Enter the Massachusetts “Social Consumption Establishment” for Marijuana
Prefaced by headlines in the on-again-off-again Denver regulations regarding so-called “Cannabis Clubs,” the Massachusetts Cannabis Control Commission draft regulations created a third type of retail license for operators to sell “single servings” of marijuana to consumers on the premises. While the size of such a serving has yet to be defined, our understanding is that these businesses will not be able to serve more than an ordinary dose of THC, e.g. 10mg. These licenses are distinguished as Primary Use or Mixed Use social consumption establishments, which designation depends on whether 51% of the average gross revenue is derived from the sale of marijuana products to be consumed on the premises.
It is ostensibly possible for either “primary” or “mixed use” to exist in the presence of other business types, the only difference between these licenses being revenues. The license requires very strict controls for storage and security, and also that the sales be “closely integrated with the shared business product or service.” Importantly, and probably very disappointing to many restaurateurs, these regulations explicitly forbid the use or consumption of alcohol in any of these social consumption establishments – at least at the same time marijuana is offered. Suggested businesses tailored to social consumption have included:
- Cafes, Bakeries & other food establishments not serving alcohol.
- Massage parlors and spas, clinics etc.
- Movie theaters (not arcades due to other restrictions)
- Yoga Studios, gyms and fitness clubs
- Bud & Breakfast Inns/Hotels
While prospective businesses of this kind can be exciting in concept, from a legal perspective they are not at the top of our recommended models. The reason for this, if it isn’t apparent, is that an owner of the social consumption business — and/or the real estate it occupies — incurs a risk of liability if the consumer causes or is a participant in an accident or other damaging event. And while marijuana advocates may protest that the effects of marijuana are not nearly so detrimental to e.g. hand-eye coordination as alcohol, the reality is that law enforcement and the Courts have not adopted this distinction. Until suitable intoxication testing standards are in place, and until there is more widespread understanding on the effects of marijuana, the same warning will till apply from this office.
The Marijuana Transporter – A Third Party Secure Solution for the Industry
Not to be confused with consumer delivery services, these transporters will be authorized to ship marijuana between licensed establishments (think cultivator to retailer or processor, cultivator or processor to retailer etc.) Many existing operations will operate their own inter-facility shipment, but these third party licensed services will be essential for any of the smaller operators with limited resources, of which the Massachusetts licensing scheme stands to launch quite a few. Where most banks use a “Brinks” or “Loomis” shipper for their cash, it follows that a company that develops an efficient infrastructure for bulk marijuana transport in Massachusetts will be able to enjoy similar success (A little inside knowledge here, but one of our clients that reached out to Brinks learned that they would nearly give away their used vehicle inventory).
Enforcing the Standards for Massachusetts Marijuana – The Independent Testing Lab
On a trip one early September day in 2012 to the west coast, I visited an old friend in Seattle who happened to be working at a testing lab for the medical marijuana industry (Washington passed its own recreational law shortly thereafter). The office itself was a mere two room unit comprising little more than 6-800 square feet. One room acted simply as a reception area, while the other contained a pair of equipment stacks barely larger than component stereo systems.
These units were High Pressure Liquid Chromatography units, or (“HPLCs”), and apart from the desktop computers connected to them, accounted for the entire testing lab operation. That month too, the magazine “High Times” was hosting a Cannabis Cup celebration in the city, and this lab was responsible for all of the entrants to the competition.
Since that day, I’ve long been interested in this particular Cannabis business model from a legal perspective. The office itself, with as many test samples as it had from around the city, probably held less than the legal possession limit for any medical patient. Because of this, the relatively low cost barriers to entry, and because such business requires no interaction with patients or consumers of any kind, the marijuana testing lab in Massachusetts remains a recommendation for our clients to enter.
Massachusetts Marijuana Research Facility Licensure
Another interesting yet obscure license available on the recreational marijuana market is similarly science based, but a lot more focused. While federal law has largely precluded the creation of any such entities in the U.S., they are somewhat common in Israel, where a lot of marijuana studies originate.
Such a research facility is naturally going to materialize in the form of a non-profit, or else will likely be associated with a university, both of which Massachusetts has many —
especially in the medical sciences. So while the federal school funding conflict that currently prevents meaningful research will remain an impediment to the large scale R&D in this field, if the U.S. Congress can find the votes to pass even moderate reforms, we expect Massachusetts will fast become a leader in marijuana research for the foreseeable future.
Whether we see some, most or all of these different marijuana business types open in Massachusetts is a guessing game, but it is certain the Cannabis Control Commission is ready for business. Federal law as of the time of this article remains the most significant obstacle to the industry without a doubt – for banking, insurance and even prosecution from the Department of Justice. The state’s own security, tracking and community engagement requirements are certainly a burden too, but a Massachusetts attorney with marijuana industry experience will be able to successfully guide his or her clients without much issue.