Marijuana Retailers – Are Private Clubs an Answer to Prohibitions on Public Use?

By Cary R. Kadlecek and Timothy H. Watkins 

on January 27th, 2016Posted in 

Landlords, Regulatory, Retail, Retail Sales

In jurisdictions where recreational marijuana is legal, many retail entrepreneurs and commercial landlords want to understand how and if marijuana can be consumed in retail establishments.  In jurisdictions such as Colorado and the District of Columbia, where the use and possession of marijuana for recreation is legal, consumption cannot occur in public.  This has left marijuana consumers without public establishments in which to legally consume marijuana, and has motivated entrepreneurs to find alternatives.

One way that businesses and consumers have responded to this demand is through the establishment of “cannabis clubs” where consumers pay a fee to be a member of a private club that allows the consumption on-premises of marijuana without selling it.  Smoking in private clubs is permitted in some jurisdictions as an exception to laws that otherwise ban smoking in public places.

The regulatory landscape for such private cannabis clubs is often murky and varies by jurisdiction.  Several cannabis clubs exist in Colorado, but few are sanctioned by the local jurisdiction, while others operate in a regulatory grey area.  In Alaska, where the use of recreational marijuana is legal but the sale of it is not, some businesses operate as dispensaries where medical marijuana cardholders can acquire marijuana in exchange for a donation, or as co-ops where recreational users exchange marijuana among themselves. 

 The District of Columbia banned the use of recreational marijuana in private clubs soon after it became legal and recently voted to extend the ban.  However, the controversy surrounding this vote seems to indicate there may be movement on this issue in the future.

As recreational marijuana becomes legal in more states, the regulatory landscape for retail business owners who wish to cater to these consumers will become more complex.  

Similarly, retail landlords will want to understand their risks for leasing to such establishments.  Both should pay close attention as laws and regulations struggle to keep up with businesses springing up in the wake of the legalization of marijuana.

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