The 420 Smoke Lounge opened in August 2016 in Trinidad, Colorado. Entrepreneurs Kate Mullen and Laurie Lyon are now suing the city over a recently enacted moratorium on private smoking clubs. (Courtesy of Kate Mullen)

Cannabis on the Colorado border: Trinidad sued after enacting pot club moratorium

Colorado’s cannabis industry may be centered in metro Denver, but there’s plenty of action around the state’s edges.

Towns like Sedgwick, near Colorado’s northern border with Nebraska, have found new economic life because of legal marijuana. Not surprisingly, according to reports, many patrons at those cannabis dispensaries are from the Cornhusker State.

Meanwhile to the south, about 15 miles from the Colorado-New Mexico state line, the city of Trinidad is going through an even larger boom thanks to sales of adult-use cannabis.

Between January and May of this year, the city’s cannabis businesses brought in $14.2 million in gross sales from legal marijuana, Trinidad city attorney Les Downs told The Cannabist. Trinidad’s sales in that span accounted for about 2 percent of the state’s overall sales of cannabis products, based on Colorado sales tax data monitored by The Cannabist.

Considering that Colorado has been averaging $100 million or more in monthly sales of legal cannabis for the past 12 months, that’s not small change.

But not all of Trinidad’s businesses are flourishing, such as one catering to visitors looking for a place to legally consume their cannabis purchases.

Last month, entrepreneurs Kate Mullen and Laurie Lyon filed a lawsuit against several Trinidad officials, including Mayor Phil Rico, alleging that a city campaign of intimidation against their dual business — the Feed Your Head shop and 420 Smoke Lounge — ultimately resulted in their closure this past May.

Trinidad officials and members of the city council created ex post facto (a criminal law applied retroactively) legislation “to cause closure to the only cannabis lounge in Southeastern Colorado, in a city with 22 dispensaries and no public or private location or venue for traveling adult cannabis buyers to enjoy their legal cannabis purchase,” according to the suit filed in Las Animas County District Court.

Mullen and Lyon further allege that Trinidad’s “moratorium” on public or privately-owned cannabis lounges, enacted this past spring, was actually “an indefinite ban with no limits.”

When their business plan was originally presented to Trinidad’s economic development director last year it was received with enthusiasm, and the shop and lounge opened their doors in late August, Mullen told The Cannabist.

The Feed Your Head shop in Trinidad, Colorado. Entrepreneur Kate Mullen said it was a gift shop that didn’t sell cannabis, and neither did the adjacent 420 Smoke Lounge, according to Mullen. (Courtesy of Kate Mullen)

Relations between the smoke lounge and the city went along smoothly at first, she said.

“Bear in mind we shared a courtyard with the police substation,” Mullen said. “And our parking lot was shared with City Hall.”

But the city’s “supportive and positive” attitude toward their business began to sour this past spring, following a personnel change in the city manager position and a crackdown on some local dispensaries and other cannabis-related businesses, she said.

According to a Trinidad Police Department letter from March, addressed “To Whom it May Concern,” those businesses were hosting so-called “industry nights,” or social gatherings where cannabis was “purportedly given away to people after a cover charge is being paid, ostensibly to gain entrance.”

Such events, the letter continued, amounted to a “thinly veiled exchange of money for marijuana to be consumed on the premises,” which in turn violated Colorado state law regarding public consumption of cannabis.

No cannabis was ever provided by 420 Smoke Lounge, Mullen said. Patrons had to bring their own marijuana products to the facility. Neither of her businesses was targeted in the initial law enforcement crackdown. However, the letter “made the dispensaries paranoid to do advertising and marketing business with us, because it essentially alluded to the fact that our business was illegal and that anyone going into it would be prosecuted,” she said.

City attorney Downs said Trinidad officials never “expressly or tacitly condoned” local smoking clubs. They did, however, consider┬ápotential state legislation that would create cannabis consumption clubs. Earlier this year, state lawmakers considered a bill that would create regulations for such businesses.

“For the first several months of this year we were waiting on the state legislature to take action,” Downs said. “There were a number of bills pending in the legislature regarding smoking clubs.”

When it became apparent that the state lawmakers would not reach an agreement on the issue of open and public consumption of cannabis in Colorado or pot clubs, Trinidad officials began to focus on “industry nights” and smoking clubs, Downs said.

“The city quickly realized that it was getting rather out of control,” he said. “People were trying to do these kinds of things or not complying with the reasonable requests of the city, so at that time the city opted to pass a moratorium on smoking clubs.”

When state lawmakers failed to pass regulations for pot clubs they left Colorado with a patchwork of rules for such establishments.

Colorado already has about 30 private pot clubs, according to legislative analysts, but they operate under various local regulations and are sometimes raided by law enforcement. Some underground clubs have a speakeasy feel, with small groups meeting up to smoke in a secret location that members sometimes call “Dave’s House,” a reference to a classic Cheech and Chong skit.

Mullen and Lyon’s lawsuit was recently granted a motion to proceed without funds, Mullen said. The case will be tried in neighboring Huerfano County, which has less of a case load. The defendants have until Aug. 17 to file an answer to the complaint.

The Trinidad moratorium does not affect the sale of cannabis in the city, Downs said. He also acknowledged that it “does make sense” to have smoking clubs.

While Trinidad is a great locale for cannabis businesses, most of the clientele are from other states where marijuana remains illegal, Mullen said. Outside of several “420-friendly” hotels in the region, those visitors have few places where they can legally consume their purchases, leaving them open to prosecution by local law enforcement.

“In our experience, 85 to 90 percent of the recreational (cannabis) business here in Trinidad is Texas business,” she said. “It’s not only that you can buy legal cannabis here far cheaper than you can buy it (illegally) in Texas … but it’s a great place to go camping. It’s a quaint little town. It’s just got lots of opportunity and lots and lots of possibilities.”

Two documents: Trinidad Police Dept. memo and cannabis entrepreneurs’ lawsuit