: Hey, and welcome to Legal Voices. Meritas’ official podcast channel where we bring to you industry related legal updates. In our latest series, Mario Torres, lawyer at Meritas member firm Brazeau Seller and Co-Chair of Meritas’ Latin America & Caribbean Cannabis law group, interviews lawyers from around the world to learn more about how each jurisdiction is handling cannabis and marijuana legalization. Before I hand it off to Mario and for those of you who are new to Meritas, Meritas is an established global alliance of closely connected, yet independent law firms that each offer a full range of high-quality, specialized legal services. We were built upon a rigorous system for monitoring and enhancing the quality of our member firms, and have been connecting clients with carefully qualified, business legal expertise in over 250 markets around the world since 1990.
Mario: Welcome everyone to the 8th episode of the Meritas Cannabis World Tour! Over the next 5 episodes we will remain in the continental United States. We will begin this part of the series with Colorado and our affiliate in Denver, Fairfield and Woods. Today's guest is Gil Selinger who is Chair of the Corporate Department in Fairfield and Woods and he has an expertise in various corporate and commercial matters including cannabis law. Gil, welcome!
Mario: Ok. So welcome Gil Selinger from our Meritas affiliate in Colorado, Gil, how are you?
Gil: I'm doing well Mario. How are you?
Mario: Loving the summer and waiting for the world to turnaround, but I really cannot complain.
Gil: Good, I'm so glad.
Mario: So Gil let's jump right into it. We know, or most people will know, that Colorado was sort of one of the first out of the gate. Or, probably they first out of the gate in the US. Along with, or shortly before Washington state. What does legalization look like now? What have we done, 7 years later? What does legalization of cannabis look like in Colorado today?
Gil: It's actually almost 10 years. We legalized marijuana for recreational use in 2012, so just in January it will be 10 years that we've, that it's been legalized here for recreational use. You know, today, it's really the way the laws are changing, the way things look, it is all about the minutia, and it's really about the fine tuning. Colorado has been at this for so long. And then there was about 10 years before that that medical marijuana before it was legalized for recreational use. So, our state has a very robust system of enforcement and laws and regulations. And all the things that are developing right now are really about fine tuning those about addressing certain populations or certain problems that have arisen in trying to find the sort of statutory or regulatory solutions to, whether it's banking, or whether it's access for medical patients, to certain types of things, or whether it's mental health, or other things like that.
Mario: So, just to understand a little bit, what, for example the sort of benchmarks that I have, or the point of reference that I have is Canada, and we have separate regime's, let's call it for medical versus adult use. Is that similar in Colorado? So, if you're a medical use patient, do you source your cannabis from different methods than you would if you were an adult use user. What does that delineation look like?
Gil: There's absolutely a divide in Colorado that if you're a medical patient you have a bunch of different avenues that aren't sort of retail, in terms of how to acquire whatever cannabis that you want to use. And, that might include giving the rights that you have from your medical provider, to grow plants, to somebody else, to grow for you, it might be growing your own stuff, or it might be still shopping at a place that's specifically carrying medical products. In Colorado, every plant from the moment it is seeded, from the moment it's put into soil, it's either going to be medical or it's going to be recreational. It can't be both and that means everything that comes from it. So that means if it's being sold, you know, for the plant itself, it's being made into some sort of tincture or concentrate or some sort of edible. Everything that derives from that original seed has to be designated either medical or recreational from the very beginning. And so then when a patient or a consumer is shopping, they're going to be shopping at different places. It might be the same store. But it'll have two completely different entrances, one for the medical patients and one for the recreational users and a different access. And they may see each other on the way in, but other than that, it's completely different process. And in Colorado, you know, part of what has been extremely successful for the state as a whole has been this sort of taxation regime that we have on the recreational use. There is not taxes, except for some sort of low-level fees to just sort of keep the system up for medical patients, but recreational users pay pretty hefty taxes and the state has benefited very greatly from them.
Mario: And so what I would maybe understand is that they're separate licenses for medical cultivators, and you know medical retail store operators in there like you need a separate license to sell to cultivate for medical purposes and sell to medical patients than you would for recreational?
Gil: Yeah. In Colorado, there's sort of different tiers of the licensing. And, so, part of it is cultivation part of it might be processing. And then a place that is selling to a consumer would have to have to, if they're doing both, would have to have two. A cultivation center, might not need two separate licenses. If they're growing both at the same place, you can get a license that sort of encapsulates both. But there's, there's just sort of these different levels cultivation and growing, then there's concentrates then there's edible and other similar products, and then there's the actual retail dispensary licenses to sort of sell directly to the public.
Mario: Interesting. And so let me ask you, you've been 10 years in, legalization has certainly established in Colorado. Is the industry, I don't want to say matured, but what is the status? Do you have industry players that have been there from day one and have gotten stronger? Do you have a mixed bag, some new entrants? What does the industry look like for, for industry participants, from where you're sitting?
Gil: Sure. When Colorado first legalized any form of cannabis, when it was medical and then including when recreational was legalized. There were a lot of limitations as to who the owners could be, limiting ownership to Colorado residents and there are exceptions, but but for a long time the sort of capital markets related to the cannabis industry were limited based on residency requirements. Those were slowly lifted. And then last year right before the pandemic happened, the state passed a new law. And there's an article on my website that I've written that anybody's happy to look at it, fwlaw.com, where I analyzed the changes that were made, that allowed outside investment into our market. So, it included out of state residents, it included public companies, it included Canadian Public companies. So, there has been a really major shift in the last 18 months here about a larger influx of larger players, multi-state operators, multinational operators - might be somebody based in Canada - where they are coming in and sort of doing a big mergers and acquisitions - buying up licenses, they're buying up operations, and sort of consolidating them. Before that happened, in the last 18 months, I think that there was in the sort of almost 20 years of cannabis legalization in Colorado, there were the pioneers who went out and did it all immediately. And then there was sort of, a period where a lot of them sold out. I think they saw that there ability to grow the business on a sort of multi-level basis, with multi locations, and all the ways the business was growing, that they maybe didn't have all the skills or the desire. So there was this shift of the sort of, you know, 1 or 2 guys with which open a location today being sold to a Colorado Corporation that was putting in multiple locations. So there was some sort of consolidation of the market then. And then the market is consolidating further, now that there is this ability to bring in outside investment, it's not, necessarily a resident in Colorado. So I think that we're moving towards seeing a lot more chains. I mean, there's a couple already. There happens to be one chain in Colorado, that really likes to buy old, McDonald's. So, you drive by and you know what a McDonald's looks like, because McDonald's all look the same everywhere in the world, while you drive by these places and you expect it to be McDonald's from far away, and it's a dispenser.
Mario: Folks, are creative that's for sure. So, you know, you mentioned you've got 20 years of legalization in one form or another. Which always begs for me the question. How did Colorado get to be at the forefront of it? I've heard different stories in different jurisdictions. For example, in Canada we had a gray market, let's call it, that was created through some court challenges and let's call it the selective non-enforcement and that sort of stuff. And then we went into a commercialization model of medical. So, that's the Canadian story in a nutshell. But I've also heard different, for example, in Colombia or in other countries, they see legalization to the extent that they've done it. It is creating a new industry that will provide jobs and opportunities. What prompted Colorado to really take that jumper or or, you know, be first out of the gate in that sense in the US. Especially considering that it's unlawful or was unlawful, still unlawful federally.
Gil: I mean I think that there's a couple of things. I mean Colorado has always been a fairly, I use the word progressive and I don't mean it in a political way. I mean it in a sort of like an advanced thinking kind of way, and open to new ideas. And I think that there was some acceptance in the general sort of medical community that there might be uses for cannabis. And there had been attempts to legalize it. To back up. It has all been done through vote, through the vote of the voters in Colorado. It's been done through constitutional amendments to the Constitution of Colorado. So it was advocated by members of the populace, and then they put together groups that were included, you know, legislators and businesspeople and doctors and all that. And I think that all of what you said as the goals were part of it, but originally it was addressing some specific patient needs that medicine was not necessarily addressing. But the voters of Colorado approved it. And a big part of it also was that the sort of tradeoff was at least the, it has evolved over time, but the initial deal with the public was that all tax revenue that was associated or fee revenue when it was just medical, when there weren't taxes, but everything went to our schools and our parks and recreation. And, for schools it's for building schools. It's not funding them. So to an extent that anybody thought that it sort of was balancing the good and the evil, the good, you know, sort of seem to win. And they have been on the ballot a couple of times and lost and got narrowed into sort of how it, how it works when it was first legalized here, but it was done by the voters every time. And, you know then the legislature got burdened with trying to come up with the rules and regulations, and like we talked about earlier, it's taken a long time to sort of smooth all those out. And you know, honestly, the comments I made before, about opening up to investment. Colorado ended up, while we were very early with everything else, we were one of the last ones to do that. And so if you start to look at some of the states in the United States, on the West Coast, California, Oregon, Washington, Nevada, all of them are allowing outside investment much earlier than we do. We did. And a lot of people in Colorado actually feel like the industry sort of got stymied by some of the regulations that prevented outside capital.
Mario: No, and that really leads me to my final question because that's a really good trajectory, let's call it. And, you mentioned earlier that the stage that Colorado is in now is fine tuning what it has established. And again, establish through what I understand is a very clear voter mandate. What changes can we see, and you mentioned the big one 18 months ago, what changes can we expect to see In Colorado or do you think the industry would need or would like, in the coming months and a couple of years?
Gil: I mean, what, what we see in the coming months right now that's in front of the governor or that's in the legislature right now really relate to, a lot of them have to do with potency, restrictions on potency, restrictions on the amount of cannabis that any consumer can buy whether they're medical or recreational. Fine tuning how much somebody out of state can buy in any one sitting? So, it's sort of controls.
Mario: Sorry, is that like increasing the number or decreasing the amount that can be potency, because those are issues that we see here in Canada, as well?
Gil: So, there are some big concern here in Colorado, that the concentrates that are being made out of the cannabis plant are too potent, and possibly dangerously so. So, there is a debate that's going on right now. The bill that made it through part of our legislature. The general consensus is, it's too restrictive, and it lowers the potency too far and will affect medical patients. So, it's really this balancing act that's going on about what's too much and what's too little. So that's part of the, the potency battle is generally lowering it. It's just a question of where the cap is. And then the plants or volume count issue has actually gone down, because it was really, really big for medical patients for a long time. Like they can have a really large, they could go and buy a really large amount of marijuana at any one time, and so that's being reduced a little. The amount for recreational adults is being proposed to go up a little. And so it's sort of just balancing, like who can have how much when, and then they're also trying to establish a statewide system that can enforce that. Because, you know, there's a statewide system for medical cards, but other than that, there's just sort of laws that all of these dispensary's have to follow. And so you or I could go into one place and buy our maximum and drive down the street to another place and buy our maximum and those places are not talking to each other. Because there's no system, no state clearinghouse to say that, you know, Gil or Mario have already reached their limit for today. And, so, that's one of the other things that's in the works. Trying to sort of get everybody on the same network so that they can better understand what the public is doing. And it's also part of, you know, trying to make sure that it stays being used recreationally or medically for the purpose intended and not criminally, you know, cartels, not leaving the state. All the things that people worry about, the changes that are being made and proposed are to lock that down a little bit more and make sure that those sort of loopholes are avoided.
Mario: And my apologies because I interrupted, but you said, where's that bill? Where's that bill now?
Gil: There's a couple of different bills that I sort of just glommed together when I was summarizing. There's one on, the one that deals solely with potency for medical patients, is on the Governor's desk. I believe that there is a pretty hard push for him to veto it and for it to get reworked. The ones that relate to the software system and the sort of clearing house that's, I believe, passed one half of the legislature, but that's expected to go all the way through. All of them are in this year's session. I don't know that all of them are passed yet. But when you read sort of what the lobbyists are saying, and the people that are helping writing them, you can sort of tell the ones that are likely to succeed, the ones that might have to go back to the drawing board. But the ones that I summarize for you seems to be the ones that are most likely to take effect.
Mario: And sort of the last little piece here, Gil, is, do you see room for industry growth in Colorado? And one of the reasons I ask is, because in Canada's specifically in Ontario, we're seeing retail, stores open, they remove the cap and now there's hundreds of stores and not all equally, geographically spread out. So you're seeing a real concentration of some stores in certain cities in certain areas of certain cities so much so that people are saying, hey, we're going to have to have a little bit of a you know, a pullback here because there's too many. So some people are saying you know, we also see licensed producer sitting on thousands of grams of unsold cannabis. So some of them are going to have to start pulling back production potentially. Are there some of those issues that Colorado has dealt with in the past a little bit of sort of maybe people got a little bit too far ahead of themselves and had to pull back or are you now sort of you know sort of stagnant or maybe stagnant isn't the right word but the cruising altitude and this is what it'll be like for a bit. Or, what are your thoughts on that?
Gil: I think that it's mostly that it's reached the cruising altitude part. When recreational was first legalized in 2012 there was definitely like a supply - demand lag because of what we discussed earlier about each specific plant having to be designated as medical or recreational from the get go. And so there was this lag that recreational legalize these places are opening, but they didn't have time to grow the plants to sell, to meet the demands. So, I think that it was more of a scarcity then, not a problem of overabundance. The real problem in Colorado has been related to zoning and real estate. And so they're part of the ability of local jurisdictions and municipalities to restrict the ability of cannabis in any form to be sold has to do with their ability to sort of control their zoning laws. And the laws on the state level, sort of require distance requirements from schools, and daycares and places of worship, and, you know, other similar, police stations, fire departments, things like that. There are distance requirements. And so what that really does is it creates a sort of patchwork of places where there's plenty of room because there's no schools, because it's a warehouse district, or something like that to have a bunch of these things. And then in the middle of the neighborhood, you don't see any of them. And so I think that, like you're saying, there are places where there's a lot of them. There's places that there are not. And, I think the point that I'm getting at, is that for the most part, at least in the sort of urban centers in Colorado, Denver, and it's very vast suburbs, Boulder, and it's very vast suburbs, Colorado Springs and it's vast suburbs, most of real estate that could be used for the purposes of anything to do with selling cannabis in any form are already occupied by either a cannabis business or something else and they can't get in there. There tends to be more availability, now, in more rural Colorado warehouses and outdoor grows or greenhouse grows that are being built because, out there there's more land, and there's less people, and there's less restriction. But when you really look in Denver proper and those other cities, I mentioned, the availability of real estate that is zoned and permitted correctly for either retail use or even cultivation, is very limited right now. The ones that in Denver, they're sort of warehouse districts. A great example, is the area that's by Denver's old airport. Denver had an airport that closed I'd be pressed to tell you when... in the late nineties. But the area near it was just full of storage warehouses and no homes. A large portion of them were vacant at the time that the sort of legalization happened and the cultivators and the operators came in and rented them all out. So, these areas along the interstate are warehouses just full of marijuana operations. But, they've filled them up and there's no more. And, there is no more places they can go. So, that's why the ultimate answer to your question is I think it's sort of just like a steady even keel and you know, as the real estate market changes and there's more availability for them to expand. I'm sure some of them would like to but generally they are limited because they can't find new places to grow, to grow their business, not to grow the plants.
Mario: Gotcha. No, that makes sense, and I think, you know, after 10 years you start to see what that market will bear for that particular industry and I think you guys are getting there and I'm sure there'll be further developments. And as you said, as things get fine tuned and people, the regulators have opportunity to improve things for both patients and the public they will take the steps to do so. Gil, this has been very informative. I really appreciate your time.
Gil: My pleasure.
Mario: I hope to talk with you again soon.
Gil: Absolutely. Mario, thanks so much for having me.
Mario: Thank you very much Gil. That was Gil Selinger from Fairfield and Woods in Denver, Colorado. For more information, please go to fwlaw.com. I am Mario Torres from Brazeau Seller Law in Ottawa, Canada. Thank you for joining us.
Meritas: On behalf of Meritas, thank you for listing. Find this weeks show notes and a variety of other free resources on the News & Insights section of the Meritas website, www.meritas.org. Be sure to join us next week to learn more about cannabis regulations around the globe. Thank you again for listening and have a wonderful day!