Cannabis Consumption Lounges Present a Unique Risk Management Challenge

Summary

Early cannabis legalization initiatives included bans on any form of public marijuana consumption primarily due to fears of a potential social backlash from Amsterdam-style pot cafés. Although several states, led by Alaska in 2019, now have regulations that provide for some form of on-site cannabis consumption, relatively few licenses have been issued anywhere. Because the risk profile of consumption lounges is still not well understood, regulators and local officials have proceeded cautiously. Meanwhile, operators of the handful of existing licensed facilities have faced onerous local restrictions, lack of available insurance, and a higher-than-expected cost of compliance, including expensive air-filtration systems and other nuisance-abatement costs. Pandemic-related limitations have further delayed progress.