Colorado, a leader in marijuana legalization, enjoys top rank among investors. As its market matures, however, experts in the industry have proposed legislative reforms to maintain Colorado’s lead.

A recent editorial in the Denver Post offers one example. The authors are Ron Kammerzell, who has served as the senior director for enforcement at the Colorado Department of Revenue, and Nate Bruggeman, who has served as assistant attorney general at the Colorado Department of Law’s Marijuana Enforcement Division. They ask for three specific reforms, the goal of which is to encourage greater capital investment in the state’s new industry.

  • One reform the authors recommend is loosening of the state’s prohibition on investment in Colorado’s marijuana companies by publicly traded companies. While this law avoids conflict with the federal government, it also reduces the availability of capital investment. The authors argue there is little to be gained by retaining this law.
  • A second recommendation is that the state’s two separate sets of laws concerning medical and adult-use marijuana be recodified into one. The authors argue that the two codes are more complex (and thus more expensive to comply with) than they would be if merged into one.
  • Third, they recommend reform of the state’s laws governing marijuana research and development, which the authors claim are “replete with contradictions and gaps.”

Kammerzell and Bruggeman are not alone in attempting to persuade Colorado’s government to reform its marijuana laws. Writing for Forbes, Lewis Koski, former director of the Colorado Marijuana Enforcement Division and a consultant on marijuana policy, also discusses investment by publicly traded companies. The governor, John Hickenlooper, recently vetoed legislation that would have permitted publicly traded companies to obtain cannabis business licenses. “It would have been the most significant legislation for the industry since legalization itself,” Koski opines. Under the current law, those wishing to raise capital for a marijuana business in Colorado are largely cut off from traditional sources of capital, which are connected to federally regulated banks. Instead, business owners must rely on such private sources as friends and family. Koski sees this as one tall barrier to entry into the market. Another is the regulatory and bureaucratic requirements of operating a legal cannabis business. While these requirements help prevent the entry of criminal elements into the legal market, they also can exhaust the resources of legitimate businesspeople with limited capital.

On or off the brakes?

Some proposed reforms, such as harmonizing the state’s medical and retail laws, seem noncontroversial. The idea of allowing increased investment from sources outside the state, including publicly traded companies, however, did not have unanimous support. Some in the state’s industry did not support a bill that would have allowed marijuana businesses to have publicly traded owners, even though many other legal states allow this. Meg Collins, the vice president of public affairs for Good Chemistry, a cultivator and retailer of cannabis, said: “This sweeping, material change in our regulations could significantly increase the risk of federal scrutiny.”

As Colorado’s marijuana industry continues to grow and mature, calls for new laws to streamline regulation and allow for increased capital investment should not come as a surprise. Unless the federal government changes its position on marijuana, however, many industry leaders may continue to prefer a cautious approach to business development.

What do you think? Should Colorado open its doors to out-of-state investment? Leave a comment below.

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