Investors from around the country, and possibly globally, are ready to supply capital, especially to cannabis companies ready to go with a public offering. But Colorado state laws are hindering financial growth for the cannabis industry located in Colorado. In Nevada, a lawsuit has been filed against the Nevada Department of Taxation by owners and operators of 11 dispensaries left out of the latest round of licenses awarded by regulators.
According to the Colorado Department of Revenue, the state’s cannabis industry is estimated to produce $1.5 billion revenue annually. However, the state’s current law bars outside financial investment.
“What we’re seeing now is states like California, Florida, and Massachusetts bring in capital to get ahead of us in infrastructure, R&D, new-product development. That’s not something the Silicon Valley of cannabis—Colorado—should allow to happen,” Dean Heizer, executive director and chief legal strategist for LivWell Enlightened Health, a Colorado-based cannabis retail operator, said in a statement.
Colorado lawmakers passed a bill in 2018 allowing outside investors and capital, but former Gov. John Hickenlooper (D) vetoed it calling its passage “premature,” partly because the industry is still illegal federally and lacks banking services. He also expressed concern for the potential of criminal enterprises to become a partner in the Colorado-based cannabis market through investment with profits from criminal enterprises.
Colorado’s new Governor Jared Polis (D) is positioned as a champion of the cannabis industry. The bipartisan legislation would allow publicly held companies to invest and hold cannabis licenses in Colorado. The House Finance Committee unanimously endorsed HB 19-1090 that would allow publicly traded companies and outside investors access to Colorado’s cannabis market. The House Appropriations Committee will now hear the bill.
The current state law limits out-of-state owners to 15 people. This law eliminates the potential for a public stock offering, a merger with a publicly held company or capital raises from venture capital funds with over 15 investors.
“We’ve been hindered in our growth because our laws restricted outside ownership and investment,” said Andy Williams, CEO of Denver-based cannabis grower and retailer Medicine Man. “This is a little late but allows Colorado companies to compete with the rest of the country and the rest of the world. Without it, Colorado would fall further behind.”
Chris Woods, the owner of Boulder-based dispensary chain Terrapin Care Station, told Colorado Public Radio that he is concerned that opening the cannabis industry to outside investors could lead to more black-market activity and is opposed to passing the bill.
LivWell has a contingency plan to move all its non-licensed assets to Nevada if the bill is not passed in 2019 Heizer also stated.
However, there are problems with the cannabis business environment in Nevada. Attorney and former Nevada Secretary of State Ross Miller filed a motion on behalf of 11 dispensary owners that were not awarded a license by state regulators in a lawsuit against the Nevada Department of Taxation.
In 2018, there were 462 applications for 61 new Nevada cannabis dispensary licenses.
“When we found out we didn’t get any licenses, I was just flabbergasted,” said John Ritter of The Grove Dispensary. He was notified that he did not receive a license, but no reason was given. As Ritter explained to KLAS Eight News Now (Las Vegas CBS affiliate), he attempted to reach out to the taxation department to determine the criteria to receive a license. However, the representative of the taxation department told Ritter that the department’s criteria and the process to award licenses would not be disclosed.