Just before the close of the Colorado legislature’s 2024 session, lawmakers approved a bill aimed at streamlining several deficiencies in the state’s regulation of marijuana businesses. While not all the bill’s intended fixes were passed, certain provisions will facilitate significant changes for businesses, including for licensing processes, contaminant testing protocols, reporting obligations, compliance procedures, and operations management practices. Several notable changes are discussed below.
Business Licensing
SB 24-076 (the act) would make two important changes to current marijuana business licensing laws in Colorado that will significantly reduce state-level licensing compliance obligations for cannabis businesses. First, the act extends the initial and renewal license periods from one to two years for all regulated marijuana business licenses and licenses granted to controlling beneficial owners, as well as medical and retail delivery permits.[1] However, localities have the option to choose which local licenses are valid for one or two years, which could leave some businesses stuck with annual local licensure requirements.[2]
For businesses with identical controlling beneficial owners (CBOs), multiple license types, and separate locations, the act requires a unified application process that would be subject to a lower initial and renewal license fee for each application than would be paid for applications for the same individual licenses.[3] This means fewer applications and lower licensing fees for business owners. The Colorado Department of Revenue, Marijuana Enforcement Division (MED) would have until January 1, 2026, to promulgate rules for the unified licensure process.
The act also amends the eligibility requirements for social equity applicants who submit their applications for a Finding of Suitability after February 1, 2025. Until now, the requirements for social equity applicants in Colorado have been:
- Applicants must be Colorado residents;
- The applicant must not be a CBO, who has been subject to disciplinary or legal action by the state;
- Applicants must demonstrate at least one of the following:
a. Residency in a designated “disproportionately impacted area” or “opportunity zone” for at least 15 years between 1980 and 2010;
b. The applicant or one of the applicant’s immediate family members (i.e., parents, legal guardians, siblings, spouse, children, or minors in their guardianship) was arrested for a marijuana offense, convicted of a marijuana offense, or was subject to civil asset forfeiture related to a marijuana investigation; or
c. The applicant’s household income in the prior year did not exceed a certain threshold.[4]
Notably, under the new requirements, social equity applicants are no longer required to be Colorado residents. The duration of residency in disproportionately impacted areas has been reduced from 15 to five years, and new qualification options based on residency in government-subsidized housing have been added. New requirements have also been imposed with respect to arrests and convictions, with some familial relationships requiring an arrest and a conviction, and others requiring an arrest or conviction. In addition, receiving assistance from any one of several specifically listed federal or state programs may now qualify an applicant in absence of meeting the residency, arrest and/or conviction history, or income requirements.[5]
Product Containment Testing
Product testing requirements will only be slightly impacted by the changes brought under SB 24-076. The act removes a requirement that products, which previously failed a contaminant test but subsequently passed the same test, must contain a label indicating that the product failed a test.[6] The act also specifically authorizes retesting when marijuana or marijuana products have failed a containment test, including for pesticides.[7]
However, some of the most impactful contaminant testing provisions were cut from the bill during the reconciliation process. This includes the development of a program, which would have authorized licensees to conduct fewer contaminant tests than normal after demonstrating that their standard operating procedures and production practices result in consistently passing contaminant testing.[8] Other provisions which would have similarly reduced redundant testing requirements were also cut from the bill.
Reporting Obligations and Compliance Procedures
Businesses will need to be aware of some important changes with respect to compliance procedures and reporting obligations brought about by SB 24-076. First, in a major efficiency win for the industry, the act specifies that licensees are not obligated to utilize radio frequency identification (RFID) tags to track marijuana effective January 1, 2027.[9] The act also amends the definition of an “immature plant” to include nonflowering plants that are not taller or wider than 15 inches, increased from the current limit of 8 inches.[10]
Additionally, the act specifies that MED must amend current regulatory requirements pertaining to reports of modifications to the security requirements of the premises of a marijuana business, including the lighting, physical security, video, and alarm requirements, making such reporting a biennial requirement.
Some changes to current law will impact the operating procedures of all customer-facing marijuana businesses. For example, state law currently requires that marijuana stores provide customers who purchase marijuana concentrates with an educational resource drafted by MED informing readers on the use of marijuana concentrates.[11] Now, instead of simply making the materials available to consumers, storefronts will be responsible for physically attaching the state’s educational resource to the customer’s receipt of sale, product container, or exit packaging.[12]
Operations Management
Under SB 24-076, CBOs would no longer be required to have identification (ID) cards in limited access areas of their marijuana businesses, but all other individuals with unescorted access in these areas must still have ID cards.[13] In addition, retail marijuana stores would be allowed to sell both hemp products and food, including food that is not infused with marijuana or hemp, although sales of food products may not exceed 20% of a store’s annual gross revenue.[14]
Finally, regarding product procurement, current law allows medical and retail cultivation facilities to obtain immature plants, marijuana seeds, and marijuana genetic material from entities that are “licensed or otherwise approved to operate in other jurisdictions.”[15] SB 24-076 amends and clarifies this allowance, granting cultivation facilities the ability to obtain genetic material from any person licensed by, approved by, or permitted by another jurisdiction to possess or cultivate cannabis plants.[16] The definition of “genetic material” has also been amended to include: immature plants containing a delta-9 tetrahydrocannabinol (THC) concentration of no more than 3/10 of 1% on a dry weight basis; cannabis seeds; tissue culture; and small amounts or fragments of cannabis plants containing a delta-9 THC concentration of no more than 3/10 of 1% on a dry-weight basis.[17]
Why It Matters
Although not all of the pro-industry provisions that first appeared in SB 24-076 ultimately made it through to the engrossed version, several of the act’s changes would reduce redundancies and streamline efficiencies within the industry. Most notably, business licenses would become subject to biennial, rather than annual renewal requirements. Some changes will redefine how individuals qualify for social equity ownership interests in marijuana businesses in the future. Other, less favorable changes will also necessitate new compliance protocols and adjustments to standard operating procedures. Stay tuned to Troutman Pepper’s Cannabis Communications Newsletter to find out how these changes will impact Colorado’s marijuana industry.
[1] Senate Bill 24-076 at 12 lines 8-18; 13 lines 16-18; 16 lines 2-4; 16-17 lines 27 & 1-2; 19 lines 14-16 (Rerevised May 7, 2024).
[2] SB 24-076 at 12 lines 15-18.
[3] SB 24-076 at 12 lines 25-27 & 13 lines 1-7.
[4] See Colo. Rev. Stat. Ann. § 44-10-308(4).
[5] SB 24-076 at 8-11.
[6] SB 24-076 at 5 lines 2-5.
[7] SB 24-076 at 5 lines 6-10.
[8] See Introduced Senate Bill 24-076 at 6 lines 10-24 (January 22, 2024), available at: https://leg.colorado.gov/sites/default/files/documents/2024A/bills/2024a_076_01.pdf
[9] SB 24-076 at 6 lines 15-19.
[10] SB 24-076 at 4 lines 3-6.
[11] Colo. Rev. Stat. Ann. § 44-10-501(3)(g)
[12] SB 24-076 at 13 lines 9-15; 16 lines 8-13.
[13] SB 24-076 at 5 lines 19-25.
[14] SB 24-076 at 16 lines 14-26.
[15] Colo. Rev. Stat. Ann. § 44-10-602(12)(a)(III)
[16] SB 24-076 at 13 lines 23 – 27; 14 & 15; 17-19.
[17] SB 24-076 at 3 lines 6-14.
