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On-Premise Sector Slow To Develop In Cannabis Space

February 4, 2020

While the march toward the widespread legitimization of cannabis is underway, only a handful of markets in the U.S. allow social consumption spaces. Proponents of on-premise cannabis legalization say the legislative fight remains difficult.

Thus far, 11 states and Washington, D.C., have passed recreational marijuana laws, and only six of them—Alaska, California, Illinois, Massachusetts, Michigan, and Colorado—explicitly allow on-premise consumption on a state or local level. Other states including Oregon make exceptions for private membership clubs without paid staff, fueling a rise in venues of the kind.

Last year Colorado passed House Bill 1230, which created two on-premise focused cannabis licenses: one that allows cannabis sales outlets to operate on-site consumption spaces, and one that allows other types of bars, restaurants, and hotels to create cannabis-use areas pending local municipal government approval. Thus far, Denver is the only jurisdiction in Colorado that grants on-premise consumption licenses, and the city has only one venue, though plans are afoot for more to open this year.

In California, Magnolia is an Oakland institution and one of several on-premise venues in the state. Magnolia expanded from a cannabis dispensary into a multi-use space incorporating a retail area as well as a vapor lounge and a recently opened dab bar. The lounge area offers complimentary Volcano vaporizers to foster a communal feel. Magnolia general manager Katie Rabinowitz says the consumption space brings together all walks of life, from working 30-somethings who come in with laptops to senior citizens seeking a communal space for medicinal marijuana.

Barbary Coast is another Bay Area cannabis leader. The San Francisco venue started as a medical dispensary in 2013 and added a consumption lounge a few years later. CEO Jesse Henry’s aim has been to provide a clean, safe, and comfortable place to consume cannabis, and he says his venue has received great support. He predicts that the cannabis consumption landscape will change dramatically over the next few years as lawmakers process demand for on-premise cannabis venues and balance it with reasonable safety regulations.

With California law leaving social consumption for cities to decide, the Bay Area has led the way and continues to grow, with the city of Berkeley also recently giving the nod to social spaces. Further south, West Hollywood was the first city in the greater Los Angeles area to greenlight an on-premise program; Lowell’s Café is now open there.

On the East Coast, Massachusetts has approached the issue tentatively. The state’s cannabis regulator approved a pilot program for on-premise consumption last fall, which is still in early stages. The Summit Lounge in Worcester, about 40 miles west of Boston, is one of the state’s only players, operating on the private club system. When it opened in 2018 COO Kyle Moon says people couldn’t believe the space was legal, but he adds that it established itself quickly and now has more than 5,000 members.

Summit Lounge doesn’t sell any cannabis products because it doesn’t have a dispensary license, but patrons from nearby retail outlets frequent the venue. “We’re in the nightlife district of Worcester and have a storefront, so people know about us,” Moon says. “This is where the industry is going across the country. As public perception changes you’ll see more of this.”

Lawmakers in Illinois accounted for on-site consumption in their legalization effort, paving the way for a push. The decision is being left to municipalities, and many mayors and city councils seem more open to the idea than has been the case elsewhere. Last week, Springfield approved Illinois Supply & Provisions for a social use license, the first in the state.

Elsewhere, legislators are reevaluating bans on the practice. In Washington—which was one of the first states to legalize—Rep. Steve Kirby introduced a bill that would legalize cannabis lounges. It’s currently awaiting a hearing.—Laura Pelner & Danny Sullivan

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