(1) The state licensing authority shall:

(a) Grant or refuse state licenses for the cultivation, manufacture, distribution, and sale of medical marijuana as provided by law; suspend, fine, restrict, or revoke such licenses, whether active, expired, or surrendered, upon a violation of this article 11, or a rule promulgated pursuant to this article 11; and impose any penalty authorized by this article 11 or any rule promulgated pursuant to this article 11. The state licensing authority may take any action with respect to a registration pursuant to this article 11 as it may with respect to a license pursuant to this article 11, in accordance with the procedures established pursuant to this article 11.

(b) Promulgate such rules and such special rulings and findings as necessary for the proper regulation and control of the cultivation, manufacture, distribution, and sale of medical marijuana and for the enforcement of this article 11. A county, municipality, or city and county that has adopted a temporary moratorium regarding the subject matter of this article 11 shall be specifically authorized to extend the moratorium until June 30, 2012.

(c) Hear and determine at a public hearing any contested state license denial and any complaints against a licensee and administer oaths and issue subpoenas to require the presence of persons and the production of papers, books, and records necessary to the determination of any hearing so held, all in accordance with article 4 of title 24. The state licensing authority may, at its discretion, delegate to the department hearing officers the authority to conduct licensing, disciplinary, and rule-making hearings under section 24-4-105. When conducting the hearings, the hearing officers shall be employees of the state licensing authority under the direction and supervision of the executive director and the state licensing authority.

(d) Maintain the confidentiality of reports or other information obtained from a medical or retail licensee containing any individualized data, information, or records related to the licensee or its operation, including sales information, financial records, tax returns, credit reports, cultivation information, testing results, and security information and plans, or revealing any patient information, or any other records that are exempt from public inspection pursuant to state law. Such reports or other information may be used only for a purpose authorized by this article 11 or article 12 of this title 44, or for any other state or local law enforcement purpose. Any information released related to patients may be used only for a purpose authorized bythis article 11 or article 12 of this title 44, or to verify that a person who presented a registry identification card to a state or local law enforcement official is lawfully in possession of such card.

(e) Develop such forms, licenses, identification cards, and applications as are necessary or convenient in the discretion of the state licensing authority for the administration of this article 11 or any of the rules promulgated under this article 11;

(f) Prepare and transmit annually, in the form and manner prescribed by the heads of the principal departments pursuant to section 24-1-136, a report accounting to the governor for the efficient discharge of all responsibilities assigned by law or directive to the state licensing authority;

(g) In recognition of the potential medicinal value of medical marijuana, make a request by January 1, 2012, to the federal drug enforcement administration to consider rescheduling, for pharmaceutical purposes, medical marijuana from a schedule I controlled substance to a schedule II controlled substance; and

(h) Develop and maintain a seed-to-sale tracking system that tracks medical marijuana from either the seed or immature plant stage until the medical marijuana or medical marijuana-infused product is sold to a customer at a medical marijuana center to ensure that no medical marijuana grown or processed by a medical marijuana establishment is sold or otherwise transferred except by a medical marijuana center; except that the medical marijuana or medical marijuana-infused product is no longer subject to the tracking system once the medical marijuana or medical marijuana-infused product has been:

(I) Transferred to a medical research facility pursuant to section 25-1.5-106.5 (5)(b); or

(II) Transferred to a pesticide manufacturer in quantities that are limited as specified in rules promulgated by the state licensing authority, in consultation with the departments of public health and environment and agriculture. The rules must define a pesticide manufacturer that is authorized to conduct research and must authorize a pesticide manufacturer to conduct research to establish safe and effective protocols for the use of pesticides on medical marijuana. Notwithstanding any other provision of law, a pesticide manufacturer authorized pursuant to this subsection (1)(h)(II) to conduct pesticide research regarding marijuana must be located in Colorado, must conduct the research in Colorado, and is exempt from all otherwise applicable restrictions on the possession and use of medical marijuana or medical marijuana-infused product; except that the manufacturer shall:

(A) Not possess at any time a quantity of medical marijuana or medical marijuana-infused product in excess of the limit established in rules promulgated by the state licensing authority;

(B) Use the medical marijuana and medical marijuana-infused product only for the pesticide research authorized pursuant to this subsection (1)(h)(II);

(C) Destroy, in compliance with rules promulgated by the state licensing authority, all medical marijuana and medical marijuana-infused product remaining after the research has been completed; and

(D) Not apply pesticides for research purposes on the licensed premises of a medical marijuana business.

(2) (a) Rules promulgated pursuant to subsection (1)(b) of this section may include, but need not be limited to, the following subjects:

(I) Compliance with, enforcement of, or violation of any provision of this article 11, section 18-18-406.3 (7), or any rule issued pursuant to this article 11, including procedures and grounds for denying, suspending, fining, restricting, or revoking a state license issued pursuant to this article 11;

(II) Specifications of duties of officers and employees of the state licensing authority;

(III) Instructions for local licensing authorities and law enforcement officers;

(IV) Requirements for inspections, investigations, searches, seizures, forfeitures, and such additional activities as may become necessary from time to time;

(V) Creation of a range of penalties for use by the state licensing authority;

(VI) Prohibition of misrepresentation and unfair practices;

(VII) Control of informational and product displays on licensed premises;

(VIII) Development of individual identification cards for owners, officers, managers, contractors, employees, and other support staff of entities licensed pursuant to this article 11, including a fingerprint-based criminal history record check as may be required by the state licensing authority prior to issuing a card;

(IX) Identification of state licensees and their owners, officers, managers, and employees;

(X) Security requirements for any premises licensed pursuant to this article 11, including, at a minimum, lighting, physical security, video, alarm requirements, and other minimum procedures for internal control as deemed necessary by the state licensing authority to properly administer and enforce the provisions of this article 11, including reporting requirements for changes, alterations, or modifications to the premises;

(XI) Regulation of the storage of, warehouses for, and transportation of medical marijuana;

(XII) Sanitary requirements for medical marijuana centers, including but not limited to sanitary requirements for the preparation of medical marijuana-infused products;

(XIII) The specification of acceptable forms of picture identification that a medical marijuana center may accept when verifying a sale;

(XIV) Labeling standards;

(XV) Prohibiting the sale of medical marijuana and medical marijuana-infused products unless the product is:

(A) Packaged in packaging meeting requirements established by the state licensing authority similar to the federal "Poison Prevention Packaging Act of 1970", 15 U.S.C. sec. 1471 et seq.; or

(B) Placed in an opaque and resealable exit package or container at the point of sale prior to exiting the store, and the container or package meets the requirements established by the state licensing authority.

(XVI) Records to be kept by licensees and the required availability of the records;

(XVII) State licensing procedures, including procedures for renewals, reinstatements, initial licenses, and the payment of licensing fees;

(XVIII) The reporting and transmittal of monthly sales tax payments by medical marijuana centers;

(XIX) Authorization for the department to have access to licensing information to ensure sales and income tax payment and the effective administration of this article 11;

(XX) Rules effective on or before January 1, 2016, relating to permitted economic interests including a process for a criminal history record check, a requirement that a permitted economic interest applicant submit to and pass a criminal history record check, a divestiture, and other agreements that would qualify as permitted economic interests;

(XXI) Medical marijuana transporter licensed businesses, including requirements for drivers, including obtaining and maintaining a valid Colorado driver's license; insurance requirements; acceptable time frames for transport, storage, and delivery; requirements for transport vehicles; and requirements for licensed premises;

(XXII) Medical marijuana business operator licensees, including the form and structure of allowable agreements between operators and owners;

(XXIII) Authorization for the department to issue administrative citations and procedures for issuing, appealing, and creating a citation violation list and schedule of penalties;

(XXIV) Such other matters as are necessary for the fair, impartial, stringent, and comprehensive administration of this article 11;

(XXV) The parameters and qualifications of an indirect beneficial interest owner and a qualified limited passive investor;

(XXVI) Marijuana research and development licenses and marijuana research and development cultivation licenses, including application requirements; renewal requirements, including whether additional research projects may be added or considered; conditions for license revocation; security measures to ensure marijuana is not diverted to purposes other than research or diverted outside of the regulated marijuana market; the amount of plants, useable marijuana, marijuana concentrates, or marijuana-infused products a licensee may have on its premises; licensee reporting requirements; the conditions under which marijuana possessed by medical marijuana licensees may be donated to marijuana research and development licensees and marijuana research and development cultivation licensees or transferred to a nonmetric-based research facility; provisions to prevent contamination; requirements for destruction or transfer of marijuana after the research is concluded; and any additional requirements;

(XXVII) Temporary appointee registrations issued pursuant to section 44-11-401 (1.5), including occupational and business registration requirements; application time frames; notification requirements; issuance, expiration, renewal, suspension, and revocation of a temporary appointee registration; and conditions of registration;

(XXVIII) Requirements for a centralized distribution permit for optional premises cultivation facilities issued pursuant to section 44-11-403 (5), including but not limited to permit application requirements and privileges and restrictions of a centralized distribution permit; and

(XXIX) Requirements for issuance of colocation permits to a marijuana research and development licensee or a marijuana research and development cultivation licensee authorizing colocation with a medical marijuana-infused products manufacturing licensed premises, including application requirements, eligibility, restrictions to prevent cross-contamination and to ensure physical separation of inventory and research activities, and other privileges and restrictions of permits.

(b) Nothing in this article 11 shall be construed as delegating to the state licensing authority the power to fix prices for medical marijuana.

(c) Nothing in this article 11 shall be construed to limit a law enforcement agency's ability to investigate unlawful activity in relation to a medical marijuana center, optional premises cultivation operation, or medical marijuana-infused products manufacturer. A law enforcement agency shall have the authority to run a Colorado crime information center criminal history record check of a primary caregiver, licensee, or employee of a licensee during an investigation of unlawful activity related to medical marijuana.

(3) (a) Rules promulgated pursuant to subsection (1)(b) of this section must include, but need not be limited to, the following subjects:

(I) (A) Establishing a medical marijuana and medical marijuana-infused products independent testing and certification program for medical marijuana licensees, within an implementation time frame, and requiring licensees to test medical marijuana to ensure, at a minimum, that products sold for human consumption do not contain contaminants that are injurious to health and to ensure correct labeling.

(B) Testing may include analysis for microbial and residual solvents and chemical and biological contaminants deemed to be public health hazards by the Colorado department of public health and environment based on medical reports and published scientific literature.

(C) In the event that test results indicate the presence of quantities of any substance determined to be injurious to health, the licensee shall immediately quarantine the products and notify the state licensing authority. The state licensing authority shall give the licensee an opportunity to remediate the product if the test indicated the presence of a microbial. If the licensee is unable to remediate the product, the licensee shall document and properly destroy the adulterated product.

(D) Testing shall also verify THC potency representations and homogeneity for correct labeling and provide a cannabinoid profile for the marijuana product.

(E) The state licensing authority shall determine an acceptable variance for potency representations and procedures to address potency misrepresentations.

(F) The state licensing authority shall determine the protocols and frequency of marijuana testing by licensees.

(G) A state, local, or municipal agency shall not employ or use the results of any test of medical marijuana or medical marijuana-infused products conducted by an analytical laboratory that is not certified pursuant to this subsection (3)(a)(I) for the particular testing category or is not accredited pursuant to the International Organization for Standardization/International Electrotechnical Commission 17025:2005 standard, or any subsequent superseding standard, in that field of testing. Starting January 1, 2018, a state, local, or municipal agency may use or employ the results of any test of medical marijuana or medical marijuana-infused products conducted on or after January 1, 2018, by an analytical laboratory that is certified pursuant to this subsection (3)(a)(I) for the particular testing category or is accredited pursuant to the International Organization for Standardization/International Electrotechnical Commission 17025:2005 standard, or any subsequent superseding standard, in that field of testing.

(H) On or before January 1, 2019, requiring a medical marijuana testing facility to be accredited by a body that is itself recognized by the International Laboratory Accreditation Cooperation in a category of testing pursuant to the International Organization for Standardization/International Electrotechnical Commission 17025:2005 standard, or a subsequent superseding standard, in order to receive certification or maintain certification; except that the state licensing authority may by rule establish conditions for providing extensions to a newly licensed medical marijuana testing facility for a period not to exceed twelve months or a medical marijuana testing facility for good cause as defined by rules promulgated by the state licensing authority, which shall include but may not be limited to when an application for accreditation has been submitted and is pending with a recognized accrediting body.

(II) Signage, marketing, and advertising, including but not limited to a prohibition on mass-market campaigns that have a high likelihood of reaching persons under eighteen years of age and other such rules that may include:

(A) Allowing packaging and accessory branding;

(B) A prohibition on health or physical benefit claims in advertising, merchandising, and packaging;

(C) A prohibition on unsolicited pop-up advertising on the internet;

(D) A prohibition on banner ads on mass-market websites;

(E) A prohibition on opt-in marketing that does not permit an easy and permanent opt-out feature; and

(F) A prohibition on marketing directed toward location-based devices, including but not limited to cellular phones, unless the marketing is a mobile device application installed on the device by the owner of the device who is eighteen years of age or older and includes a permanent and easy opt-out feature.

(III) (A) A prohibition on the production and sale of edible medical marijuana-infused products that are in the distinct shape of a human, animal, or fruit. Geometric shapes and products that are simply fruit flavored are not considered fruit. Products in the shape of a marijuana leaf are permissible. Nothing in this subsection (3)(a)(III) applies to a company logo.

(B) The rules promulgated pursuant to this subsection (3)(a)(III) shall take effect on October 1, 2017.

(IV) Conditions under which a licensee is authorized to transfer fibrous waste to a person for the purpose of producing only industrial fiber products. The conditions must include contract requirements that stipulate that the fibrous waste will only be used to produce industrial fiber products; record-keeping requirements; security measures related to the transport and transfer of fibrous waste; handling contaminated fibrous waste requirements; and processes associated with handling fibrous waste. The rules shall not require licensees to alter fibrous waste from its natural state prior to transfer.

(b) The executive director of the department of public health and environment shall provide to the state licensing authority standards for licensing laboratories pursuant to the requirements as outlined in subsection (3)(a)(I)(A) of this section for medical marijuana and medical marijuana-infused products.

(c) Mandatory medical marijuana testing shall not begin until a marijuana laboratory testing reference library is created and licensees are set up for proficiency tests and standards.

(4) Rules promulgated pursuant to subsection (1)(b) of this section must include, but need not be limited to, the following subjects:

(a) The state licensing authority shall create a statewide licensure class system for optional premises cultivation facility licenses. The classifications may be based upon square footage of the facility; lights, lumens, or wattage; lit canopy; the number of cultivating plants; other reasonable metrics; or any combination thereof. The state licensing authority shall create a fee structure for the licensure class system.

(b) (I) The state licensing authority may establish limitations upon medical marijuana production through one or more of the following methods:

(A) Placing or modifying a limit on the number of licenses that it issues, by class or overall, but in placing or modifying the limits, the authority shall consider the reasonable availability of new licenses after a limit is established or modified;

(B) Placing or modifying a limit on the amount of production permitted by an optional premises cultivation facility license or class of licenses based upon some reasonable metric or set of metrics including, but not limited to, those items detailed in subsection (4)(a) of this section, previous months' sales, pending sales, or other reasonable metrics as determined by the state licensing authority; and

(C) Placing or modifying a limit on the total amount of production by optional premises cultivation facility licensees in the state, collectively, based upon some reasonable metric or set of metrics including, but not limited to, those items detailed in subsection (4)(a) of this section, as determined by the state licensing authority.

(II) When considering any such limitations, the state licensing authority shall:

(A) Consider the total current and anticipated demand for medical marijuana and medical marijuana-infused products in Colorado;

(B) Consider any other relevant factors; and

(C) Attempt to minimize the market for unlawful marijuana.

(c) The state licensing authority may adopt regulations that limit the amount of medical marijuana inventory that a medical marijuana center may have on hand. If the state licensing authority adopts a limitation, the limitation must be commercially reasonable and consider factors including a medical marijuana center's sales history and the number of patients that are registered at a medical marijuana center as their primary center.