Barbara Brohl Executive Director & State Licensing Authority Colorado Department of Revenue
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1 Barbara Brohl Executive Director & State Licensing Authority Colorado Department of Revenue 1
2 Background and History Colorado Industry Segments Legislative Process Rulemaking Process Regulatory & Enforcement Process Current Status of the Industry Looking Ahead Costs of Regulatory Enforcement Taxation Questions 2
3 Colorado Medical Marijuana History Amendment 20 (2000) Caregiver Model Generally 2 oz., 6 plants Per Patient 2010 HB Created the Regulatory Structure Created the MED to Regulate the Industry Culitvations - Products Manufacturers Centers 3
4 Amendment 64 (2012) Allows Personal Growth and Personal Use of Marijuana Allows Individuals 21 years old or older - to Possess, Use, Display, Purchase, Transport, and Transfer (without remuneration), to Individuals 21 years old or older - One Ounce or Less of Marijuana Regulates the Growth, Manufacture, and Sale of Retail Marijuana System of Licensed Marijuana Establishments Overseen by State and Local Governments
5 Amendment 64 Task Force (2012) Created by Executive Order Identified the Members Laid out Expectations Create and Deliver a Report to the Governor, the General Assembly, and the Attorney General
6 Stakeholders State Legislators Public Health Public Safety Agriculture Revenue A64 Campaign Marijuana Industry Marijuana Consumers Law Professor Physician Juvenile Justice District Attorney Attorney General Public Defender Municipal League Counties Business Community Labor/Employees 6
7 Private Segment Criminal Segment Aggregate Marijuana Market Commercial Segment (Companies) 7
8 2013 Legislative Session Creation of the Regulatory Structure and Funding Model (HB ) Creation of the Taxing Structure (HB ) Reporting and Lab Requirements, Responsible Vendor Program (SB13-283) Harmonization of Certain Medical and Recreational Requirements (SB13-283) Established the 5 Nanogram THC Permissible Inference for Driving Under the Influence of Drugs (HB )
9 2014 Legislative Session Harmonization of Child Protection Elements between the Medical and Recreational (HB ) Established Requirement for Equivalencies Between Retail Marijuana Products (HB ) Created a Working Group to Make Recommendations on how Edible Marijuana can be Clearly Identifiable (HB ) 9
10 2015 Legislative Session Prohibition of Use of EBT Cards (HB & SB15-065) Marijuana Reference Lab (HB ) Unregulated Manufacture of Marijuana Concentrate (HB ) Permitted Economic Interest (HB ) Restrictions of One Time Transfer of Marijuana (HB ) Caregiver Requirements (HB15-014) 10
11 2015 Legislative Session (cont.) Medical Marijuana Sunset Review (SB15-115) Industrial Hemp Testing (SB15-196) Medical Marijuana Mandatory Testing (SB15-260) 11
12 Criminal Segment Private Segment Aggregate Marijuana Industry Commercial Segment (Companies) 12
13 Two Industry Segments Medical Recreational Licensee Based State Licensing Local Licensing Regulatory and/or Criminal Stores, Cultivations, Infused Manufacturers, Testing Facilities 13
14 Use of Stakeholder Working Groups for Rulemaking Industry Members Governmental Officials Law Enforcement Consumer Safety Groups Doctors Benefits Negotiated Rulemaking Voluntary Compliance 14
15 Preventing distribution of marijuana to minors Preventing the involvement of criminal enterprises, gangs and cartels in legal marijuana industry Preventing the diversion of legalized marijuana to other states 15
16 Child Resistant Packaging Extensive Labeling Advertising Waste removal Production limits Enforcement / Underage Compliance Checks
17 Production Management Restrictions on Purchase Amounts Restrictions on Hours of Operation Restrictions on Where One Can Consume Restrictions on Edibles
18 No sales outside the licensed premises No internet sales No delivery Video Surveillance Requirements of Entire Premises Waste Removal Production Limits 18
19 19
20 May 2014 MED began testing for potency of recreational marijuana and recreational marijuana products. July 2014 MED began testing for homogeneity of recreational marijuana products. April 2015 MED began beta testing for residual solvents. MED expects to begin beta testing for microbials in the coming months. 19 Licensed Recreational Testing Facilities
21 Nearly 4,000 potency tests reported in METRC in 2014 and 2,815 in the first quarter of percent passing rate for potency tests in 2014 and 99.3 percent for the first quarter of 2015 Nearly 2,300 homogeneity tests reported in METRC in 2014 and 1,150 in the first quarter of percent passing rate for homogeneity tests in 2014 and 100 percent for the first quarter of 2015 SB will require the implementation of testing for MMJ by July 1, 2016
22 22
23 Business structure Criminal background for owners Government obligations Financial agreements Source of funding Compliance history Business associations Coordination with local licensing authority Licensing recommendation to SLA 23
24 Extensive Financial and Criminal Background Checks Two-year Colorado Residency Requirement Medical Marijuana May operate from 8:00 am to 7:00 pm Must have both State and Local Authority license to operate Can only sell to patients with a medical marijuana card Retail Marijuana May operate from 8:00 am to 12:00 am Must have State license and Local Authority approval to operate Can sell to anyone over 21
25 Compliance Inspections Initial inspections Routine inspections Risk based inspections Complaint Investigations Solvability factors Underage Compliance Operations Liquor Model Under 21, Residency, Registered Patient 25
26 Travel Manifest Requirements Quantity Limitations on Tourists Labeling of Containers Prior to Sale Tamper-evident Shipping Containers Traceability 26
27 Track and record a chain of custody from Seed to Sale. Provide MED with inspection process tools necessary to complete on-site validation of inventory. Provide mechanism to produce standardized manifests for transportation of marijuana within Colorado law enforcement priority Tracks both Medical and Retail Marijuana Inventory within closed regulatory system Tracking will END once it is purchased by the patient or retail customer
28 RFID Tag
29 29
30 30
31 Read Distance Read Speed RFID s unique ability to isolate and cingulate a single ID number RFID s has a unique ability to capture and ignore ID s it has already identified RFID improves and simplifies reporting and compliance processes RFID saves the user time resulting in reduced labor cost Creates a strong chain of custody and traceability
32 32
33 33
34 Retail Marijuana Code, Rule 1307 Public Safety Violations Suspension up to $100,000 fine per violation and/or license revocation Violations Associated with Cole Memo Priorities License Violations Suspension up to $50,000 fine per violation and/or license revocation General violations not affecting consumer safety or public safety License Infractions Suspension up to a $10,000 fine per violation Minor regulatory violations 34
35 Progressive Discipline Model Verbal and Written Warnings Minor regulatory violations Part of compliance history Division issuance Assurance of Voluntary Compliance Progressive in nature Fee paid for cost of investigation Division issuance 35
36 Order to Show Cause Associated with more serious violations Formal Issuance by State Licensing Authority Summary Suspension Exigent circumstances Immediate action due to public safety and welfare issues Formal Issuance by State Licensing Authority 36
37 Revocation Totality of Circumstances Severity of violations Constitutional Statutory Regulatory Consumer/Public Safety Formal Issuance by State Licensing Authority 37
38 38
39 January 1, 2014 through December 31, 2014 Medical Marijuana Retail Marijuana 748 Cultivations 163 Infused Products Manufacturers 505 Centers 397 Cultivations 98 Infused Products Manufacturers 322 Stores 19 Testing Facilities (Labs)
40 As of May 31, 2015 Medical Marijuana Retail Marijuana 762 Cultivations 181 Infused Products Manufacturers 511 Centers 361 Cultivations 126 Infused Products Manufacturers 361 Stores 19 Testing Facilities (Labs)
41 12,000 10,000 8,000 6,000 4,000 2,000 - Medical Flower Sold (lbs.) Retail Flower Sold (lbs.) 41
42 42
43 400, , , , , , ,000 50,000 - Medical Infused Edibles Sold (Units) Retail Infused Edibles Sold (Units) 43
44 44
45 45
46 46
47 Rulemaking Agenda 2015: Implementation of 2015 Legislation Implementation of Prior Year Legislation HB Equivalency of Flower to Concentrate Equivalency Study HB Retail Marijuana Edible Products HB Report Update Production Management Rules Housekeeping Rule Changes
48 2015 Rulemaking Timeline: July & August - Numerous Working Group Meetings July 31 Permanent Rulemaking Notice Late August & Early September Permanent Rulemaking Hearings Early October - Adopt Rules Late November Permanent Rules Effective
49 Enforcement Staff (55 now, hiring 12 more) Taxation Staff (21) Enforcement Offices (4) Legal Fees for Rulemaking Legal Fees for Other Litigation Official Reports and Studies New Monitoring Systems 49
50 Uses School Construction and Marijuana Purposes Taxes (for sales 1/1/14 3/31/15) - $87.9M Excise Tax (on unprocessed Recreational marijuana) - $20.4M Special Sales Tax on Recreational marijuana - $42M General Sales Tax on Recreational Marijuana - $12.1M General Sales Tax on Medical Marijuana - $13.3M 50
51 For more information, please see the DOR / MED website at enforcement Publications: MED Market Size and Demand Study July 9, 2014 Colorado Department of Regulatory Agencies (DORA) Sunset Review Report, October 15, 2014 House Bill Marijuana Edibles Work Group Report January 30, 2015 House Bill Marijuana Edibles Fact Sheet January 30, 2015 MED Annual Update, February 27, 2015
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