Would-be thieves smashed a window at Denver’s Simply Pure dispensary in June 2021, then climbed in and tried to get into the store’s offices. An alarm sounded, and when Denver police arrived, the intruders jumped out of the window and drove off before they could steal any cash or marijuana products, said Wanda James, co-owner of Simply Pure.

“At no point in the break-in was any cannabis or money in any harm of being stolen,” James said. “All of our cannabis products are in the vault that is Simply Pure and all cash is picked up daily.”

Simply Pure, like all Colorado marijuana stores, has been required to follow many state safety measures since recreational marijuana sales became legal, such as requirements to have cameras recording video footage, limited areas where customers can access weed and commercial-grade locks.

But the city of Denver now wants cannabis businesses to add even more security measures. Some dispensary owners say they understand the desire to keep their businesses safe. Others say the expense of meeting the new security requirements, which gobble up valuable retail space, will make it difficult for them to thrive.

Dispensaries in Denver are now required to build vaults, lined with 3/4 an inch of plywood, enclosed with a steel door to prevent burglaries. (Olivia Sun, The Colorado Sun via Report for America) Under the new rule, all dispensary wall inventory must be placed within a locked area nightly. (Olivia Sun, The Colorado Sun via Report for America)

“All this does is put small businesses out of business so that the large businesses can take over and that’s what Denver has been about now for years,” said James, the first Black woman to own a legally licensed marijuana dispensary in the country. “We’re literally going to reduce the size of our dispensary by about a half because we have to literally build a safe. It’s beyond me.”

The new mandate

Since Jan. 1, Denver medical and recreational dispensaries have been required to have at least one safe for marijuana products and cash that is secured to the building and in an area with limited access.

Dispensaries that do not have enough room for a safe must install alternative security measures, such as guard posts or other physical barriers to keep cars from smashing into the building, live remote monitoring of facility video surveillance with loudspeakers and alarm systems with sirens and strobe lights, or an onsite security guard patrolling the establishment during non-business hours, according to the new rules.

The rules apply to Denver retail and medical marijuana dispensaries, and hospitality and sales businesses, where people can purchase and consume marijuana and consume it onsite.

Under the new rules, delivery vehicles carrying weed products must be unmarked and equipped with video surveillance, and a secure storage compartment. City leaders have compiled an online checklist to help businesses navigate the new compliance process.

Some cannabis industry leaders support the new mandate, saying the rules will increase public safety and protect their stores from repeated burglaries.

Dispensaries in Denver are now required to build vaults, lined with 3/4 an inch of plywood, enclosed with a steel door to prevent burglaries. (Olivia Sun, The Colorado Sun via Report for America)

But people who oppose the ordinance say the policy is unreasonable, especially given that other retailers selling high-value merchandise, such as jewelry stores, pawn shops and gun shops, aren’t required to take similar precautions.

There is no required city business license for jewelry stores or gun stores in Denver, and therefore, no licensing mechanism to require them to take any additional security steps, said Eric Escudero, director of communications for the Denver Department of Excise and Licenses, the regulatory authority creating and enforcing cannabis rules in the city.

There are also no federal regulations for how gun shop owners must protect their cash and merchandise, said Crystal McCoy, public information officer for the Bureau of Alcohol, Tobacco, Firearms and Explosives’ Denver field division. “I know the marijuana industry has quite a bit of regulations about building and ventilation and alarms and all that stuff. We don’t have any of that for gun shops.”

Local governments, typically through a department of excise and licenses, can impose security requirements on gun shops, McCoy said.

An increase in burglaries

Denver Mayor Michael Hancock signed a sweeping overhaul of marijuana regulations in April 2021. The overhaul included the new safety and storage rules, developed in response to rising numbers of smash-and-grab attempts at dispensaries, the city’s Escudero said.

The rules were published on Oct. 1, but dispensaries had until Jan. 1 to comply with the safe storage provision. The city is focused on helping businesses comply before taking any enforcement action, Escudero said.

There were 188 reports of burglaries at marijuana businesses in 2020, up from 144 the year before, according to most-recent Denver Police Department data. Data from 2021 is expected to be released within a few weeks. There are currently 204 cannabis stores in Denver. In 2020, those stores made $715 million in marijuana sales, according to the city’s website. There are now more than 30 states in the U.S. that have legalized medical or recreational marijuana.

Escudero said he’s not aware of any comparable increase in burglaries of gun shops, pawn shops and jewelry stores in Denver that would require new similar safety rules. The Denver Police Department, which tracks this data, confirmed Escudero’s statement.

“One of the reasons we think we have one of the most successfully-regulated cannabis markets in the world is that we have focused on safety,” Escudero said. “But unfortunately, in recent years, we have seen an increase in burglaries at dispensaries, and obviously, any time we see an increase in crime, that is really concerning to us.”

The safe storage rules are designed to protect marijuana businesses, but also to keep stolen cannabis from being sold on the illicit market to minors, Escudero said. “And I think everyone agrees that keeping cannabis out of the hands of youth, whose brains develop until they’re 24, is an important priority.”

Kristi Meyer, general manager of the Golden Meds dispensary on South Broadway, said her store is in compliance with the new rules. The owner of the business added a steel door and a locking system to the store’s safe in the building and a plywood wall on the inside of the vault. Before the plywood was added, a thief would have had an easier time breaking through the drywall, she said.

Kristi Meyer, general manager at Golden Meds in Denver, has worked in dispensary management for over ten years and anticipates security modifications to gain popularity. (Olivia Sun, The Colorado Sun via Report for America)

“Honestly, I have mixed feelings on it,” she said of the new rules. “This rule change this year was the biggest I’ve seen in years for the industry and I immediately thought about a lot of small mom-and-pop places, if they are still around, even. A lot of the rules that they’ve added on, over the years, have made it harder for small businesses, from what I’ve seen, and I’m not a business owner. It’s a lot to keep up with.”

She’s managed three cannabis businesses over the last decade and all have had an attempted or successful burglary. When Golden Meds was burglarized last summer, thieves broke through a glass window and kicked open the wooden door that protected the safe. She doesn’t know how much product was stolen, but said she suspects the burglars had scoped out the layout, and overall security of the store.

“On camera, you could see that they came in, and they knew right where to come when they busted through the door, and so they had been in the store previously, and that’s the creepy factor of it,” she said. “You know that people aren’t always smiling in your face and just buying weed. There might be an ulterior motive behind that.”

At another store where she worked, thieves broke in three times, once getting away with 20 pounds of product, which cost about $40,000, she said. When weed is stolen, it’s not necessarily falling into the hands of local youth, she said. It’s often swiftly moved to another state where weed is illegal and sold on the black market for sometimes four times the Colorado price. “I’ve seen pictures of product from Colorado in Florida posted online,” she said.

Although it has increasingly become harder to follow Colorado cannabis rules, Meyer said, the more that can be done to prevent people from trying to steal, the better.

Not the first city to require safe storage

The overhaul in marijuana rules and regulations was developed by the Department of Excise and Licenses with input from Mayor Hancock’s office and other agencies. Denver police “played a critical role” by providing input on the changes that would be needed to make marijuana stores in Denver safer. A marijuana licensing workgroup comprising city council members, Denver police, youth safety activists and social equity activists also advised the Department of Excise and Licenses during drafting of the legislation, Escudero said.

Some businesses have not yet complied. City leaders are allowing a grace period while they work with marijuana businesses to help them comply as soon as possible, he said.

Boulder has safe storage rules for medical and recreational marijuana. So, too, does Aurora, which is in the process of revising its rules that require all applicants seeking a license to operate a retail marijuana business to submit a plan specifying how they’ll prevent theft of marijuana products, such as by storing them in a locked room, only accessible to authorized people. Before opening, the applicant must also demonstrate that they will install a safe or vault for storage of any marijuana products and cash on the premises while the business is closed to the public.

“I’ve worked mornings, early mornings, opening by myself to nights closing alone, and it’s not always been super safe,” said Kristi Meyer, general manager at Golden Meds in Denver. “[Precautions] are not just because of what product they’re going to get. It’s for the safety of people that work in the industry.” (Olivia Sun, The Colorado Sun via Report for America)

The safe or vault must be incorporated into the building’s structure to prevent removal. Like Denver’s rules, Aurora’s rules state that cold or frozen marijuana-infused products must be stored in a refrigerator or freezer attached to the building’s structure, said Dusty Allen, lead licensing and compliance analyst for the city of Aurora’s licensing division.

The new rules

Complying with the new Denver regulations is complicated, even for businesses that have been established for years. Some of the rules require remodeling or redesigning stores, said James, who stocks 432 products at her Simply Pure dispensary.

“We deal with something like 28 different companies, with all different types of products, and all that product is out in my dispensary,” she said. “My dispensary is 1,700 square feet. Where would I get a safe big enough to put everything into? … This is requiring me to change everything about the layout in my store, which is going to be tens of thousands of dollars.”

James has hired a designer to help with the process and is waiting for a cost estimate for the new vault, which she expects to occupy about half the floor space in her dispensary in the Lower Highland neighborhood. “It doesn’t work,” she said of the new rules.

Both James and Samantha Walsh, a lobbyist who represents Simply Pure and a trade group for cannabis entrepreneurs of color, accused city officials of over-regulating the industry to push small businesses out of Denver’s supersaturated cannabis market.

Still, James said Simply Pure will not go out of business, under the new rules. She said her company will fundraise in order to cover the cost of the new storage rules, and she will continue speaking out against the new requirements.

“I am going to make this an election issue,” she also said. “Whoever wants to be the next mayor of Denver must embrace this industry and must be positive about this industry and not just tolerate it.”

Gabe Lindsay, who owns Cookies dispensary in Commerce City, said in the last four years, there have been two attempted break-ins at his dispensary with a loss of about $1,000 in products, which would take about an hour for him to recuperate in sales. Lindsay’s application to open a new dispensary, on the intersection of Havana Street and East Alameda Avenue, under Denver’s new social equity program was recently approved.

“It’s going to put a strain on everything,” Lindsay said of the new storage rules. “To lock everything up, you’re going to have to shut down your shop an hour or two hours ahead before you have to close, just to get everything in. Then you’re going to have to have (staff) in there an hour or two hours ahead, just to unload everything every day. So it’s not only the cost of just building the safe. The cost that comes with having to run your business like that — it’s more than just the safe. It’s the manpower hours to do it. There’s a trickle down effect.”

If cannabis businesses want to take extra safety precautions, the city should allow them to do it at their own pace, he said.

The new rules will come at an increased cost for cannabis business owners, Escudero said. If a business is an easy target, and gets repeatedly burglarized or damaged, that will hurt the bottom line of those business leaders more than a one-time cost related to safety and storage regulations, he said.

Bill Reilly, general manager at Frost Exotic Cannabis, a small dispensary on West Alameda Avenue, said he supports the new rule. When the owners of Frost Exotic Cannabis purchased the dispensary, many of the new safety measures were already in place, he said.

“We have 24-hour video surveillance and our safes are very large and securely attached to the structure,” he said. “All we really had to do was add plywood and reinforced steel mesh to the top vault, and multi-point, single motion locking systems were placed on both vault doors. So we really didn’t have to do a lot. We were actually kind of lucky.”

The safes that hold cannabis and cash there cost $11,000, he said. Upgrading the vaults and doors at the store to comply with Denver’s new regulations were an added cost of about $3,500, he said.

Though Frost Exotic has not had an attempted burglary, Reilly said the new Denver regulations are intended to slow or stop the surge in theft from cannabis shops.

“Anything we can do to help, not only our customers, but the products we have in the store — I think it’s a great idea,” he said. “I haven’t heard anything but positivity about it.”

Trevor Hughes

USA TODAY

DENVER — The unmarked armored truck rumbles to a stop in a narrow alley, and former U.S. Marine Matthew Karr slides out, one hand holding a folder, the other hovering near the pistol holstered at his hip.

With efficient motions he retrieves a locked, leather-bound satchel from a safe set into the truck’s side and presses a buzzer outside the door. It swings open to reveal a cavernous warehouse filled with marijuana and a safe stuffed with cash.

Welcome to the rear guard of Colorado’s rapidly expanding legal marijuana industry, where eager users pour millions of dollars — most of it in small bills — into buying pot, hashish, and marijuana-infused foods and drinks. All that cash adds up, and there are few places to put it: Federal regulations, which still classify pot as an illegal drug, make it difficult for marijuana producers to deposit their profits into traditional bank accounts.

And those cash-heavy small businesses make awfully attractive — and vulnerable — targets for criminals.

That’s where Karr and the company he works for come in.

Heading through the warehouse where workers tend young marijuana plants, Karr greets a young woman, and the two empty a safe of tens of thousands of dollars in cash neatly packed in plastic envelopes. Like every room in this combined marijuana store and grow house, the smell of pot hangs heavy in the air. Karr double-checks the ledger, locks his satchel and hustles outside, where former cop Phil Baca waits at the wheel of the armored car.

Karr opens the truck’s safe, pitches the satchel inside and climbs back into the passenger seat, an AR-15 rifle stashed behind him. It’s a scene that plays out six times in three hours. Their take for the day: somewhere close to $100,000 in cash.

“For the first three months, people were just keeping the money everywhere — in the walls, in mattresses, at home,” says Sean Campbell, CEO of Blue Line Protection Group, which provides marijuana security services, including Karr, Baca and the armored car. “And banks don’t even want to deal with it. You have a quarter-of-a-million dollars in cash show up all at once. The counting time alone is going to take an hour.”

The unusual problem of having too much cash is forcing business owners to hire security firms like Campbell’s, especially after Denver police warned in June of a credible threat against marijuana stores and couriers.

Marijuana-store owners have suffered some smash-and-grab robberies over the last several years but surveillance systems and close police attention have solved many of them. Experts say those robberies were largely committed by amateurs, rather than sophisticated crime rings.

Campbell said he believes it will take a serious high-dollar heist to force smaller marijuana stores to take their security more seriously.

State law requires marijuana businesses to have security cameras and systems on the premises, and many have armed guards, but they remain easy targets. The stores and grow operations often are in remote industrial areas, in warehouses that have not been hardened against a determined intruder. Many stores have large amounts of pot sitting around in rooms secured only by flimsy wooden doors.

Options are limited, however. Unlike most other businesses, marijuana-store owners can’t easily open bank accounts for fear of running afoul of federal law. Despite Washington state joining Colorado last week in legalizing sales of marijuana for recreational purposes and 23 states plus the District of Columbia permitting medical pot, the federal government still classifies the plant as an illegal drug more dangerous than cocaine or methamphetamine.

By opening a bank account, pot growers and shop owners run the risk of being charged with money laundering, because federal banking laws and regulations are deliberately aimed at tracking large flows of cash like those generated by both legal and illegal drug sales. A single such charge can bring decades in prison, and most banks and pot-shop owners don’t want to run that risk.

“When you go into the business, and you know it’s federally illegal, you’re taking your chances,” said Tom Gorman, who runs the federally funded Rocky Mountain High Intensity Drug Trafficking Area task force. “That’s the problem when the state legalizes something that remains illegal at the federal level.”

While declining to be quoted by name, many marijuana store owners interviewed by USA TODAY shared tales of playing cat-and-mouse with banks, managing to keep accounts open for only a few months at a time before getting shut down.

U.S. Treasury officials require banks to file what are known as “suspicious activity reports” whenever they suspect someone is trying to launder money. Anyone bringing in a pile of cash sets off internal alarms for bank workers, pot-shop workers say. Federal financial-crimes investigators encourage banks to report suspected marijuana transactions because pot remains illegal at the federal level.

“Our goal is to promote financial transparency and make sure law enforcement receives the reporting from financial institutions that it needs to police this activity and to make it less likely that this financial activity will run underground and be much harder to track,” said Steve Hudak, a spokesman for the Treasury Department’s Financial Crimes Enforcement Network.

Tax-and-marijuana attorney Rachel Gillette said she’s seen banks’ concerns firsthand — several banks she deals with said they wouldn’t let her open an account, even though both the federal and state government are allowed to deposit tax payments from pot sellers. Gillette said federally regulated banks say it’s just easier for them not to risk getting their hands tainted by pot.

“They literally told me they would not take my account because I do business with the marijuana industry,” Gillette said. “That seems fundamentally unfair — the state is taking that money and putting it in the bank; the IRS is taking that money and putting it in the bank.”

Gillette is suing the IRS on behalf of one of her clients who has been paying federal payroll tax bills with cash. The IRS calls for electronic payments and adds a 10% surcharge for cash payments, she said. With some marijuana businesses paying payroll taxes of $100,000 a quarter, those penalties are substantial.

Colorado has tried to solve the problem with a new state law permitting creation of marijuana banking cooperatives, which would have the power to accept deposits, lend money and make electronic payments. But that system likely won’t begin operating for at least another year, said Gov. John Hickenlooper, and even then federal officials would need to bless the plan.

The amount of cash already flowing through the fast-growing system has forced state tax officials to change how they accommodate payments. While Colorado allows businesses to pay their taxes in cash, most pay electronically. Marijuana businesses, however, must trek to a central Denver office, cash in hand, where they’re met at the curb by armed guards and escorted inside.

“Some people walk in with shoe boxes. Some people have it in locked briefcases. We’ve had people bring it in buckets,” said Natriece Bryant, a spokeswoman for the Colorado Department of Revenue.

Campbell, who runs the armored-car company, said the vast cash flows are a clear come-on for criminals. He said he’s working with banks to offer alternatives for marijuana businesses, including vault services. For many in the marijuana industry, the scene from the Emmy-winning television series Breaking Bad of a storage unit filled with drug cash hits uncomfortably close to reality.

Says Campbell, “You’re effectively creating a magnet for crime.”