What Is Marijuana Dispensary Looping and Why Is It Illegal Now?

What is cannabis dispensary looping and why is it illegal?

When Sweet Leaf, a major Denver cannabis dispensary chain, was raided by police a few years ago and more than 15 of its licenses were revoked, the recreational marijuana market at large was appalled. Local residents and the general public have been informed that after a 12-month investigation, they were exposed to looping activities in which consumers were illegally sold large quantities of leisure items in one day.

States where marijuana is legal often place daily limits on the amount of marijuana a consumer can purchase. For example, retailers in Washington are only allowed to sell recreational users one ounce of flower, 16 ounces of solid cannabis, 72 ounces of liquid cannabis, and seven grams of concentrate. Recreational marijuana users in Massachusetts are allowed to purchase up to one ounce of flower or five grams of concentrate. On the other hand, the maximum amount of cannabis that can be purchased in Colorado is 28 grams of flower or the equivalent in marijuana products, 799.9 mg of edibles, or 7.99 grams of concentrate.

Cannabis looping is the customer’s way of circumventing these limitations.

What is Cannabis Dispensary Looping?

Cannabis looping is the process of getting around top-down buyer restrictions that were created with no regard for how they might be enforced.

A consumer who “loops” buys up to their legal maximum, pays that money, and then makes another purchase. Then this is “looped” or repeated. The route that customers would take to their car and back could perhaps be the origin of the term. Although loops are not always visually apparent, this gives the impression that they are. Recently, looping has become more discreet and is done within a counter visit with many transactions. Just buy most of the allowed stuff, exit the store, then come back and complete another transaction (sometimes with a different budtender).

A loophole in the legislation

An apparent error in legislative language led to the growth of the loop practice. The one ounce limit was first defined in recreational sales legislation as “in a single transaction”. Dispensaries running in a loop rang the 1 ounce, ended the transaction, and then rang in a different order and started a new transaction to comply with the letter of the law.

The Sweet Leaf case

In 2017, Sweefleaf was accused of selling in excess of one ounce to multiple customers. Sweet Leaf and Colorado’s Marijuana Enforcement Division settled after nearly a year of appeals and legal fees. To cover the $2 million in taxes and fines owed to them, the owners agreed to sell all 26 licenses (retail, processing and cultivation). They are barred from owning or investing in cannabis companies in Colorado for the next 15 years and have been forced to destroy any remaining inventory.

Of the 15 arrested marijuana sellers, seven had their charges dropped and the other nine were either awaiting trial dates or discussing settlements in response to narcotics-related crimes. Four of the accused budtenders are represented by cannabis attorney Rob Corry, who stated in his defense: “Generally, budtenders have indicated that they have been informed by upper management that this is a legal practice.” Not to mention that the Colorado Constitution only mentions the one ounce personal possession limit, not the one ounce sell limit.

Therefore, not only the business owners but also the people making looped transactions seem to be responsible for the looping. This means your budtenders may be putting their freedom at risk and they need to be instructed to stop looping before it happens. In fact, budtenders are the group most affected by these rules. The people who benefit most from loop and pharmacy operators were not the target of any of the multiple crimes filed by Denver police.

Putting an end to cannabis looping

Colorado Department of Revenue Marijuana Communications Specialist Shannon Gray commented on the Sweet Leaf debacle. She said grinding is prohibited by law and regulation.

The Marijuana Enforcement Division (MED) passed new regulations, effective January 1, 2018, further defining the statutory looping ban. Specifically, these regulations define a single transaction as multiple transfers to the same consumer made on the same business day and examine whether a licensee knows or reasonably should know that such a transfer would result in the consumer being in possession of more than one ounce of marijuana . These regulations also clearly define the quantity restrictions for sale.

As long as you track the relevant customer information, have made the necessary investments in your operating systems, and have employee training programs in place, looping is easy to spot and prevent.

Buying and setting up a point of sale i.e. a POS system for your pharmacy will automatically track purchases using customer IDs. Budtenders are also warned when they are about to engage in a transaction that would take them out of compliance. This is by far the easiest way to ensure compliance with cannabis sales restrictions at all times. By doing this, you are figuratively preventing customers from walking around your pharmacy and protecting your staff from potentially serious legal risks.

Consider Sweet Leaf’s theorem for context. Buying a POS system is far cheaper than facing such business-destroying penalties. The state has used the Sweet Leaf case to send a strong message to other cannabis stores to desist and desist from such illegitimate activities. Sweet Leaf’s Denver locations remain dormant.

final remark

Many budtenders were unaware that they were breaking the law by looping because they were simply following management’s orders. Some industry respondents expressed significant resentment toward both senior management units and the Marijuana Enforcement Division.

Budtenders as a whole have demonstrated a strong desire to conform to rules and regulations. “Why would anyone want to sacrifice their entire career in a burgeoning industry for a few more sales?” is still a common question. Many argue that it would have been better if the MED had communicated sensibly with Sweet Leaf rather than immediately conducting raids and felony arrests. One can only hope that this will not happen again in the future.

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