Board decides Legislature must authorize marijuana clubs

When Nov. 24 comes around, the only legal place to consume newly legal Alaska cannabis will be your home.

The Legislature will have to decide whether or not to allow cannabis social clubs in Alaska, following a highly contentious Marijuana Control Board ruling on Sept. 24 that prohibited clubs.

“A person may not maintain a place where marijuana or marijuana products are received or kept,” the regulation reads, “or to which marijuana or marijuana products are brought for consumption by the public or by members of a club, association, or corporation unless the person is authorized to do so under this title.”

The board took this language straight from Alaska alcohol regulation; in alcohol, this language bans bottle clubs. The bottle club comparison was used as the basis for cease and desist letters board director Cynthia Franklin sent to Pot Luck and Alaska Cannabis Club in Ancorage, and to Northern Heights in Wasilla and Green Rush Events in Kenai.

Franklin’s cease and desist letter carried less than bulletproof legal weight because of the nebulous legal status of marijuana clubs, and was taken to be a legal suggestion rather than an order. Pot Luck Events has continued operation.

The board’s prohibition didn’t ban existing clubs, at least not functionally. Nothing changes in the day-to-day operations of Anchorage’s main social club, Pot Luck Events, whose manager, Theresa Collins, said the club would continue operating until Nov. 24. The regulations are still in draft stage, not yet approved by the Legislature.

If the Legislature accepts the proposed language, however, the clubs will be prohibited when regulations take effect. In the clubs’ best-case scenario, they will have to discontinue operations between Nov. 24, when regulations enter effect, and May 24, 2016, when the first business licenses are to be issued.

In the worst case, they won’t be allowed at all.

This leaves questions as to the board’s authority: whether it has the power to preemptively prohibit a license type before it is even created, whether it has the authority to regulate anything at all regarding marijuana clubs, and whether it could have created a license type for clubs and spared the headache.

Board authority

Marijuana clubs, which do not sell cannabis but allow cannabis users to consume and share on premises, have been a legal gray area in Alaska since a 2014 ballot initiative legalized cannabis consumption and possession as of Feb. 24.

Clubs do not sell marijuana, nor do they grow, manufacture, or test, which are the four cannabis business license types specified by the ballot initiative.

The Marijuana Control Board, however, will not issue business licenses for commercial marijuana operations until May 2016, making all commercial cannabis activity illegal until then. As recently as Sept. 14, several Alaska cannabis delivery services and businesses were issued felony charges over their activities.

At the board’s Anchorage meeting on Sept. 24, Assistant Attorney General Harriet Milks and director Franklin advised the board to accept a social club prohibition into the draft regulations. Both said the Alaska Department of Law declared the board to have no authority to regulate marijuana social clubs until the Legislature creates the license type.

“The Department of Law has already decided the board doesn’t have the authority,” said Milks. “It’s not your problem to fix. The Legislature has to take the initial steps.”

Franklin said later she recognizes the need for them, but only in the confines of a regulated license type.

“I think we ought to have social clubs,” said Franklin in an interview. “How do you know whether or not they’re operating according to regulation? That’s the problem of leaving it in this gray area. You’re creating an unregulated segment of the market.”

Franklin said opposition to the board’s decision is not representative of the entire industry, and that clubs in their current unregulated form defy the will of the voters who voted for a regulated industry.

“The industry are people who are going to follow the rules,” said Franklin. “(Marijuana clubs) are getting all the benefits of marijuana commerce, and none of the costs. That’s not what the people voted for.”

Collins said she doesn’t buy the Department of Law’s argument, or the interpretation that the prohibition is not a ban.

“If they don’t have the authority to approve them, then how do they have the authority to prohibit them?” Collins said.

Responding to concerns later, Milks said the prohibition is not intended as a ban, but rather a clarification that until the Legislature creates the license type, it simply can’t say anything.

“It’s not a ban; a ban requires some affirmative action,” said Milks. “The regulatory board is not banning social clubs. It’s just not saying anything about them, because it can’t.”

Jana Weltzin, a business attorney representing the Alaska marijuana industry, said Milks’ characterization ignores its own language.

“(The provision) is titled ‘Marijuana clubs prohibited,’” wrote Weltzin in an email. “Not only do the regulations mention clubs, it outright prohibits them and usurps authority to regulate and control this type of business by requiring authorization pursuant to title 17.38. Further, the regulations do contain an affirmative action mechanism to enforce this provision. (The measure) states, ‘A person violating this section is subject to a civil fine as provided in 3 AAC 306.840.’ (Milks’) statements are legally incorrect.”

Board member Brandon Emmett, vice president of the Alaska Marijuana Industry Association, also disagreed with the Department of Law’s advice, arguing the board was able to create a brokerage license despite not appearing in the ballot.

“We’re saying here that we don’t have the authority to craft another license type, but nowhere in the initiative did it state broker, and that’s a license type we decided to create with relative ease,” said Emmett.

 “Broker licenses are a subset of a cultivator license,” responded Milks to Emmett. “Marijuana club is a completely different animal. It is a circumstance of using, selling, distributing marijuana that is not authorized by the Legislature at this time.”

Broker licenses allow certain actors to arrange marijuana distribution between cultivators and retailers. Milks said the initiative specifies verbs associated with brokerage actions: harvesting, packaging, distributing, and selling. Nowhere in the initiative, she said, are there any verbs concerning marijuana social club activities, such as providing a venue for consumption.

Legislative concerns

Whether or not the board members support social clubs, each wants to pass the right message to the Legislature.

“We’re pretty well on record saying we need some legislative guidance on this,” said board member Mark Springer. “We need to not dance around it, but right now, say that they’re not, knowing there may be some action by the legislature to authorize the board to authorize marijuana clubs.”

Emmett voiced concerns that the prohibition language is too strong, and will misinform the Legislature the board doesn’t support marijuana social clubs.

“If we accept this, it will send a message to the Legislature that we’ve already made our minds about how we feel,” said Emmett. “I do encourage there be some legislative discussion. Clearly this is very important for the success and economic welfare of the industry.”

Emmet also feared the matter will be forgotten, or willfully withheld, if left to the Legislature.

“If we look at the last session, very little got put out on the marijuana issue besides the bill that created this board, and this might be something that slips through the cracks,” he said. “I don’t see it a far stretch to create a marijuana club provision.”

Board Chairman Bruce Schulte highlighted the fact that several municipalities, including North Star Borough, have drafted letters of support for marijuana clubs, and lamented the fact that the board has no authority to remedy a “chicken and the egg situation.”

Schulte said the board will attempt to craft policy statements expressing the board’s support of marijuana clubs’ existence, in an attempt to inform legislators of the public and board support for such businesses.

“The best way I think advocates and supporters to make it happen is to give legislators every reason to embrace them,” said Schulte. “Ballot 2 passed, but only by a small margin. Legislators are paying close attention to that 47 percent who didn’t support it.”

For his own part, Schulte took an unpopular route in search of legislative approval, voting in favor of the prohibition.

Board member Loren Jones, a Juneau Assembly member, recused himself from the vote, leaving only four voting members to accept or deny the prohibition.

Brandon Emmett was the only board member who voted against the prohibition; Schulte, Peter Mlynarik, and Mark Springer all voted in favor. Had Schulte voted against, the prohibition would have failed on a tie 2-2 vote.

Social club supporters lambasted Schulte on a social media in response, which Schulte said is understandable. However, Schulte said he engineered his vote to show proper political deference to the Legislature and not press a controversial issue past the board’s authority.

At this point in the marijuana game, he says, it is more important to tread lightly with lawmakers in a state where 47 percent of voters voted against cannabis legalization.

“I have always advocated in favor of (marijuana clubs), but as soon as the first one opened its doors, it drew negative public scrutiny and our Legislature and local elected officials are sensitive to that,” said Schulte. “I still think clubs, lounges, cafes — whatever we end up calling them — are still a great idea, but they were never mentioned in the voter initiative and it’s disingenuous to suggest otherwise.”

Industry representatives in favor of social clubs have not challenged the board’s decision, saying the litigation process would be far too cumbersome and time consuming in marijuana’s regulatory environment.

Further, Schulte said stakeholders need to be patient or risk too much negative backlash that could damage the legalization movement.

“That is exactly what prohibitionists want,” said Schulte. “To delay implementation as long as possible so that the initiative can be repealed by the Legislature in 2017.”

Alaska legislators like Rep. Harriet Drummond, D-Anchorage, argue in favor of social clubs, specifically in relation to the tourism industry.

“I support marijuana clubs,” said Drummond, “if only for the reason that tourists can’t consume in their hotel rooms and they can’t consume in public. Where are they supposed to consume it?”

The national perspective

Nationally, marijuana social clubs exist in the same kind of regulatory turmoil as Alaska, varying from state to state.

“The social club issue is usually like what you’re seeing in Alaska,” said Kris Krane, former associate director of the National Organization for the Reform of Marijuana Law.

Krane said he doesn’t expect the Legislature to allow them, but thinks they ought to be allowed.

“I think the idea of social clubs, or at least clubs that allow consumption on site, is a good idea,” said Krane. “We have bars. Particularly when you’re talking about the tourist market, that’s an important allowance. I would strongly encourage the state to do it, but I wouldn’t expect it.”

In Colorado, clubs are semi-legal; a scant handful exists to differing degrees of public outcry and support. Like Alaska, Colorado laws outlaw public consumption of marijuana. Also like Alaska, the definition of “public,” and whether a private club meets that definition, is under discussion.

“Last month’s debut of Colorado’s latest marijuana smoking lounge — iBake Englewood, 3995 S. Broadway — quickly ran afoul of city officials,” reports the Denver Post. “Last week, the Englewood City Council passed a six-month emergency ordinance prohibiting additional pot-smoking clubs. The city probably will create permanent rules against on-site consumption in the coming months.”

In response, the Denver marijuana industry is attempting a ballot initiative for the 2016 election that would expand city marijuana consumption to bars and clubs.

In Washington, legislators banned marijuana clubs in July 2015. The new law makes operating “a club, association, or other business, for profit or otherwise, that conducts or maintains a premises for the primary or incidental purpose of providing a location where members or other persons may keep or consume marijuana on the premises” a Class C felony.

Oregon, which will have its first recreational marijuana sales beginning Oct. 1, allows clubs, provided they don’t sell cannabis and the drug is consumed out of public view.

DJ Summers can be reached at daniel.summers@alaskajournal.com.

Updated: 
11/24/2016 - 12:54pm

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