Don’t Do This - Cautionary Tales in Cannabis: Part 2 - Loopholes

It’s called “looping”.  A customer purchases the maximum amount of cannabis permitted at a dispensary; that customer leaves the dispensary and stores the product in the car; same customer returns to the dispensary 15 minutes later and makes another purchase of the maximum amount; customer repeats this many times.  Is this customer simply smoking a lot of flower? No, of course not.  This customer is diverting the flower to the illicit markets.  

This happened in Denver at vertically integrated Sweet Leaf.  Sweet Leaf had a large operation in the state with 7 retail recreational locations and holding 26 licenses. They had retail sales in the range of $5 million per month, they had hundreds of employees, and were looking at expansion into other states.  After a hearing, all of Sweet Leaf’s licenses were revoked.  

Here’s the important part: Sweet Leaf admitted it was doing this.  The company claimed that is was permitted under the regs at the time so long as the customer left the store and came back without the marijuana just purchased.  Basically, Sweet Leaf thought they could exploit a loophole in the regulations by claiming that these were separate, stand-alone transactions.  The state disagreed and found that Sweet Leaf should have known that this practice would result in the customer possessing more marijuana than the amount allowed under Colorado law.

When the state caught up with the looping, initially a number of lower-level employees, including the budtenders, were criminally charged.  Those charges were eventually dropped and the owners ended up taking responsibility.  Guilty pleas were entered and one-year prison sentences were handed down.

Lesson learned? Don’t play around with loopholes.