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Marijuana Looping & Cash Structuring – the Sweet Leaf decision reveals a glaring weakness in states’ controls over their retail marijuana regimes

County of Denver v Sweet Leaf Final Decision 7-5-18

On July 5th the City/County of Denver revoked all 26 marijuana licenses held by 9 businesses operating as Sweet Leaf. For more than two years Sweet Leaf knowingly engaged in “looping” – the practice of making multiple one-ounce transfers of marijuana to the same customer within a single day. According to the Final Decision, “Sweet Leaf’s practice of artificially dividing a single transaction into multiple transfers of marijuana to the same customer was done for the purpose of evading quantity limitations on the sale of marijuana.”

Marijuana Looping: artificially dividing a single transaction into multiple transfers of marijuana to the same customer done for the purpose of evading quantity limitations on the sale of marijuana.

Cash Structuring: artificially dividing a single transaction into multiple transfers of cash by the same customer done for the purpose of evading reporting requirements on cash transactions.

In this case, Sweet Leaf fully acknowledged that it engaged in a looping scheme, but argued that it was simply exploiting a gap in the law limiting customers’ purchases to 1 ounce per day “as long as the customer left the premises and came back without the previously purchased marijuana.” The Final Decision offered some examples, including a medical marijuana patient who purchased 446 pounds of marijuana for more than $577,000 in 137 days over a six month period. In those 137 “loopy” days, Sweet Leaf’s medical marijuana patient purchased enough marijuana to roll about 300,000 joints … 

Critically, the hearing officer concluded that “Sweet Leaf’s actions have put all other marijuana businesses in Denver and Colorado at risk of federal enforcement.”

This case highlights a problem that California’s “pot czar”, Joe Devlin identified in a statement published in the Sacramento Bee on December 29, 2017: “How to enforce a new limit on how much pot a person can buy per day: ‘Does the dispensary have to create a customer account or do you just check ID? I don’t know how you prove you’re not exceeding the daily limit without creating a customer account.’”

No states (I’m aware of) require marijuana/cannabis dispensaries or stores to (1) record the identification of customers/purchasers, and (2) make those identifications available real-time to all retailers to prevent customers from “looping” … but when a dispensary knowingly engages in looping, it deserves to not only lose its license, and have its marijuana stock forfeited (As happened to Sweet Leaf), but there should be criminal actions taken – at both the state and federal level.  I would be surprised if the Colorado US Attorney’s office didn’t step in.