Cannabis Reform Legislation Fails; Other Measures Pass

The Colorado General Assembly considered multiple bills that would have affected the cannabis industry in its recent 2026 legislative session. While a few of those bills passed into law, the bills that would have made significant changes to the cannabis industry either failed to pass or were withdrawn. This article summarizes the bills passed by the legislature (HB26-1077, HB26-1409, SB26-007, and HB26-031). It also discusses the four bills that either failed to pass or were withdrawn (SB26-161, SB26-164, HB26-1117, and HB26-1301) and what happens next.

New Cannabis Laws

HB26-1077: Average Market Rate of Unprocessed Retail Marijuana

As explained in the Fiscal Note for HB26-1077, Colorado imposes an excise tax that is due when retail marijuana is first transferred from a cultivator to a processor or distributor. If the buyer and seller are unaffiliated with each other, the amount of excise tax due is 15% of the sale price. If the buyer and seller are affiliated with each other, then the excise tax is calculated as 15% of the “average market rate” of unprocessed retail marijuana. The DOR determines the average market rate for each category of unprocessed retail marijuana by calculating median market prices per pound or count. Average market rates are updated each quarter.

HB26-1077 makes several changes to the statutory definition of “average market rate,” which have the effect of creating separate “average market rates” for fresh frozen indoor unprocessed retail marijuana and fresh frozen outdoor processed retail marijuana. The new law also includes new definitions for “indoor unprocessed retail marijuana” and “outdoor unprocessed retail marijuana”[1] and requires that the initial rates for unprocessed marijuana that are allocated to extractions must be lower than the rate for unprocessed marijuana that is allocated for direct sale to consumers.

The new law further requires the Department of Revenue to adopt rules to establish the rates for fresh frozen indoor unprocessed retail marijuana and fresh frozen outdoor unprocessed retail marijuana on or before July 1, 2027. In addition, the Department of Revenue is required to publish a general description of the methodology and data sources used to establish the rate for each average market rate category of unprocessed retail marijuana.

HB26-1077 takes effect on July 1, 2026, and is codified at Colo. Rev. Stat. §§ 39-28.8-101 and 39-28.8-201.5.

HB26-1409: Concerning the Distribution of Money Collected from the Retail Marijuana Sales Tax

In short, Colorado law required 3.5% of the gross retail marijuana sales tax revenue to be distributed to local governments. HB26-1409 eliminates distribution of that revenue to local governments and reallocates that revenue to the marijuana tax cash fund, the state public school fund, and the general fund. The new law also sets new parameters applicable to distributions to the state public school fund.

HB26-1409 is effective immediately and is codified at Colo. Rev. Stat. §§ 39-28.8-203 and 39-28.8-501.

[1] See Colo. Rev. Stat. §§ 39-28.8-101(4.5) and (6.7).

SB26-007: Medical Marijuana Use in Health Facilities

SB26-007 permits certain health facilities to allow patients who are terminally ill and who are registered in the state’s medical marijuana program to use medical marijuana within the health facility, subject to certain parameters. For example, health facilities must document the patient’s medical marijuana program registration and medical marijuana usage in the patient’s medical records. Health facilities must also develop guidelines and restrictions related to the possession, usage, storage, and administration of medical marijuana to ensure the safety of others, safe facility operations, and compliance with other laws. A health facility is not required to handle medical marijuana for a patient and may not be required to comply with the new law if certain federal entities require the health facility to suspend compliance with the law.

SB 26-007 takes effect on August 12, 2026* and is codified at Colo. Rev. Stat. §§ 25-1.5-106.1 and 25-1.5-106.

SB26-031: Use of Prescription Product with Controlled Substance

SB26-031 exempts prescription drugs containing a Schedule I controlled substance from Schedule I, subject to certain parameters. The new law clarifies that it does not apply to or affect the regulation of or lawful actions or conduct concerning natural medicine, natural medicine products, marijuana, or marijuana concentrates.

SB26-031 takes effect on August 12, 2026* and is codified at Colo. Rev. Stat. § 18-18-203.

Failed Legislation

Proposed bills that would have significantly changed Colorado’s cannabis laws did not fare well in the 2026 Legislative Session.

SB26-161. Colorado levies an excise tax of 15% on the first sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility, and a sales tax of 15% on sales of retail marijuana and retail marijuana products by a retailer. SB26-161 would have reduced the excise tax to $1.00 per pound and changed the way sales tax is charged. It also would have moved responsibility for testing and safety from the Marijuana Enforcement Division (MED) to the Colorado Department of Public Health and Environment (CDPHE) and required cannabis producers to register and be regulated like any other food manufacturer. The bill would also have required information regarding adverse health reports, traceability, and testing results to be publicly available online. SB26-161 was introduced but was withdrawn.

SB26-164. Legislators sought to regulate the manufacture, distribution, sale, and consumption of tetrahydrocannabinol (TCH) beverages that contain no more than 10 mg of total TCH per serving through SB26-164. The proposed bill set forth a detailed regulatory framework, tasking the Department of Revenue and CDPHE to adopt rules related to manufacturer registration, product labeling, production, and transportation of lawful TCH beverages. Among other things, the proposed bill also provided for licensed businesses to sell lawful TCH beverages to individuals over the age of 21 who are not visibly intoxicated. SB26-164 was introduced but postponed indefinitely.

HB26-1117. This bill would have created a state permitting system for temporary hospitality events where marijuana could be legally consumed but not sold or distributed. HB26-1117 initially passed in the House but was later withdrawn in the Senate and then postponed indefinitely.

HB26-1301. This bill was a referred measure that would have gone to voters in the 2026 general election for approval. Among other things, the bill sought to increase the state retail marijuana sales and excise taxes each by 0.42 percentage points. Tax revenue raised because of the bill was to be used to create and fund a state institution for the treatment of persons with mental health, behavioral health, or substance use disorders. HB26-1301 was introduced but failed to advance and was then postponed indefinitely.

What next?

Outdoor cultivators and extractors should watch for the Colorado Department of Revenue to exercise its rulemaking authority as required by HB26-1077 and adopt rules to establish the rates for fresh frozen indoor unprocessed retail marijuana and fresh frozen outdoor unprocessed retail marijuana. Health facilities should develop and implement recordkeeping procedures as well as guidelines and restrictions related to the possession, usage, storage, and administration of medical marijuana to ensure the safety of others, safe facility operations, and compliance with other laws in anticipation of complying with SB26-007.

As always, it is important for cannabis industry businesses to monitor all proposed federal, state, and local legislation. It remains to be seen, however, whether Colorado legislators will try again in future sessions to pass similar bills to those that failed to pass in 2026.

Our Team

BHGR’s Cannabis Group helps clients understand and comply with the legal requirements for operating a cannabis business in Colorado. Our attorneys are well-versed in federal, state, and local cannabis laws and routinely work with lawmakers and regulators, engaging in the rule-making processes on behalf of cannabis industry stakeholders. If you have questions about Colorado’s newest cannabis laws and how they may affect your business, contact us today.

*All bills discussed in this article that are effective on August 12, 2026 are, in fact, effective on that date unless a referendum petition related to the new law is timely filed and voted on in the November 2026 general election. Should that happen, the new law will take effect on the date of the official declaration of the vote thereon by the governor.

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