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Colorado lawmakers take steps to regulate cannabis social clubs

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Cannabis clubs could be in danger. - FILE PHOTO
  • File photo
  • Cannabis clubs could be in danger.

As we all know, adult-use marijuana is legal in Colorado. But, under Amendment 64, Article XVIII, Section 16, it is illegal to consume marijuana "openly and publicly or in a manner that endangers others." Given this limitation, some adults otherwise able to legally partake are having trouble finding a state-sanctioned place to do so. Tourists in temporary lodging that doesn't allow on-site consumption or renters whose landlords forbid it find themselves in this predicament, as do people living outside.

So, many in the industry and their regulators see a hole that needs filling: Where, outside of a private residence, can adults enjoy cannabis?

For the past four years, private cannabis clubs have filled the need. Though individual business models vary, in general these members-only social clubs provide a space for individuals to come together and embrace their Amendment 64 rights.

There's no licensing or regulation of operations, so these businesses exist in a legal gray area with opponents arguing they're retail sales in disguise and proponents saying adults have the right to consume cannabis in private with other adults.

Though Colorado, mostly the southern part, has seen a proliferation of such clubs, attempts at state-level regulation have so far fallen short. "There is an old adage that policy always lags 10 years behind the people, and that plays very true here," says Jason Warf of the Southern Colorado Cannabis Council, who's long been trying to push social consumption policy.

Warf was involved in drafting Senate Bill 63, a licensing framework for cannabis clubs. He and other stakeholders worked for several years to hash out the bill's rules and requirements. Throughout the process, club owners represented by Warf made concessions in order to reach a compromise. For example, they agreed to not serve alcohol or food in their establishments based on feedback from the hotel and restaurant industry.

On March 1, SB 63, sponsored by Sen. Vicki Marble, R-Fort Collins, and Rep. Jovan Melton, D-Aurora, was introduced to the Colorado Senate's Business, Labor and Technology committee along with another, seemingly similar piece of legislation, Senate Bill 184.

The two bills were originally intended to complement each other — SB 63 was aimed at creating a marijuana consumption club license and SB 184 was supposed to define these three crucial words from Amendment 64: "open and public."

But in committee, an amendment to SB 184 was proposed. This amendment extended the bill beyond defining language into drawing parameters around the business practices of the cannabis clubs themselves, stating that the sale or exchange of marijuana for remuneration would be off-limits.

Ultimately, SB 184, sponsored by Sen. Bob Gardner, R-Colorado Springs, and Rep. Dan Pabon, D-Denver, was approved 5-2. SB 63, the proposed licensing structure, failed 6-1. This switch-a-roo means the reimbursement model used by most local cannabis clubs could become illegal, if SB184 manages to pass both houses and get Gov. John Hickenlooper's signature, paving the way for municipalities to ban them.

Warf thinks passing legislation with the potential to close existing clubs will have negative economic and social effects. "Closing them will kill the jobs they are providing in communities," he explains. "Plus, clubs have become a resource for veterans, as the socialization offered is a significant aspect of treating PTSD."

Of course, SB 184 has to survive not only a Republican-controlled Senate, but also a Democrat-controlled House and a Democratic governor before it becomes law. Still, for local clubs, which have been sitting in legal limbo for months, the advancement of SB 184 isn't good news.

Bill threatens local clubs

Should Senate Bill 184 become law, it would end a business model that local clubs have pioneered and come to rely on: the reimbursement model.

Each club does it slightly differently, but the model is basically this: You sign up as a member, entitling the club to assist you in growing marijuana, then you can consume the club's marijuana in exchange for a donation. The clubs and their attorney insist that transaction doesn't constitute a sale, but lawmakers and law enforcement disagree.

Colorado Springs City Council voted last year to ban all cannabis clubs, with an eight-year grace period for them to recoup their investment only if they get a local license. Most chose not to, instead suing to get the ordinance overturned on constitutional grounds. Prohibiting private membership clubs not only violates adults' right to consume marijuana and assist one another in that, they claimed, but it also violates their right to peaceful assembly. That case is pending, so whether reimbursement constitutes a sale is still an unanswered question.

Meanwhile, the clubs that didn't apply for the city's license (which forbids marijuana exchange and mandates closure after eight years) got served cease and desist notices in September. But, you may have noticed, they're still open for business. Just last week, the city filed a motion to hold the businesses in contempt and request the authority to shut them down.

All this has owners worried for the future. Ambur Racek of Studio A64, the first post-prohibition club to open in the Springs, says she "thought the ongoing court case provided a layer of protection but now [she's] not so sure." Meanwhile, the single mom says she's put a lot into her threatened business, including a $25,000 remodel of the building that's nearly complete.

"This is it for me," she says, "if they storm in here to raid the place, we'd lose everything."

Racek is frustrated that the proposed legislation would benefit Denver's social use initiative over existing clubs in the Springs, like hers, that were first to tackle the murky legal waters.

Because SB 184 would outlaw the reimbursement model, only businesses that have some alternative source of revenue could survive. That would work just fine in the paradigm that Denver activists are pushing with that city's voter-approved Initiative 300.

Passed in November, it allows businesses that aren't already in the marijuana or alcohol business to apply for a permit to allow marijuana consumption on-site. Though city officials are still working out the kinks, this basically means that cafés, yoga studios and art galleries could offer on-site consumption, while dispensaries and bars could not.

But to mirror that model, Racek would have to totally change hers.

"It's unfair because we've been doing this a long time, and have been asking for regulation again and again," she says. "Everybody agrees there's a need for places like this, but then the situation gets manipulated by big money in Denver who don't want to see us as competition."

Springs City Councilor Bill Murray was among those who trekked up to the Capitol to support local clubs. In his remarks to the Senate's Business, Labor and Technology committee (which later passed SB 184), he told senators about his visits to local clubs — part of his due diligence before voting against the city's ban, which ultimately passed. He recalled that, upon entering Studio A64, club members assumed he was a cop. "I'm not tattooed, I'm not pierced, I don't know what those ear things are," Murray told the committee jokingly. "...Buddy, I'm sorry, I'm an old white guy!"

Despite never having smoked weed himself — "never have and never will," he noted — Murray nonetheless thought it important to actually go see the community his colleagues wanted to outlaw.

"I started talking to folks and was astounded by the sense of community so I went out with them as they pick up homeless vets, to talk to them, helping them with [their] PTSD," Murray testified. "All they do is get together to help members of our community and discuss issues."

He went on to say that he doesn't think the clubs pose a public safety concern. "When I asked the DA (Fourth Judicial District Attorney Dan May) two years ago about these clubs and how come we don't close them down, he said, 'Well, I couldn't get a conviction, so we just leave them alone,'" Murray said. "Let's just give them the regulation they've been asking for and make it common sense."

Unfortunately for club owners, patrons and their supporters, Murray's opinion wasn't shared by a majority of the Senate committee members, just as it hasn't been shared by a majority of Springs City Councilors.

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