Cannabis North

State takes aim at marijuana social clubs

Judging by the scene at Pot Luck Events on Wednesday night, one would never guess the state has advised the club to shut down.

Members had come to the downtown Anchorage marijuana social club to smoke, take dab hits and watch the "Chronic Comedy Show," while eating free candy provided at the nonalcoholic bar. "Bud of the week" samples -- provided by growers, not the club, owner Theresa Collins explained -- were displayed on a table in the back of the room.

Yet the club, which has been open since March, is one of six businesses issued cease-and-desist letters from Cynthia Franklin, director of the Alcoholic Beverage Control Board and the newly created Marijuana Control Board, in late June.

"From my perspective, there are no legal marijuana businesses," Franklin told the board during its first meeting Thursday.

Two of the letters went to marijuana delivery services -- Discreet Deliveries and Absolutely Chronic Delivery Co. -- and four were sent to social clubs: the Alaska Cannabis Club, Green Rush Events, Northern Heights and Pot Luck.

These social clubs have different models, although the basic premise is simple: People pay a membership fee to gain access to the space. They bring their own marijuana and, once inside, are free to smoke their own and share with others. Some clubs have free marijuana available; others don't.

By defining themselves as members-only clubs, the businesses say, their patrons are no longer in a public space and thus are not breaking the law against consuming marijuana in public. No marijuana is bought or sold, the clubs say.


But the state warns that continued activity could subject them to criminal and civil penalties.

Meanwhile, the Marijuana Control Board on Thursday considered how to address these social clubs as Alaska carves out new laws for legalized recreational and commercial marijuana.

'At a loss for words'

In Wasilla, Northern Heights, which calls itself a cannabis-friendly hookah bar, maintains it is being "wrongfully persecuted" for running a business where marijuana use is simply an option, manager Sarah Backlin said.

Northern Heights shut down Wednesday, not because of the cease-and-desist letter, but at the request of its landlord, MSR Inc.

The ABC Board had warned MSR its liquor license was in jeopardy unless Northern Heights closed, property manager Aubrey Okayama said. With Northshore Ale House upstairs, no marijuana is allowed on the premises, she was told, despite being a different business.

Backlin announced to a small group of disappointed members sitting outside the business Wednesday it would not be open that day. "I'm kind of at a loss for words," she said later.

Northern Heights rents out hookahs -- for marijuana or tobacco products -- which members use as they sit in the club's large first-floor room. The club's income comes from memberships, hookah rentals, tobacco products and a few snacks, Backlin said. They don't make much money yet, and employees have been working for tips, she said.

There's no free weed and the employees never handle marijuana, Backlin said.

The hookah bar was meeting a need in the community, owner Dee Edward said – a place where people who have nowhere else to smoke can go. "We're here to keep people legal, to keep people safe and responsible," she said.

After the ABC Board meeting Thursday, Edward said the business would be reopening over the weekend. Edward says the company will go to court, if necessary, to fight to stay open.

Backlin, who said she may want to apply for a license, worried she might not be able to. The Marijuana Control Board's proposed regulations on Thursday include a section saying business owners who are operating before licenses are in place would be barred from receiving a license once they become available.

Meanwhile, at Pot Luck Events on Wednesday night, about 40 people lounged on brown recliners as they passed around joints and pipes. Tourists from Ireland hovered around the dab bar, and the VIP area by the stage quickly filled with people.

For now, it's business as usual, Collins said. Still, she "absolutely" worries she will be shut down. "That's gonna be a worry for any business," Collins said.

Both Northern Heights and Pot Luck Events say they want the ABC Board to tour their businesses to dispel misconceptions and prove they are legitimate.

The equivalent of bottle clubs?

The cease-and-desist letters were sent out before the Marijuana Control Board had been appointed, Franklin said Thursday, to give clarification she said businesses had asked for: Are we legal or not?

In the cease-and-desist letters, Franklin writes that without a license, a marijuana club is operating illegally.

Consuming marijuana in public is illegal, the letter continues, and that "includes a business to which the public or a substantial portion of the public has access."


Franklin compared the social clubs to bottle clubs, which are prohibited under state law. Bottle clubs are places where alcohol is brought or kept and where people can go to drink. With the charge to "regulate marijuana like alcohol," the comparison applied, she argues.

Attorney and regular Alaska Dispatch News contributor Marcelle ?McDannel said she generally agreed with Franklin's interpretation. "Whenever there's a new law, you can't say anything definitive because the courts haven't weighed in on it yet," she noted.

However, McDannel said her sense was these businesses were "circumventing the general intent of the regulations and statutes."

Pot Luck Events attorney Lance Wells challenged the arguments laid out by Franklin. Pot Luck is "not in the marijuana business. They're in the event promoting business," Wells said.

The bottle club argument, Wells said, doesn't apply to marijuana. "There's been no statutes to come out on that at this time," Wells said. He contends the state can't just swap the word "alcohol" for "marijuana" without the Legislature changing state law.

Wells argued the club was not open to the public, and local vendors, not the club itself, were supplying free marijuana at Pot Luck. "You're not paying for marijuana," Wells said. "You're paying for membership to a private club."

Pot Luck Events doesn't have a marijuana business license, Wells continued, but it does have a business license, workers' compensation and insurance. "She has everything she needs to lawfully run a business in Alaska," Wells said.

Wells called these issues "uncharted seas" as the state moves forward with regulations.


No license type, and no power to add one

At its first meeting, the newly appointed Marijuana Control Board discussed the appropriate course of action on social clubs.

Franklin told the board, "while it might be tempting to let go of some stuff and not regulate that … you're creating a very strong point of tension between regulated and unregulated business."

Bruce Schulte, a Marijuana Control Board member, spoke Wednesday in his role as a representative of the Coalition for Responsible Cannabis Legislation.

These businesses "might be a little bit ahead of their time," Schulte said. But he noted there "clearly is a need for them, or a market for them."

The complication? Social clubs are not included as a license type under Alaska's marijuana statutes. That means the Marijuana Control Board can't make regulations about that type of business, the board's general counsel, Harriet Milks, said. The Legislature must add that license type before the board can do anything.

So on Thursday, the Marijuana Control Board voted unanimously on a "wish list" asking the Legislature to address this issue and consider adding a social club license.

These social clubs will be able to bide their time, at least for a little while. Closing the meeting, Franklin told business owners no enforcement action would be taken – at least by her agency -- between now and the next Marijuana Control Board meeting in August.

Laurel Andrews

Laurel Andrews was a reporter for the Anchorage Daily News, Alaska Dispatch News and Alaska Dispatch. She left the ADN in October 2018.