The cannabis industry is a step closer to loosening the rules on how people can consume marijuana when state law forbids its use in public. 

But the “hospitality rooms” for consuming cannabis, approved in Colorado law in 2019, have gotten off to such a slow a start that some in the industry question whether those businesses will ever succeed. Such hospitality rooms could, for example, include a “spa” model. 

And state agencies are raising worries about the expansion of marijuana consumption and their implications for public safety, notably traffic crashes.

Last week, a group working on yet another round of rulemaking for hospitality and related businesses met with the Marijuana Enforcement Division to deal with some pretty major issues, such as just how much a hospitality business could sell to to a consumer on a daily basis.

Some groups, notably Blue Rising, oppose the proposed changes in the rules that would allow hospitality facilities to sell higher quantities of marijuana. The Colorado Department of Transportation and Department of Public Safety also raised worries about what could happen to consumers after they consume cannabis at a hospitality facility.

Hospitality facilities are intended to address some of the language contained in Amendment 64, which voters approved in 2013 and which legalized recreational marijuana.

The amendment allows for consumption of cannabis for those 21 and older, but it does not permit consumption that is “open and public.” That means smoking in public places, such as parks or malls, is impermissible, but lawmakers adopted a law to allow their consumption inside the hospitality facilities, which would be located at regular places of business subject to zoning requirements.

What that means is that tourists, for example, have few options for places where they can consume. Residents of apartments or other facilities that ban consumption must, for example, find somewhere else to light up.

The state enforcement division has been working on hospitality rules ever since House Bill 19-1230 was signed into law in May 2019, with initial rules adopted in 2019 and revisions since then. The law allows for the operation of marijuana hospitality establishments and retail marijuana hospitality and sales establishments, with local government approval.

That last bit of language – the buy in of local governments – is part of what industry leaders say is tying the hands of businesses that want to open hospitality facilities. To date, only Denver and Adams County have approved regulations for those businesses. In Adams County, hospitality establishments can set up only in unincorporated parts of the county. 

The first “cannabar” with an Adams County license, JAD’s Mile High Smoke, opened just over a year ago and is only one of two operating hospitality facilities in the state.

Last week’s rulemaking hearing focused on several issues: Daily sales limits that align with the limits already imposed on retail marijuana stores, safeguards around transportation, and a new rule that would provide a pathway for a “spa-type model,” subject to all the requirements of a hospitality business.

The industry will need to overcome objections by the state’s transportation and public safety departments, which raised concerns about driving while impaired.

Glenn Davis, who manages the transportation department’s highway safety office, told the group that more drivers involved in fatal crashes are testing positive for Delta-9 THC. On top of that, half of all screen drivers who are tested show levels above 5 nanograms per milliliter, the state determinant of THC intoxication. 

The public safety agency found that drivers who are using both cannabis and alcohol are resulting in higher crash rates. 

“We have an impaired driving problem in Colorado,” Davis said, pointing to current rates of impaired driving that he said the state has not seen since the 1990s. 

Allison Rosenthal, a statistical analyst with the Department of Public Safety, said that overall detection rates for THC went from 18% in 2016 to 29% in 2022. The department has also seen a gradual rise over the same time period for drivers who test positive for Delta-9 THC at that 5 ng/ml level, she said.

About one out of every three drivers convicted of a DUI in 2020 was involved in a crash, Rosenthal said. But those crash rates increased for drivers who tested positive for both alcohol and THC, at about 36%. For those who tested positive for alcohol, THC and another drug, it increased to 39%. 

So, how much can someone buy at a hospitality facility?

The proposed rules would raise some of the daily limits sought by the industry to allow for up to 100 mg of an edible – previously, that limit was at 20 mg; for up to an ounce of flower; and, up to eight grams of concentrate. 

The proposed rules would limit consumers to one transaction per day, up to the daily limit.

Hospitality businesses and retail stores can also set up vending machines, so long as those machines are located in the business’s restricted area. 

As for “spas,” a Denver woman has proposed one on South Santa Fe Drive that would allow people to get massages, which could include using topical products that contain THC. The proposed rules would allow for those businesses and exclude the topicals from the daily purchase limits as they do not have the ability to produce a psychotropic effect.

Dawn Reinfeld of Blue Rising Together, which opposes high THC potency, said “no” to all of the proposed rules. “You don’t have the statutory authority to allow vending machines, nor do we think it’s appropriate.”

If the enforcement division is going to try it, the agency should go back to the Colorado General Assembly and get legislation passed to allow it, she added.

Joshua Davis, the owner of JAD’s, told the group purchase limits encourage bad behavior. A consumer will buy to the limit and then just go somewhere else. Increasing purchasing limits will increase safety, not hurt it, he claimed.

Another part of proposed rule would also require the consumer to have a “transportation plan” before leaving the premises – a requirement that business owners objected to. 

Davis pointed out that his business has QR codes for every transportation option, be it cabs, Uber or Lyft. That’s just being a good person, he said.

He also pointed out that liquor stores and bars are not required to ensure their customers have transportation plans when they leave.

“The idea that we should make sure that people have at least theoretical access to a safe way to get home does not seem unreasonable,” said Jordan Wellington of VS Strategies.

But, he added, “I understand alcohol businesses don’t have to do this, and we are supposed to regulate like alcohol, that’s the constitutional mandate.” 

Davis also explained how consumers use cannabis at his facility. They don’t come in for a few minutes, he said. Instead, customers will spend up to 10 hours consuming product. They watch movies or TV, or play video games, and leave when it feels safe.

“They’ve enjoyed their high, they’re sober, and now they’re ready to go. The way things play out and what people have in their head are not actually the same thing,” Davis said.

Tom Scudder of the Marijuana Industry Group asked that the rules be designed that would allow hospitality to succeed.

“We have a complete absence of places for people to safely consume in the state, and that makes no sense,” he said.  

The rules should appropriately differentiate between a hospitality business and a retail store, he added. The proposed rules would allow a hospitality business to sell the same quantity as a retail store, and that seems unreasonable from a competitive advantage, Scudder explained.

The difficulty in getting hospitality licenses also has a social equity angle, according to Sarah Woodson of the Cannabis Experience, which operates a marijuana-licensed consumption bus.

“I can’t compete with stores,” Woodson said. “A hospitality lounge is never going to make the same amount of money as a retail marijuana store.”

Rulemakers, she said, should also remember that the legislature approved a law to promote social equity within marijuana licenses, and those businesses, including hospitality businesses, have to be able to make money. 

“All of us need an opportunity to be able to create revenue and also keep in mind public health and safety,” she added.

Truman Bradley with the Marijuana Industry Group told Colorado Politics that marijuana hospitality in Colorado is very difficult to get into.

Current hospitality sales limits are too low for a business to be commercially viable, he said, pointing out that people are usually not restricted in how much they can buy at a bar or restaurant.

There’s also an issue around setbacks, which he said are so high that it’s almost impossible to find a location for a hospitality business. Denver’s ordinance places a 1,000-foot “proximity restriction” between a hospitality business and a school, daycare, recreation center or city-owned pool, an alcohol or drug treatment facility or other marijuana hospitality business.

Ventilation requirements by Denver also make it too expensive for entrepreneurs to upgrade those systems, at a cost of $200,000 or more, he said. That’s for indoor ventilation within the business, not for odor control outside of it, he said.

And all hospitality licenses in Denver are currently reserved for social equity, Bradley said, but the lack of available capital for this new business type makes it too complicated to get that kind of investment. 

The state enforcement division’s rulemaking, and rightfully so, can only control the rules at the state level and those permitted within statutory guidelines, Bradley said.

Denver’s rules around exclusivity on the licenses without adequate funding, ventilation, and setbacks are all under that city’s jurisdiction and not something the state rules can address.

“In order for hospitality to be viable, there needs to be significant change at the state and local level” because of the dual licensure rules. “It’s critical to address the fixes from both angles.”

Is there a path forward for hospitality business?

Bradley said his group interviewed all the candidates for mayor and city council before the election last May and as part of their Green Voter Guide. Hospitality was one of three issues they asked about, and he said every candidate knew about it and said they would be willing to work on it.

At the state level, the proposed rules do increase the purchase limits substantially, he said. 

The last issue is funding, he said.

“There needs to be a conversation about funding. With the industry struggling over the last two years, private equity is not getting involved,” he said.  

The proposed federal change on marijuana scheduling – moving it from Schedule 1, where it is illegal in every form, to Schedule 3, where it could be prescribed, for example – provides some hope, Bradley said. 

“I expect capital markets to open up if and when the federal government reschedules it to Schedule 3,” he added. 

But he also pointed out that marijuana has generated $2.5 billion taxes for the state, and so far, the state has invested only $400,000 in one-time grants for social equity licenses approved in the 2023 legislation. Those grants are limited to around $25,000, he said. 

“That’s nothing. The state needs to step up here and devote real resources to social equity funding,” he said. 

The stakeholder group is slated to meet several more times in October with permanent rulemaking hearing at the end of October.