By David DeMoss
Recently, we spoke about the increase in cannabis popularity and how some hotels are considering making themselves “cannabis-friendly” to attract more guests. While this could be a great business strategy, it’s also a very tricky subject, as there are still so many legality issues. While cannabis is legal in 11 states for recreational and medical use, it’s still illegal on the federal level, which poses a lot of difficulties when it comes to banking and insurance.
If hotels do decide to include cannabis-friendly packaging, they are not legally allowed to provide any cannabis, but rather can provide items such as vape pens and other goods. If they obtain the correct licensing, hotels may dedicate a section of their hotel for public cannabis use. However, that probably won’t include smoking it, as many states ban indoor smoking with the Clean Indoor Air Act. In addition, for legal purposes, hotels will want to make sure they have signage or notices that state the rules of cannabis consumption inside their premises. Since it is such a new field, there are a lot of factors at play when it comes to making businesses cannabis-friendly — and hotel owners must ensure that they’ve covered all the bases so they don’t accidentally do something that could threaten their business. More details from Alicia Hoisington below.
Hoteliers hoping to add cannabis offerings to their properties might need to navigate some challenges along the way, according to legal experts. While recreational consumption is legal in 11 states (Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington) and Washington, D.C., it’s still illegal at the federal level. And although many different state laws have similarities, sources said the legal side varies among them.
“While in many cases you can buy it and possess it legally, there has not been this great movement yet for being able to consume it publicly,” said Joseph Levey, founding partner of New York-based hospitality law firm Helbraun Levey, a full-service firm focused on the legal and licensing needs of the hospitality and cannabis industries. “Although you can do it in home out of plain sight, hotels present this hybrid platform. Yes, they are kind of residential in that guests are in their rooms, but it’s also a commercial space. It’s a gray area.”
Even so, hoteliers are looking for ways to add cannabis-friendly packages to their offerings. While that’s not illegal, experts said regulations need to be followed.
First up: “The hotelier in most circumstances, if not all, can’t be providing the cannabis. The cultivation, processing and dispensing of cannabis is tightly restricted and requires licensing,” said Seth Goldberg, partner at Philadelphia-based Duane Morris, which represents businesses and individuals at every level of the cannabis supply chain.
Then, he said hoteliers need to be aware of state- and municipality-specific regulations that refer to public consumption. But again, Levey said another gray area arises here. In some municipalities, social consumption licenses are starting to be lobbied for and become available. That means businesses with this license can dedicate an area so that users can consume cannabis publicly with others. But that doesn’t mean you’ll see people lighting up in a hotel lobby because many states have bans against smoking indoors, laid out in the Clean Indoor Air Act.
After hoteliers figure out the state laws, experts said that there’s still the federal stance to worry about.
“Another legal issue that arises out of cannabis-friendly hotel programs or packages is around banking and insurance,” Goldberg said. “Hotels need to be mindful that there is still an impediment to banking cannabis-related monies.”
Levey agreed that banking can become a huge headache for hoteliers. Because it’s federally insured, a bank can freeze an account and seize money if it believes that any funds are coming from trafficking an illegal substance, he noted.
“It can create a huge challenge for people operating in this industry,” Levey said. “Credit unions are allowed to bank with them, though, and the industry will probably head that way eventually.”
He said hoteliers should take care to cover their bases when providing cannabis-friendly packaging. Because hotels will not be providing any actual substance but rather products such as vape pens or other goods, there is little fear for being accused of trafficking. But he said hoteliers should make sure guests are advised of the rules via signage or notices that it isn’t legal for them to consume cannabis products inside the hotel.
“Ultimately, someone will try to use it at the hotel and there could be a fine. Any mitigating factors you can show to help prove you advised guests will only help you,” Levey said.
The lawyers noted that insurance becomes another problematic area for cannabis-friendly hotels.
“Insurance is tricky because no one is really playing in this space as it’s such a risky business. For instance, the federal government could decide tomorrow it wants to shut them down,” Levey said. “Yes, there would be lawsuits, but it can still happen so there’s still a bit of fear. There are some insurance companies that specialize in this, but it’s very much a specialty.”
“As an innkeeper you have a significant responsibility to all guests in the hotel. But you also want to make sure that nothing happens at the hotel that could jeopardize your insurance coverage,” Goldberg said. “However, if you solve for all of those legal questions, then the only question that remains is whether this is something you want to do from a business standpoint.”