January 31, 2019

Do Colorado Dispensary Owners Deserve Jail for ‘Looping’?

Last week the owners of Colorado’s now-defunct Sweet Leaf dispensaries were sentenced to jail time for allowing the practice of ‘looping’ in their stores. That practice is when a customer buys the maximum amount of cannabis permitted by Colorado law (currently one ounce per adult-use transaction) and returns the same day to purchase more.

The case, which also destroyed a well-known retail brand and cost dozens of employees their jobs, has become a well-known cautionary tale in the national cannabis industry. But were the tough sentences deserved? And what do they tell us about future state enforcement of cannabis laws?

Looping and the Spirit of the Law

On January 25, the office of Denver District Attorney Beth McCann announced a plea deal with the three owners of the Sweet Leaf dispensaries, Christian Johnson, Matthew Aiken and Anthony Sauro. In return for guilty pleas to violating the state’s Organized Crime Control Act, and to illegally selling and distributing marijuana, the three men each received a one-year prison sentence, to be followed by a year of parole. The Sweet Leaf dispensaries in Denver were also shut down.

'It seems like the dispensaries were comfortable with evading the spirit of the law, even though they claim they didn’t violate the letter of the law.'

Douglas Berman, law professor, Ohio State University

The sentences came after an investigation that began over a year ago and ended up involving several Colorado state agencies. State officials claimed the Sweet Leaf dispensaries were violating state law by allowing consumers to illegally make multiple purchases during the course of a day.

“Technically nobody bought more than an ounce at a time,” Douglas Berman, a law professor at Ohio State’s Moritz College of Law and a long-time observer of marijuana policy, told Leafly.

“They just kept coming in again and again and again. And it seems like the operators of the dispensaries were perfectly comfortable with evading the spirit of the law, even though they claim that they didn’t violate the letter of the law.”

An official at the Denver DA’s office also told Leafly those looping purchases diverted more than two tons of cannabis to the illicit market.

But Was it Illegal?

In a press statement, District Attorney McCann noted that the “vast majority of Denver’s marijuana industry businesses and owners are reputable and responsible and strive to obey our marijuana laws.”

'Stopping that behavior was correct; but you shouldn’t prosecute for conduct that was not clearly illegal.'

Sam Kamin, law professor, University of Denver

But Sweet Leaf, she said, “is an exception. My office will prosecute those who do not comply with our marijuana laws.”

Sam Kamin, the Vicente Sederberg Professor of Marijuana Law and Policy at the University of Denver, disagrees with the Sweet Leaf prosecution and sentences. Kamin was a consultant for Sweet Leaf during the case and admits he’s not impartial in his views. But he notes that, at the start of the investigation, Colorado’s laws were ambiguous about so-called looping practices.

“I read the regulations and state laws very carefully,” he said. “There was no prohibition at the time on multiple sales on the same day. Now it’s different, but the conduct that was alleged happened before [the new anti-looping laws] went into effect.”

Pressing Their Luck

That being said, Kamin acknowledged it was a “bad idea” for Sweet Leaf’s owners to push their luck by challenging Colorado’s cannabis laws. They also created “bad optics,” he said, when it comes to the state’s efforts to maintain control over its pioneering cannabis legalization program.

“That conduct was problematic and I understand why the state and the city of Denver wanted to crack down on it,” he said. “Stopping that behavior was correct; but you shouldn’t prosecute for conduct that was not clearly illegal.”

Professor Berman, meanwhile, questioned claims that Sweet Leaf was simply exploiting a minor loophole in local laws. He noted that other cannabis-legal states are also working to ensure their laws and regulations are respected.

“It’s not just in Colorado,” he said. “It’s an issue in every jurisdiction: Just how aggressively are regulators going to look to enforce these rules?”

Federal Tensions

There’s also the issue of the ongoing legal tensions between the U.S. federal government and states that have legalized cannabis. Many state officials still feel an ongoing need to reassure the federal government that they can continue to regulate themselves when it comes to cannabis.

“We’ve seen in Oregon where their federal prosecutor has taken on a much more aggressive role in conversations about regulation and enforcement in the state,” Berman said. That came about “because of a concern that state rules weren’t getting the job done.”

Industry Support

Other companies in Colorado’s cannabis industry have been notably silent on the Sweet Leaf case. Berman believes that lack of negative reaction shows that there is “an openness by the industry to see the bad actors gone after by state officials… that there’s a feeling that doing that is not a cure, but increases the likelihood [the federal government] will trust state regulatory authorities in the way in which they’re trying to police this industry.”

That sentiment was reflected in a statement to Leafly by the National Cannabis Industry Association (NCIA).

“It is unfortunate that one bad apple was willing to break the rules that every other business is following and risk tarnishing the cannabis industry’s reputation at a time when it is finally getting the respect it deserves from the public and policymakers,” said NCIA media relations director Morgan Fox, regarding the Sweet Leaf case.

“Thankfully, this behavior is an extreme outlier among the thousands of cannabis businesses nationwide that are complying with state laws and boosting public safety while creating jobs and generating tax revenue,” he added.

‘They Followed the Letter’

There was negative feedback to be found over the Sweet Leaf case, however, among the public comments in Westword, Denver’s alternative weekly.

“Whatever you think of Sweet Leaf, they were following the letter of the law,” said one reader, “and the government railroaded them anyway. No one should do time for marijuana, but prosecutions will inevitably continue thanks to the antiquated laws still on the books and the millions in marijuana taxes that allow unrepentant prohibitionists to fight their little war.”

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