Welcome to our Ask The Cannabist column. Clearly, you have questions about marijuana, be it a legal concern, a health curiosity, a Colorado-centric inquiry or something more far-reaching. Check out our expansive, 100-question Colorado marijuana FAQ first, and if you’re still curious, email your question to Ask The Cannabist at firstname.lastname@example.org.
We are hearing a rumor that after Jan. 1, 2016, Colorado will allow out-of-state residents to invest and own equity in licensed marijuana businesses. Is there any way to confirm if this is something that is actually in the works, or just a rumor?
This rumor is easy to track down! I checked with the Colorado Legislature on the new legislation for this year’s session. House Bill 15-1379, titled “Concerning Creation Of Marijuana Permitted Economic Interest Registrations, And, In Connection Therewith, Making An Appropriation” was signed by Gov. John Hickenlooper on May 29 this year. This new law changes out-of-state investment rules and lessens some of the current restrictions.
For more details, I asked a marijuana regulatory attorney, Jean Gonnell about the law and upcoming changes. Gonnell said, via email: “No, the new law does not allow out-of-state residents to invest and own equity. The original HB-1379 did allow for out-of-state residents to have an equity interest, but it was not the bill that passed and subsequently signed by the governor. This law is a step in the right direction.”
The biz of bud
The new law further defines the nuances for ownership and financial interest in marijuana businesses for non-residents of Colorado, who must register as a Permitted Economic Interest with the state Marijuana Enforcement Division.
Gonnell says: “The new law specifically excludes a ‘Permitted Economic Interest’ from the ‘Owner’ definition. Thus, a permitted economic interest holder cannot have the benefits of profit share of a marijuana entity.”
U.S. residents can lay the groundwork for gaining a foothold in a Colorado marijuana business. “The new law does allow for a ‘natural person who is a lawful United States resident’ to have a future interest in marijuana, such as a convertible promissory note, a right of first refusal if the licensee chooses to sell a portion of the licensed entity, an option to purchase or any other right to obtain an ownership interest,” explains Gonnell.
Investors will need to meet certain criteria, of course. Gonnell says: “This law will allow out-of-state investors to invest in marijuana with the understanding that they can become owners when they qualify for ownership by passing the required background checks and the two-year residency requirement.”
The changes to the law would be effective by Jan. 1, 2016, and according to Gonnell, “we have already seen movement from the Marijuana Enforcement Division allowing these types of interests.”
If you have a specific investment plan, it’s a good idea to consult an attorney first. XO