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Colorado gets ready for newly legal marijuana

Colorado began the Herculean task of figuring out exactly how to regulate the sale of recreational marijuana on Thursday, with members of a special task force ticking off an array of issues to be dealt with that at times seemed more mind-numbing than pot itself.

Colorado voters legalized marijuana for adults 21 and older with the passage of Amendment 64 in November. Possessing, smoking and cultivating small amounts of the drug has been legal since Gov. John Hickenlooper endorsed the election results in December.

But setting up a retail distribution system called for by the new law falls to the state legislature, which must approve regulations before the end of the next session, which starts next week.

“It’s a challenging task and a short period of time,” said Ron Kammerzell, the acting senior enforcement director for the Colorado Department of Revenue, the state agency that will handle licensing and oversight of this new industry. “But it will be very rewarding to get things right.”

Getting things right might be easier said than done. Thursday was the first meeting of the Regulatory Framework Working Group, a subcommittee of the greater 24-member Amendment 64 Implementation Task Force the governor set up to recommend a regulatory structure to the legislature.

On the working group’s plate are more than 20 issues to cope with and none are easy. Members must not only deal with how to regulate pot stores, but also hemp farming, which was also legalized in the new amendment.

They have to figure out how Amendment 64 will impact means-tested entitlements like Medicaid. They have to decide if a state-chartered bank to handle marijuana transactions is a good idea (most national banks won’t deal with transactions involving a federally prohibited narcotic). They have to decide if rules for transportation and home growers are needed; evaluate environmental impacts; and decide whether or not to track people who buy pot. And they have to avoid undoing all the work that went into the state’s medical marijuana regulatory structure, under which several hundred dispensaries do business.

And of course they also have to try to avoid suggesting ideas that might provoke the federal government. Considering the easy banter at the public meeting about smoking, growing and selling pot, it was easy to lose sight of the fact that half the people there, including some task force members, are considered criminals in Washington D.C.’s eyes because they own or operate medical marijuana centers (MMCs).

The votes in Colorado and Washington state (which also voted to legalize pot) do not affect federal law, which explicitly prohibits marijuana for any reason.

Thursday’s meeting focused on examining existing state regulatory models for liquor, medical marijuana and gambling, with the idea of creating some hybrid that can handle the unique needs of the recreational pot industry, for which there is no existing model to reference.

Although Amendment 64 was called “The Regulate Marijuana Like Alcohol Act,” some MMC owners balked at Colorado’s tiered liquor licensing structure that requires separation of manufacturing and wholesale sales from retail to avoid monopolies and unfair business practices.

They prefer the legally-required vertical integration approach that MMCs currently operate under, in which individual dispensaries produce most or all of the pot they sell. MMCs must grow at least 70 percent of the marijuana they sell and they can buy up to 30 percent of their stock from other MMCs.

This seed-to-sale system — every step of which is subject to inspection by state agents — ensures the marijuana sold in the state’s several hundred dispensaries is home-grown, and that what’s grown in Colorado is eventually sold to qualified medical patients. That’s at least some insurance against a raid by federal agents because it protects them from claims that their product is smuggled or diverted to the black market.

“We all sleep better at night knowing that works well,” said Meg Sanders, the director of the Cannabis Business Alliance and a task force member.

But the Department of Revenue’s Medical Marijuana Enforcement Division (MMED), which oversees this system, is overwhelmed. Unlike liquor licensing, where the bulk of the work happens at the local level, MMC licensing falls mostly to the state agency, which has only 14 employees. Some applications submitted two years ago have never been processed, according to task force member Bob Dill, a lawyer who represents medical marijuana businesses.

Laura Harris, the MMED director, said that part of the problem is confusion on the local level about what’s expected of cities and towns when a dispensary applies for a license.

“Many local authorities are still in a state of being unsure about their roles,” she said. “It’s like we’re speaking different languages. We almost feel like strangers with some of our jurisdictions.”

Still, Harris said she believes the current regulatory model could be “harmonized” with Amendment 64 so that those dispensaries that leaped through numerous hoops to stay in business don’t have to start from scratch to sell retail pot for recreational use.

“I think it’s something that’s very doable,” she said.

She should hope so. This working group, with its cornucopia of thorny issues, is just one of five cleaved from the larger task force. The entire group must agree on a package of recommendations by Feb. 28. At that point, the governor, the attorney general and the entire state legislature will also weigh in on the matter.

“A lot of long nights,” predicted Kammerzell, the Revenue Department’s enforcement director and co-chair of Thursday’s meeting. “A lot of hard work.”

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