What Will Out-Of-State Investment Look Like in Colorado?

On Monday, Colorado’s Marijuana Enforcement Division hosted the first of two work group sessions on House Bill 19-1090, a measure that will transform the state’s cannabis business ownership requirements by allowing for publicly traded companies and outside investment to enter. Governor Jared Polis signed the bill into law in late May.

During the session, participants—mostly licensees, attorneys, regulators, and policymakers, including State Representative Matt Gray, who co-sponsored the bill—discussed four main topics: the documents they’d need to retain and submit; disclosures on business owners and those with financial interests; publicly traded corporations’ direct investments, and M&A activity; and divesture of “unsuitable parties.”

During public comment, Ryan Shaw, owner of Canna City cannabis shop, was particularly vocal. He said that while he generally supports the bill, he opposes the proposed auditing requirements that would, in his view, “benefit corporations tremendously.” He added, “the events that are going to be happening with the larger players in the state are going to give them some extra weapons to further seek markets or to tactically knock off their opposition.”

He noted potentially favorable conditions in other states, including lower taxes on cultivators, and concluded, “I’m just saying that there are a lot of small companies barely hanging on.”

Through this conversation, participants explored questions like: How can rules reasonably define “contributions to operating capital” when determining whether disclosure is required? Are there limitations imposed by the Federal Securities and Exchange Commission that make certain transactions more or less likely than others? And what is a reasonable time period for divestiture of a person found unsuitable?

By the session’s end, the Marijuana Enforcement Division identified small groups of stakeholders to “develop options for new or revised language,” which will be further discussed at an upcoming work group session on July 15, in preparation for a hearing in October.