COULD NEW REGS KILL THE GREEN RUSH BUZZ?

A new law called the Colorado Medical Marijuana Code (CMMC) was
recently signed into law by Gov. Ritter. The CMMC is intended to place
new regulations on a buregeoning industry that has been largely
unregulated since limited use of medical marijuana was legalized in
2000 by amendment of the state constitution.

The new code provides that a medical marijuana business that is
"established" and "locally approved" on July 1, 2010 (or for which the
owner has applied for approval before July 1, 2010, that is
subsequently granted) will be allowed to continue operating if it
complies with applicable state and local laws. The term "established"
is defined in CMMC to mean (1) owning or leasing a space "with a
storefront"; and (2) remitting sales tax in a timely manner on retail
sales as required by state and local law.

The CMMC appears to have created a "green rush" in many communities as
aspiring medical marijuana entrepreneurs seek to establish their
businesses before the July 1 deadline. In the down economy, these new
businesses are creating demand for commercial space where none may
otherwise exist.

Becoming established before the deadline may allow medical marijuana
businesses to operate, but perhaps only for a limited period of time.
The continued operation of such businesses will require owners to
comply with forthcoming regulations issued by state and local
governments, the substance of which are still largely unknown.

Some of the known requirements are as follows:

. A person wishing to run a medical marijuana business must apply for
a state license on or before August 1, 2010, and pay a state licensing
fee in an amount that is not yet determined (but could be
substantial).

. The CMMC requires each local government (city, county, or city and
county) to establish its own medical marijuana licensing regulations.
The local regulations are not yet adopted and could be burdensome. In
lieu of adopting their own regulations, local governments may
permanently ban these businesses (a power that was in question before
CMMC).

. On or before September 1, 2010, a medical marijuana business must
grow 70 percent of its own medicine (the remaining 30 percent can be
purchased from another source). The business can utilize a large space
that is both a growing operation and a dispensary or it can designate
a separate growing location.

. A medical marijuana business must post a bond of $5,000 as security
for its sales tax liability.

. The owner, and any employees of the business, can't have a felony
conviction in the last five years (or any felony conviction related to
controlled substances); can't be in default on student loans; can't
have unpaid child support; and must meet certain state residency
requirements.

. A medical marijuana business cannot be located within 1,000
feet

of a school, an alcohol or drug treatment center, or a child care
facility as measured from the property line at the time the license is
issued.

. A medical marijuana business must be located in a zoning district
for which the use of medical marijuana is "contemplated." This means
that, even if a zoning district permits uses - such as a plant store,
nursery, drug store, or sale of any commodity - that could arguably
inlcude medical marijuana use, a business may not be permitted if the
zoning regulations do not expressly permit such use. Those local
governments that wish to allow medical marijuana businesses must
designate permitted zones; a business established by the July 1
deadline may later be disqualified because it is not in the proper
zoning district. There is no guarantee that the business would be
permitted to move to a permitted zone.

While the green rush is now on as medical marijuana businesses seek to
become established by the July 1 deadline, the coming state and local
regulations may kill the buzz. New medical marijuana businesses should
consider the potential affect of new regulations before incurring
expenses trying to become established.

Noah Klug is principal of The Klug Law Firm, LLC, a general law
practice in Summit County emphasizing real estate, business and litigation.