Investment

Missouri Bill Limits Out-of-State Investment in Cannabis to 25%

The Missouri Legislature introduced a bill, HB 906, to limit the ownership in cannabis businesses by out-of state investors to 25%. The bill does not address whether a publicly traded company can qualify as an investor or whether a suitability determination is required for either individuals or large shareholders of a publicly traded company.

Missouri’s bill is the latest state to allow out-of state investors. Both Colorado and Washington recently introduced bills opening up investment in the cannabis industry. Access to new capital is needed to help the cannabis industry address the lack of traditional financing.

The Colorado House Bill 19-1090 would allow publicly traded companies, and unlimited investors from outside of Colorado, to invest in and own marijuana businesses. House Bill 19-090 repeals the ban on investors in marijuana businesses that are publicly traded companies, and repeals the 15 person limit on the number of out-of-state investors. The proposed amendments require controlling beneficial owners to make certain disclosures, and proposes a process for the cannabis regulator to evaluate the suitability of these investors.

The Washington Legislature introduced four (4) bills to allow non-residents and foreign companies to invest in cannabis businesses. Currently, Washington requires owners of cannabis businesses to be state residents. Washington’s bills make a simple amendment the cannabis licensing requirements to allow for outside investment.

The following links provide additional information about the recent developments in Colorado and Washington.

Colorado Bill Allows Publicly Traded Companies To Own Marijuana Businesses

Washington Introduces 4 Bills That Allow Non-Residents To Own Cannabis Businesses

Washington Introduces 4 Bills That Allow Non-Residents to Own Cannabis Businesses

The Washington Legislature introduced four (4) bills to allow non-residents and foreign companies to invest in cannabis businesses. Currently, Washington requires owners of cannabis businesses to be state residents. Access to new capital will help the cannabis industry address the lack of traditional financing. The introduced legislation also reflects the need to address restrictions that impede consolidation in the industry.

Colorado also recently introduced Bill 19-1090 to allow publicly traded companies, and investors from outside of Colorado, to invest in cannabis businesses. The Colorado bill repeals the ban on investors in marijuana businesses that are publicly traded companies, and repeals the 15 person limit on the number of out-of-state investors.

Washington’s bills make a simple amendment the cannabis licensing requirements to allow for outside investment. By contrast, Colorado’s bill imposes liability and regulatory obligations on outside investors by requiring controlling beneficial owners to make certain disclosures. Colorado’s bill also provides the regulator with a tremendous amount of new authority.

A summary of the four (4) Washington bills is provided below.

  • SB 5409 / HB 1236 - The ability of business and nonprofit entities to obtain a marijuana license

    • Natural persons owning more than 10% must be on the license.

    • If there are no natural persons who own more than 10%, the person with the largest ownership share must qualify for and be on the license.

    • The officers and directors must meet the licensee qualifications.

    • Opens up investment in cannabis businesses to non-Washington residents and companies that are not formed in Washington

  • SB 5202 The ability of business and nonprofit entities to obtain a marijuana license

    • Opens up investment in cannabis businesses to non-Washington residents and companies that are not formed in Washington but that are registered to do business in the state.

    • Natural persons must meet the licensee qualifications except for the residency requirements.

  • HB 1289 Licensed Marijuana Businesses

    • Opens up investment in cannabis businesses to non-Washington residents and companies that are not formed in Washington but that are registered to do business in the state.

    • Non-Washington businesses that invest in cannabis must enter into a labor peace agreement, and all interest holders must be resident citizens of the United States.

    • The entity may set up a holding company to provide managerial services to the cannabis business.