Changes to the Colorado Marijuana Business Make it Easier to Participate

Legal marijuana in the United States remains a hot-button issue, even as the industry has been quite a success for Washington and Colorado. In 2015 alone, Colorado brought in an astonishing $996,184,778 in revenue from marijuana sales. That's 42% more than 2014, and $135 million in tax revenue. Colorado's marijuana users are doing great things for the economy.

Since Washington and Colorado legalized for recreational use, Oregon and Alaska have joined in. While several states consider medical marijuana legal, many others still have no laws legalizing the use of marijuana for any purpose.

But, because of federal regulations against the recreational sale and use of marijuana, those who are in the dispensary business haven't had it easy. Since you can't route money from the sale of marijuana through traditional banks, the industry is cash-only and represents a huge security risk.

But, thanks to recent changes - starting and running a dispensary just got a bit easier.

In March, the U.S. Supreme Court chose not to take a lawsuit Nebraska and Oklahoma filed to overturn Colorado's legalization law. If they wish to continue the case, the states will need to do so with the federal district court.

On the same day, a federal judge dismissed a lawsuit against Rocky Mountain Organics - a marijuana company which was accused of violating both the U.S. Constitution and the Racketeer Influenced and Corrupt Organizations Act (RICO).

Because of the risk of RICO lawsuits and their impact on the marijuana market, Colorado governor John Doe signed a bill to remove the surety bond requirement for cannabis businesses. This is a major victory for the industry because a lot of surety bond companies stopped working with marijuana businesses because they were afraid they'd get caught in the RICO crossfire.

What's a Surety Bond?

A surety bond is a way to guarantee you'll follow the rules. Bonding companies take a percentage of the bond amount to guarantee a business will abide by the state's rules. It's essentially insurance for clients, that the business pays for. Marijuana dispensaries are not the only business where they are used. Nearly any professional will have some surety bond requirements - with thousands of requirements across the country. Costs vary based on the size of the bond, the company that bonds the company, and the reason you're required to get the bond.

How Does this Help Colorado's Marijuana Business?

Removing the surety bond requirement means there is less capital required to start a dispensary. Because of the high risk of the industry, the cost of the bonds was often so high that many who wanted to grow and sell marijuana weren't able to.

Before the change, Colorado required any businesses selling marijuana to post a $5,000 bond for the sale of medical marijuana, and another separate $5,000 bond for retail sale. Plus, retail dispensaries were required to post yet another retail excise tax bond, with additional county and city bonds as required based on dispensary location. Prices also vary based on the underwriting consideration of the bonding company, which involves reviewing the applicant's credit report.

While many in Colorado are rejoicing over the change, several states have a long way to go before achieving the same success. Though we expect 2016 to be a good year for marijuana policy reform, only time will tell how states will respond.