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Denver company avoids Colorado ban on publicly traded pot companies

As Colorado’s legislature considers whether to allow publicly traded cannabis companies to operate in the state, one such company in Denver has been doing so for months.

Founded in 2010 by John Fritzel, then a bankrupt former Subway franchisee, and two of his friends, MJardin has become a significant player in North America’s cannabis industry. In Colorado alone, it manages 13 cultivation facilities, 14 acres of outdoor growing operations and seven dispensaries, according to a slideshow presentation it gave to investors in January that was obtained by The Denver Post.

In mid-November, MJardin went public on the Canadian Securities Exchange, seemingly causing a conflict with the spirit — if not the letter — of Colorado’s prohibition on publicly traded cannabis companies. There are a half-dozen mentions of the restriction in the state’s marijuana rulebook.

Jeannette Harkin, a senior vice president at MJardin, said in an email that the company consults, advises and assists in marijuana cultivation in Colorado but does not operate or own licensed marijuana businesses. MJardin “cooperates fully with applicable laws and regulations,” she said.

That line between operator and consultant is thin, where it exists at all. MJardin’s seven Buddy Boy dispensary locations in Denver are registered to several different companies with obscure names, like TWOG-Walnut LLC and 3B-38 LLC. What those seven companies have in common is the man who holds their state marijuana license: Fritzel, the co-founder of MJardin.

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Fritzel is currently an MJardin shareholder, Harkin says. The co-founder also holds the marijuana license for PotCo, one of MJardin’s seven-acre grow facilities.

“There’s not really a black and white line there but if a publicly traded company is managing a store in the usual sense of the word, then it probably has some sort of control over the licensed entity and that would not be permitted,” said Daniel Garfield, a leading cannabis attorney in Denver.

Garfield, speaking generally about Colorado’s cannabis statutes and not MJardin specifically, said publicly traded companies can make loans to cannabis operations or act as a landlord but cannot draw revenue. MJardin’s presentation to investors in January touted Buddy Boy’s profitability.

In December, MJardin Chairman and CEO Rishi Gautam told an investment show that as MJardin expands, it’s doing so as a “principal owner-operator” of retail stores in the United States and beyond, a move that would more clearly violate Colorado statutes if done so here.

A spokesperson for Colorado’s Marijuana Enforcement Division declined to comment directly on MJardin, saying only that ownership structures for all cannabis companies are subject to evaluation. The agency routinely reviews the ownership interests and investments of licensees, the spokesperson said.

Luke Niforatos with Smart Approaches to Marijuana, which opposes marijuana legalization, said Colorado’s cannabis industry has, on many occasions, displayed a blatant disregard for the law.

“We have called upon the Department of Revenue to punish these offenses as well as enact tougher regulations, but routinely the industry gets off scot-free,” he said. “In the case of MJardin, we are renewing our call on our state’s regulators to get serious and hold this industry accountable.”