For years, movies, music and other aspects of popular culture have hailed Amsterdam as the number one destination for openly consuming cannabis purchased from "coffee shops."

As depicted in movies such as Cheech and Chong's "Still Smokin" and "Harold & Kumar Escape from Guantanamo Bay," travelers flock to Amsterdam for the opportunity to openly consume cannabis purchased from these coffeeshops. In addition to selling cannabis, these businesses also serve food and beverages and are treated as hangout spots.

In hip-hop artist Rick Ross's song titled "Amsterdam," Ross describes these coffeeshops and raps that he has an "Amsterdam state of mind" and is "burning Amsterdam green, where it falls like a leaf."

In the U.S., some states where cannabis has been legalized for adult use have begun to open cannabis consumption lounges similar to the popular coffeeshops in the Netherlands.

However, one difference — at least in California where adult use cannabis was legalized in 2016 with the passage of Proposition 64 — is that consumption lounges have been unable to offer prepared noncannabis food and beverages on-site. This changed on Sept. 30, when California Gov. Gavin Newsom signed California A.B. 1775 into law.

A.B. 1775 amends Section 26200 of the California Business and Professions Code and authorizes licensed retailers and microbusinesses to, among other things, prepare and sell noncannabis food and beverages on-site in the same areas where cannabis consumption is permitted, subject to the following conditions:

• The preparation or sale of noncannabis food or beverages complies with Chapter 1 of the California Retail Food Code commencing at Section 113700;
• The area of the premises where cannabis consumption is permitted may only be accessed by persons who are at least 21 years old;
• Conspicuous signs must be placed at each entrance to the areas where consumption is permitted, warning that cannabis consumption is permitted on-site, including the smoking of cannabis;
• Cannabis consumption is not visible from any public place or area not restricted by age;
• Alcohol and tobacco sales and consumption are not permitted on the premises;
• Any noncannabis food or beverages are not contaminated by or commingled with any cannabis products sold or consumed on the premises; and
• Employees or customers are prohibited from smoking or vaporizing any cannabis products in the same area where noncannabis food is prepared or stored or in the ware-washing area.[1] 

Importantly, the provisions of California Business and Professions Code Section 26200 explicitly state that "non-cannabis food or beverage products" do not include industrial hemp products or hemp products, as defined under California law.

Prior to A.B. 1775's passage, only prepackaged food could be served at cannabis consumption lounges. The inability to offer prepared noncannabis food and beverages has distinguished consumption lounges from other areas of the hospitality industry, despite the characteristics that could classify them as being a part of such industry.

But why would offering prepared noncannabis food and beverages be important for cannabis consumption lounges? 

Stated simply, the past portrayal of the cannabis consumer is not the current reality, especially since adult use has been legalized in multiple states. Further, a consumption lounge where cannabis consumption is the only activity is not a sustainable business model.

In terms of the demographics, cannabis consumers are no longer limited to the stereotypical young cannabis enthusiast. In fact, demographic information collected by cannabis operators demonstrates that consumption lounges are frequented by people in many age groups and from many socioeconomic backgrounds, from college students to blue-collar workers to professionals.

But the foregoing still does not explain why adult cannabis consumers need to visit a cannabis consumption lounge to consume cannabis.

Notably, the regulations in states that have legalized adult use all include one important caveat — consumption of cannabis and cannabis products must take place in private, with the term "private" specifically excluding locations that one might ordinarily consider to be private. Consumers are not legally permitted to consume cannabis or cannabis products in any public place, including but not limited to restaurants, bars, parks, sidewalks or any other place that is generally accessible to the public.

Tourists are not legally permitted to consume cannabis in their hotel rooms or anywhere else that is not a private residence. And nontourists may not be able to consume cannabis at their homes for a variety of reasons, including that they might reside with others who do not wish to be exposed to cannabis smoke. In other words, even though a person might be able to legally smoke cannabis in a state, there are significant limitations as to where that person could do so.

The ability to visit a cannabis consumption lounge provides the consumer with a safe place to legally enjoy cannabis products. Perhaps more telling is the fact that customers who visit cannabis consumption lounges are doing so not just to consume cannabis.

Rather, they visit consumption lounges to socialize, network or even work, much like traditional coffee shops, bars or pubs in the U.S. Indeed, in some jurisdictions like Las Vegas, where the economy is hospitality-driven, demographics information suggests that some consumers who visit consumption lounges do so to attend events, such as sporting events, birthday parties or bachelor/bachelorette parties. This is where the ability to serve prepared noncannabis food and beverages becomes important.

As an example, imagine a group of 15 men decide to travel for a bachelor party weekend to Los Angeles, where some local jurisdictions have authorized cannabis consumption lounges. On one day of the weekend, the group decides to visit a cannabis consumption lounge; however, three of the men do not consume cannabis.

On the one hand, if the consumption lounge does not offer food and beverages, it is likely that those three men will not visit the consumption lounge as there would be no purpose for them to do so. Aside from the nonconsumers feeling excluded from the event, the consumption lounge would lose revenue that would have been generated if the three nonconsumers could do something other than consume cannabis products.

On the other hand, the nonconsumers might be motivated to attend and still feel included in the experience, despite not being cannabis consumers, if they are able to hang out with the group and do something other than consume cannabis.

Additionally, if a customer were to visit a bar and could not do anything other than consume alcohol, that customer's visit to that bar would likely not last very long. That customer would probably become intoxicated quickly, then leave and likely not return unless they really desire to be in an environment where the only thing they can do is consume alcohol.

Offering food and beverages ensures that a customer's alcohol consumption is gradual and occurs over a longer period of time. It is a well-established fact that consuming alcohol on an empty stomach will lead to a consumer becoming intoxicated quickly.

Conversely, eating prior to or while consuming alcohol will lead to a slower alcohol absorption rate, thereby delaying the intoxicating effects of alcohol. This means that the customer will probably extend his or her visit to the bar, which could lead to increased revenue for the bar since the customer is staying to order food and alcohol over a longer time frame.

The same applies to cannabis consumption lounges. If a consumer cannot do anything other than consume cannabis, that customer's visit to the consumption lounge will not last very long. Once that customer is sufficiently high, that customer will not have any other activity in which to participate, so he or she will likely leave. But, if a customer could order food and beverages while consuming cannabis, that customer's absorption of cannabis would be slower, resulting in a longer visit to and more revenue generated for the consumption lounge.

The most obvious reasons food and beverages are important are because of the effects of cannabis consumption itself. Cannabis consumers are aware that certain strains of cannabis are appetite stimulants. Furthermore, THC causes chemical changes in the mouth, which decreases saliva production and causes what many consumers refer to as "cotton mouth."

Because of the foregoing side effects, it seems logical to offer food and drinks at consumption lounges. Without it, customers will likely leave the consumption lounge to go to a bar, restaurant or other establishment that does serve food and beverages.

Although there may be benefits to allowing food and beverages at cannabis consumption lounges, these benefits must be weighed against public safety concerns. Notwithstanding that, A.B. 1775 expressly requires that prepared food and beverages not be contaminated or commingled with cannabis products sold on-site, there is still a risk of accidental contamination or comingling. This could lead to a customer consuming too much cannabis if he or she ingests food or drinks that were accidentally contaminated.

Even worse, this could lead to a person who visits a consumption lounge but does not want to consume cannabis to accidentally ingest cannabis if he or she orders food or drinks. The foregoing scenarios could lead to liability for the consumption lounge if the customers suffer any sort of injury or other damages as a result of accidental consumption of contaminated food or drinks.

Consumption lounges also face liability simply by allowing consumption to take place on-site, much like bars could face liability for serving alcohol if the state in which the bar is located has dram shop laws. Generally, dram shop laws allow establishments that serve alcohol to be held liable for any injuries or death resulting from those establishments' sale of alcohol, even though the intoxicated customer might have caused such injuries or death.

While liability arises from the mere operation of consumption lounges and is not directly linked to the sale of prepared foods and beverages, as discussed above, offering food and drinks will likely lead a consumer to stay at the consumption lounge for a longer time period. Arguably, this could lead to increased cannabis consumption and intoxication, which potentially increases the probability that a consumer takes some action that causes injury or death after leaving the consumption lounge.

Some experts in the cannabis industry expect that states will begin enacting laws similar to dram shop laws in order to hold cannabis consumption lounges liable for any injuries or death caused by a person who consumed cannabis at their establishment. To mitigate such potential liability, some consumption lounges are offering rides to consumers to dissuade them from driving after visiting a consumption lounge. However, lounge owners ultimately cannot force its customers to accept rides or force customers to take any other precautions after consuming cannabis.

Lastly, the expense associated with offering prepared food and drinks could be steep, which presents a challenge for an industry that is already struggling to stay afloat. There could be high costs related to quality control, preventing contamination and general regulatory compliance. Moreover, there could be significant expenses associated with attempting to mitigate the liabilities discussed above.

There is no easy or cost-effective way to prevent all injuries or death caused by a customer, making it difficult for consumption lounges to adequately prepare and budget for these uncertain liabilities.

It remains to be seen whether A.B. 1775's passage will lead to a significant increase both in the number of cannabis consumption lounges in California or the number of customers visiting those lounges.

The costs associated with offering food and beverages may prove to be too burdensome. Only time will tell if the California cannabis market will become the next Amsterdam and adopt Rick Ross's "Amsterdam state of mind."

Reprinted with permission of Law360.