Still Rolling
Rachael Ardanuy on cannabis law’s growing pains and what she sees ahead
Published in 2024 Colorado Super Lawyers magazine
By Trevor Kupfer on February 29, 2024
For Rachael Z. Ardanuy, current chair of the bar association’s Cannabis Law Section, the path to her practice area and its legalization were conveniently aligned.
As an undergrad at Florida State from 2003 to 2007, she lobbied for local ballot initiatives at National Organization for the Reform of Marijuana Laws. She got her license to practice in 2012, the year Colorado voters legalized recreational marijuana. “But the first adult-use dispensaries didn’t really open until 2014, when I took the bar exam,” Ardanuy says.
She moved to Colorado just in time to start working in cannabis law and then opened her firm, RZA Legal, with the goal of helping folks navigate regulations in the budding industry.
Now, a decade later, she reflects on the ups and downs of the business of legal cannabis.
“We’ve seen the rules and regulations change a lot over the past 10 years,” she says. “They change nearly every year, and sometimes significantly.”
Initially, the implementation of seed-to-sale tracking requirements led to radio frequency identification tags that wasted both money and single-use plastics. “So they made some changes to remove reference to RFID technology, and now the next step is finding alternatives. We still need to track them, but there can be more efficient and environmentally friendly ways to do it,” she says.
Another significant regulatory evolution came a few years ago, when big business entered the fray. “Previously, they only allowed Colorado residents to invest and be a marijuana business owner. That changed pretty dramatically when they allowed publicly traded companies to hold interest,” Ardanuy says. “That has created a situation where it has allowed multi-state operators, even though we cannot engage in interstate commerce. We saw consolidation in the industry—bigger players get a little bit bigger—as well as companies invest and then leave, because their model is not based on a mature market, which is what we have now.”
The pandemic presented challenges and opportunities, including the industry being deemed essential and getting a big boost in sales. “A lot of companies saw growth because of that, but many of those companies grew thinking those new levels were going to be maintained. And then, when the pandemic started to ebb and people’s bills started to come due again, plus inflation, sales dipped down to 2019 levels. As a result of the decrease in wholesale prices in the industry, many businesses found it was unsustainable to continue operating as they had grown accustomed,” Ardanuy says.
Despite the dip—the state collected almost $100 million less in cannabis tax revenue in 2022 than in 2021—there’s still plenty of money to be made. Last summer, Denver passed the $500 million mark in total tax revenue. “So there’s still commerce going on in cannabis, just not as much as it once was.”
Perhaps the biggest reason for the dip in Colorado is because of increased availability elsewhere. So many states have legalized cannabis that Colorado’s boom in tourism has waned. The state even fell behind when it came to hospitality lounges and other consumption spaces.
Watching other state rollouts has made Ardanuy realize some of Colorado’s shortcomings in being an early legalizer. “Back when cannabis was legalized, there was zero thought put towards equity, restorative justice, diversity, anything. It was just like, ‘Let’s just legalize!’ So the industry was really led and held predominantly—and still is—by white entrepreneurs who had connections and ability to access capital,” Ardanuy says.
“There is a push now to try to level the playing field,” she adds, citing the state Bar’s offer of free legal consultations to social equity applicants. In the past, “if you had a felony related to drugs, you couldn’t be a marijuana business owner originally. Now you can. That left out a lot of folks who it shouldn’t have, because of the bias policing has in this country.”
All in all, “cannabis is still rolling,” Ardanuy says. “We just legalized natural medicine, and it’s looking like it’s going to go a very similar route as far as the regulatory perspective.”
Colorado is also the first state to legalize psychedelic mushrooms for personal use, and plans to issue licenses this year. “That’s the next emerging industry. The years of cannabis legalization in Colorado has prepared us to do a better job of rolling it out,” Ardanuy says. Working in the cannabis law space has made Ardanuy realize just how similar her clients’ struggles are to her own. “Lawyers are one of the original highly regulated industries. We can’t advertise in every possible way. We have to pay dues. We have to go through massive background checks. We have to make exceptional investments in passing the bar, going to law school and startup costs to get law firms going. And we have exceptional rules for professional conduct. These are all exactly the same things the cannabis industry goes through.”
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