With nearly half of the United States of America having decriminalized or legalized adult-use cannabis, where are the opportunities for the hospitality industry?
Last week, Illinois became the eleventh state in the USA to legalize adult-use cannabis. When Governor JB Pritzker signed the bill, Illinois became the first state to legalize cannabis and establish a distribution system to license dispensaries via the legislative process.
Legalization of cannabis in Illinois will go into effect on January 1, 2020.
This is not to be confused with decriminalization, which is the strategy that has been adopted by 13 other states. In states where cannabis has been decriminalized, possessing small amounts of the substance is met with civil—rather than criminal—penalties. The sale and manufacture of cannabis aren’t regulated and remain illegal in those states
When a state chooses legalization, they’re not just instructing the police to “look the other” way if they find small amounts of personal-use cannabis. The laws that prohibit the possession and personal use of cannabis have been abolished in these states. It also means that:
- states can regulate cannabis use and sales;
- states can tax cannabis use and sales;
- non-violent offenders jailed or imprisoned for small amounts of personal-use cannabis can be freed, making room for violent criminals and removing the burden from taxpayers.
To that last point, some reports estimate that nearly 800,000 people in Illinois with criminal records due to purchasing or possessing 30 grams or less of cannabis may have their records expunged.
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While cannabis is still a Schedule 1 substance and therefore illegal federally, more politicians are making legalization a part of their campaigns. Most states (33 plus Washington, DC) permit medical use of cannabis. However, public consumption of cannabis—referred to by advocates as “social consumption”—isn’t at all mainstream or widespread even though use is becoming somewhat de-stigmatized.
On May 1 of this year, the Las Vegas City Council voted 4-1 to allow cannabis social-use lounges. It’s likely the vote would have been unanimous but Mayor Carolyn Goodman abstained because a family member works in the cannabis industry, presenting a conflict of interest.
The ordinance allows businesses with the proper permit to let customers use cannabis on property. Social-use lounges must be at least 1,000 feet away from casinos and schools, and they’re required to put an air control plan into place to keep smoke from escaping the venue.
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A day after Las Vegas voted on the city’s ordinance, Colorado passed a bill that addresses the public (social) use of cannabis. The bill permits dispensaries to apply for tasting room licenses, much like licenses granted to breweries and distilleries in the state. Hospitality businesses like restaurants, hotels and music venues (and other businesses, such as art galleries) can apply for private consumption licenses and limited cannabis sales. Some businesses, like tour buses that leverage cannabis tourism, are able can be licenses for consumption but not sales. Colorado addressed their Clean Indoor Air Act, the state law that prohibits public indoor smoking, by exempting businesses that are granted a consumption license.
These legal developments represent progress in terms of the viability for bar, nightclub, restaurant and hotel operators to enter the adult-use recreational cannabis space. There’s now at least one city that has addressed consumption lounges and their proximity to schools. Air control and indoor smoking bans have been addressed by a city and a state.
Chris Sayegh, CEO and head chef of The Herbal Chef, said recently that “hospitality in general is a huge topic” when it comes to cannabis legalization. However, he and other experts like Chad Finkelstein, a partner at Dale & Lessmann LLP, and Scot Rutledge, a partner at Argentum Partners, believe cannabis will never be legal on a federal level without significant changes to the United States Senate.
The current Schedule 1 status of cannabis doesn’t mean that cannabis doesn’t present operators with opportunities. Social-consumption ordinances and licenses may be moving slowly but they’re still moving forward—progress is being made.
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“Nevada will likely be the first state to actually implement public consumption,” said Rutledge back in May. “Nevada will do well because Las Vegas is all about hospitality and regulating hospitality experiences.”
Rutledge also predicted that within the next two years, legal-drinking-age adults will be permitted to bring their own cannabis-infused beverages to social-consumption lounges. He has also said that operators should keep in mind that licensed cannabis producers aren't necessarily experts when it comes to creating food and beverage items—their specialty is in getting cannabis products licensed. What they want is to leverage the infrastructure that bar, nightclub and restaurant operators have in place already.
While cities and states slowly address social consumption and figuring out how to regulate that aspect of cannabis, operators can keep their eyes and ears open for partnership opportunities. Operators can also become involved politically, making their feelings about decriminalization, legalization, and public consumption known to local and state representatives.