As of December 5th, 2022, Rhode Island has eliminated the fee to obtain a medical card for Medical Cannabis. Patients will no longer have to pay $50 for a card and renewal fees. The move to end these fees comes at the commencement of recreational sales in the state. Although the fees are gone, the 7% sales tax rate is still intact.
Just meeting the state’s self-imposed deadline of December 31st for the opening of a retail location, Legal Cannabis Dispensary Sales began officially at 4:20 pm in the State of New York on Thursday, December 29th at Housing Works, a non-profit organization that supports people living with HIV and AIDS in the Greenwich Village “NO-HO” section of Manhattan. A former Gap Clothing Store located at 750 Broadway. Doors opened with about 2000 online reservations as hundreds of people stood online hoping for a chance to enter. The inaugural purchase was made by New York State’s Top Cannabis regulator, Chris Alexander, the executive director of the New York Office of Cannabis Management. New York adult-use retailers are projected to generate $1 billion-$1.2 billion in sales in 2023 and $2.2 billion-$2.7 billion by 2026, according to the 2022 MJBiz Factbook.
GENERAL CANNABIS UPDATE
On Friday, December 2nd, President Biden made history when he signed the bipartisan Medical Marijuana and Cannabidiol Research Expansion Act. The Legislation makes it easier for researchers to study cannabis and its potential therapeutic benefits. The bill allows universities, including those that receive federal funding, and private companies to acquire DEA licenses to grow and handle cannabis for research purposes. There are currently seven institutions licensed by the DEA to produce marijuana for research purposes. The Legislation also directs the Department of Health and Human Services (DHHS), to research the “therapeutic potential of cannabis”. This bill creates pathways for a new area of business within the Cannabis industry, particularly for pharmaceutical companies. Such research could lead to the creation of cannabis-based products that are marketed and sold using science-based medical claims.
The Food and Drug Administration recently tasked with carrying out a scientific review of cannabis in order to inform Federal Scheduling, says that it is just months away from releasing its regulatory assessment of Hemp products, particularly CBD. Hemp and its derivatives like CBD were legalized in the 2018 Farm Bill, but the FDA, under much criticism, has delayed rolling out any regulations, maintaining that research needed to be completed. The Principal Deputy Commissioner Janet Woodcock and her team discussed the next steps necessary to regulate consumable CBD products, suggesting that the traditional pathway of regulating it as a dietary supplement may not be feasible. It is possible that the FDA may pass the baton to Congress in order for a regulatory pathway to be created. While the FDA struggles to create a regulatory framework, other derivatives like Delta-8 THC are finding their way into the marketplace, which is a “more intensifying short-term concern” according to Norman Biernbaum of the FDA. Bipartisan lawmakers have repeatedly pressed the FDA to create a marketing pathway for CBD in the food supply and as a dietary supplement.
New Payment Software for Cannabis Industry
Former NBA Indiana Pacers player David Harrison and Former Rep. Dan Donovan (R-NY) have teamed up to launch a new product that they think can aid in resolving the industry’s financial challenges, regardless of federal reform. “Token HiFi, a digital asset exchange program, built to provide individualized tracking and reporting services to meet each state’s specific regulatory needs.” The duo believes that the current political landscape around cannabis policy and lack of progress on SAFE banking in congress create a space for their product to thrive. Their goal is to launch in early Q1 2023.
SAFE Banking Act
Despite a rational and impassioned plea for federal cannabis banking reform, The SAFE BANKING ACT did not pass. Eight Pennsylvania lawmakers released an impassioned plea to Senator Pat Toomney, who Retired at the end of the last congressional session, in a last-ditch effort to get the legislation passed. Without the support from Toomey, Senator Mitch McConnell was able to block SAFE from attaching to the National Defense Authorization Act, and the Omnibus Spending Bill. “Without enough time in the lame-duck session to submit SAFE to the typical committee process and a floor vote, Schumer’s push to package cannabis banking reform into larger legislation – a common enough technique in Washington – was considered the bill’s best shot at passage before 2023.” Senator Chuck Schumer found himself at an impasse late in the game with Republicans feeling it was too late to take action and Democrats asking for more social justice reforms in the bill. In the end, the act failed because it lacked one Republican co-sponsor to seal the deal.
November Ballot Results
Adult Use Cannabis legalization measures were up for consideration on the ballot last month In North Dakota, South Dakota, and Arkansas were defeated, however, voters in Maryland and Missouri have approved Legislation.
Beginning on July 1, 2023 adults will be allowed to possess up to 1.5 ounces of cannabis and/or 12 grams of cannabis concentrates and to grow up to two cannabis plants in their homes for personal use. Possessing amounts between 1.5 ounces and 2.5 ounces will be subject to civil fines but possessing more than 2.5 ounces will result in criminal penalties. The law establishes a process to facilitate the expungement of past eligible convictions and also allows for the resentencing of those incarcerated for eligible cannabis crimes. Eligible parties may begin petitioning the courts after 1/1/23.
Missouri voters decided in favor of Amendment 3 legalizing the possession, cultivation, and licensed retail sale of cannabis for those ages 21 and older. Beginning on December 8, 2022, adults will be permitted to possess up to three ounces of cannabis and grow up to six flowering plants, six immature plants, and six plants under 14 inches for personal use. The law requires the implementation of a process for the automatic review and expungement of certain marijuana convictions by June 8, 2023. The regulations have yet to be finalized, but the drafts are available here.
Nevada (Consumption Lounges)
On Wednesday, November 30th, the Nevada Cannabis Compliance Board (CCB) conducted two drawings via random number selection to determine the issuance of cannabis consumption lounge licenses. According to state law, the CCB may issue 20 independent cannabis consumption lounge licenses, 10 of which are designated for social equity applicants. The CCB received a total of 99 applications for 20 retail cannabis consumption lounges, 49 independent lounges, and 30 social equity independent lounges. Upon receiving final inspection, licensure, and approval by the Board, retail cannabis consumption lounges are expected to open during the first half of 2023. According to Las Vegas TV station KLAS, almost all of the 20 licenses went to companies in Las Vegas and unincorporated Clark County.
Rhode Island’s first adult-use marijuana sales began on December 1st, with 5 dispensaries serving consumers 21 and older. During last month’s election, voters in more than 30 cities were asked to decide to allow cannabis businesses to operate within their jurisdictions. Almost all of those cities opted in, but those that didn’t place the question on their ballot will by default allow marijuana businesses in their area, including the state’s largest cities: Cranston, Pawtucket, Providence, and Warwick. These five dispensaries are operating with hybrid licenses that allow them to sell cannabis to both Medical patients and Adult Use customers. According to MJBizDaily, “Rhode Island’s adult-use market is expected to generate $80 million in sales in the first year and $300 million by the fourth year”.
On November 21st, New York regulators issued the first 36 marijuana retail licenses for the adult-use market that officials hope will open by year’s end. The timeline may be possible with the announcement by the OCM that delivery services may launch before retail stores open. New York adult-use retailers are projected to generate $1 billion-$1.2 billion in sales next year, growing to $2.2 billion-$2.7 billion by 2026, according to MJBiz Daily. New York’s existing medical cannabis market is vertically integrated with multi-state operators accounting for almost all of the existing medical market. NY regulators took a much different approach to the adult-use market. In an attempt to limit the presence of these multi-state operators, proposed rules include a one-time licensing fee of $5 million, an additional $3 million fee per store, and a three-year moratorium on opening any retail store for recreational sales. The state’s medical marijuana market is expected to bring in $220 million to $270 million this year, increasing to $320 million-$390 million by 2026, according to MJBiz Daily.
New Jersey Cannabis regulators approved regulations for “public cannabis consumption areas” which would allow a social use option for adults and patients. “Adult-use cannabis shops opened in April, but advocates have emphasized the need to implement regulations that give people additional spaces to lawfully consume” according to marijuana moment. Some of the rules include the prohibition of food items being sold on-site, though people would be able to bring their own food or have it delivered. Alcohol and tobacco can not be sold or consumed at cannabis consumption sites. They could operate indoors or outdoors, however outdoors will require an enclosure. The proposed application fee, micro business, and standard license fees for the facilities will be $1,000
The United Nations Conference on Trade and Development (UNCTAD) released a special 93-page report on industrial hemp, that focuses on how developing economies can “exploit hemp’s economic and social potential through a whole-plant approach, based on the exploitive use of all the plant’s parts”. The report goes on to suggest that “this approach could facilitate the creation of production chains that are able to contribute to growth in rural areas, in the manufacturing and food processing industries. Moreover hemp development “should be at the core of any sectoral development strategies” for the future of developing economies.
The New Jersey Assembly has approved a bill that would allow licensed marijuana businesses to deduct certain expenses on their state tax returns, creating a partial remedy to the substantial tax woes cannabis businesses face. The lack of federal regulation for the industry continues to block businesses from making federal deductions under Internal Revenue Service (IRS) code known as 280E. While generally, state tax policy mirrors federal law, this new bill states “a licensed cannabis business’s gross income “shall be determined without regard to section 280E of the [federal] Internal Revenue Code” according to Marijuana Moment. Now the measure heads to the Senate for consideration. Pennsylvania and New York have taken similar steps to initiate similar tax reform measures.
Nevada Marijuana Regulators have received over 100 consumption lounge applications since announcing the new license type last month, with plans to approve them by early 2023. Current retailers are able to apply to build lounges into their existing operations. Independent Operators have the opportunity to create lounges by entering into a contract with a retailer to purchase and prepare ready-to-consume cannabis products for resale at brand-new facilities. According to a press release, “CCB received 20 applications from existing retailers, 50 from independent lounge applicants, and 30 from independent social equity applicants”. The CCB may issue 20 independent cannabis consumption lounge licenses, of which half have been designated for social equity applicants. This new license type will allow license holders to incorporate cannabis with Yoga, massage therapy, and infused food, as well as smoking and vaping in separate rooms. Water will be freely available to all guests but products that are meant to be single-use or ready-to-consume will not be allowed to leave the premises.
Arizona nears 1 billion in legal marijuana sales for 2022. Total cannabis sales passed the $980 million mark in the first eight months of 2022 and will likely approach, if not eclipse, 2021’s $1.4 billion before the year ends.
Pennsylvania launched a grant program to support hemp marketing and consumer awareness. The state Department of Agriculture said that non-profit organizations that take on marketing initiatives to increase hemp sales, exports, and consumer awareness of the industry are eligible for reimbursement. The purpose of the program is threefold, according to a notice in the Pennsylvania Bulletin:
- Increase Consumer awareness of agricultural hemp products within PA, thereby increasing sales of agricultural hemp products.
- Educate producers and consumers about agricultural hemp products within PA
- Facilitate the Growth and development of export markets for agricultural hemp products in PA
The City of Detroit received 90 applications for the 60 recreational marijuana licenses available in the first round, which include licenses for dispensaries, microbusinesses, and consumption lounges. 50 non-equity and 40 equity applications were submitted by the deadline of Oct. 1, with 28 of the 40 equity applicants qualifying for Detroit Legacy status as well, according to Kim James, director of Detroit’s office of marijuana ventures and entrepreneurship.
The city will issue a total of 160 licenses in three phases. The 60 licenses that will be awarded in the first phase include 40 retail, 10 microbusiness, and 10 consumption lounge licenses. Detroit started accepting applications for unlimited licenses for growing or processing cannabis in April of 2022. Half of all the limited licenses are set aside for “equity applicants” defined by the city as people who live in communities that have been disproportionately impacted by marijuana prohibition and enforcement. Equity applicants also include those with certified Detroit Legacy status currently living in Detroit or another disproportionately impacted community, however, Detroit has faced multiple legal challenges over this piece of its ordinance.
After two lawsuits that challenged the ordinance were dismissed in August, the city moved forward with opening its application process for the limited licenses on September 1st. However, another lawsuit was filed at the end of last month in the U.S. District Court for the Eastern District of Michigan, claiming the ordinance gave an unfair preference to longtime Detroiters.
CANNABIS ECONOMIC UPDATE
Cannabis as Cash Crop
The wholesale value of marijuana across 15 adult-use states has reached $5 billion—making it the sixth most valuable cash crop in the country, above potatoes and rice—according to a new report. The $5 billion does not account for the medical cannabis market that provides for medical cannabis patients in 37 States.
With an estimated 13,300 American farms growing cannabis, the significant takeaway is that the cannabis industry is a large component of the agriculture industry, even if it’s only legal and regulated by certain states thus far. Crops that exceed its value are:
- Corn @ $82.6 billion,
- Soybeans @ $57.5 billion
- Hay @ $19.3 billion
- Wheat @ $11.9 billion
- Cotton @ $7.5 billion
Researchers found that farmers grew 24 percent more metric tons of adult-use marijuana in 2021 compared to the previous year. Overall, the sector cultivated 2,834 metric tons of cannabis. While the USDA does not (publicly) track marijuana cultivation, they have released the results of a first-ever federal survey on the hemp industry earlier this year, “providing a “benchmark” analysis of the economic impact of the burgeoning market and finding that the industry reached $824 million in value in 2021”.
According to a Leafly report released this February, there are almost half a million people employed full-time in the cannabis sector as more state markets come online and mature. Last year was the first time that job creation in the marijuana industry exceeded six figures, with 107,059 new jobs created, compared to 32,700 in 2019 and 77,300 in 2020. As of 2021, there are 428,059 people employed in the marijuana space, compared to 321,000 the prior year.
At least 28 California municipalities could create cannabis ballot initiatives this November election cycle, creating 125-150 new cannabis business licenses. If passed, we would see the largest cohort of new markets open up to cannabis since California started regulating adult use in 2018, according to MJBizDaily research. The proposed referendums will ask voters to approve or prohibit marijuana businesses. The voter-led ballot drives would begin to close the wide gaps in consumer accessibility since a majority of cities and counties across the state still ban commercial marijuana operations. According to MJ Biz, “most of the initiatives are centered near dense population centers in Southern California, near L.A. and San Diego, with the potential for Los Angeles County to approve as many as 25 stores, and San Diego County 20-40 retailers.” According to the state’s Department of Cannabis Control, only 31% of 539 cities and counties in California allow cannabis retail operations.
Nevada (Las Vegas)
On September 21, 2022, In a 5-1 vote, the Las Vegas City Council approved Cannabis Consumption Lounges. Unincorporated Clark and Las Vegas County will be the only jurisdictions in Southern Nevada to host the lounges, which are similar to taverns but no alcohol sales will be allowed. The new license type will allow marijuana customers to consume legally outside of private homes since voters legalized recreational use in 2016. Now the 40 million or so yearly tourists will have a place to legally consume, without having to resort to doing so illegally in the street, parking garages, or hotel rooms. Most of the licenses will be issued to existing dispensaries with lounges attached to or “adjacent” to the businesses. There are currently 17 licensed dispensaries in the city, but “statewide, there will be 20 licenses issued to independent applicants for standalone gathering spots, with half to go to “social equity applicants,” who’ve been adversely affected by marijuana laws before the state legalized it,” according to Las Vegas Review Journal Other cities like North Las Vegas, Henderson, Boulder City, and Mesquite have opted out. In order to comply with state laws city staffers will now need to iron out the 2019 Social Use Venue ordinance that will lay the groundwork for consumption lounges in the city of Las Vegas. The city expects its application process to open in the first couple of months of 2023, with the first lounges in the county projected to open up early next year.
Vermont joined 14 other states with legal adult-use cannabis sales, according to the Marijuana Policy Project. On October 1st adult-use sales began in Vermont though only three dispensaries were ready to be open on day 1 “Vermont’s inaugural weekend will be “more of a soft opening,” as more product manufacturers and testing facilities come online and cannabis harvest become available, said James Pepper, chair of the state Cannabis Control Board” according to the Washington Post. Vermont’s Cannabis Control Board prioritized review and waived licensing fees for social equity applicants that are Black or Hispanic, or from communities that historically have been disproportionately affected by cannabis being outlawed, or who have been or had a family member who has been incarcerated for a cannabis-related offense. More than 30 social equity applicants, mostly growers, have been approved.
Oklahomans will not be voting on adult-use cannabis legalization on Nov. 8. The state’s Supreme Court recently denied a request by advocates behind State Question 820 to instruct the Oklahoma Election Board to include the adult-use petition on the ballot after the signature-verification process wasn’t completed on time, according to MJBizdaily.com. Justice Douglas Combs stated, “SQ820 will be voted upon by the people of Oklahoma, albeit either at the next general election following November 8, 2022, or at a special election set by the Governor or the Legislature, but could not be mandated to be included on the November 2022 general election ballot.”
In previous ballot initiatives, the secretary of state’s office was responsible only for counting petition signatures for ballot questions, but in this instance, the delays began at the secretary of state’s office, when they outsourced the verification process to a third party, which took seven weeks contrary to earlier statements by the secretary of State’s office that the process would take two to three weeks.
As of September 26, the Cannabis Control Board in the US territory of Guam has approved two applications for “responsible official” identification cards. The “responsible official” credential allows an applicant to apply with the Guam Department of Revenue and Taxation for a Cannabis License and Cannabis Establishment Permit. Guam legalized adult use of cannabis in 2019, with rules and regulations taking effect this past May 29th. Adults 21 and over are eligible to grow, possess and consume cannabis. However, it is illegal to sell or trade cannabis for any value unless you have attained the proper credentials and licenses for an establishment. There will be licenses for cultivation, manufacturing, testing facilities, and retail locations, but residents will only be able to own one type of cannabis business license. The cannabis law requires a 15% excise tax to be assessed when cannabis growers sell to manufacturers or retailers. Half of the tax collected will go to the government’s general fund and the rest will be divided between the Department of Public Health and Social Services and the Guam Police Department.
Federal Transportation Licenses
Commercial drivers who use CBD products are doing so “at their own risk,” according to a federal agency’s draft in the handbook for medical examiners who are responsible for issuing U.S. Department of Transportation (DOT) certifications. The proposed guidance, published in the Federal Register, is used to advise medical examiners when they carry out physical exams for commercial drivers, whose jobs require interstate travel. While the Federal Motor Carrier Safety Administration (FMCSA) handbook says that drivers aren’t prohibited from using federally legal CBD products that contain up to 0.3 percent THC per dry weight, it cautions examiners that the use of the non-intoxicating cannabinoid could still jeopardize physical exam certifications. Drivers who are required to submit to the exam and receive the DOT certification, “cannot be physically qualified” if they use marijuana, regardless if it is legal in the state they reside in. There is no medicinal or religious use exemption.
The lack of oversight of CBD by the Food and Drug Administration (FDA) does not ensure that the labels on CBD products that claim to contain less than 0.3 percent by dry weight of THC are accurate. Testing positive for THC because of mislabeling will not be a valid excuse so drivers could still be deemed ineligible for certification if they take the wrong product.
Arkansas may see adult-use marijuana legalization on the ballot in November. It would allow adults to possess up to 1 ounce of cannabis, prohibit home grow, allow municipalities to vote on restrictions against marijuana businesses, and excludes any kind of expungement provisions. The state’s Alcoholic Beverage Control Department (ABC) would be responsible for regulating the program and issuing the licenses. Existing medical marijuana facilities would be able to serve adult consumers by allowing them to open another location. The state would impose a 10% tax on adult use sales. Individuals can now own a stake in more than 18 dispensaries. Dispensaries would be able to cultivate and store up to 100 seedlings, instead of 50 as prescribed under the current medical cannabis law.
Effective August 5, 2022 eligible DC residents may immediately purchase medical cannabis from licensed dispensaries using the temporary patient registration approval sent to applicants upon submission of an online patient application. Temporary registrations are valid for 30 days and may be used while an applicant’s application is under review. Non-DC residents are not able to register in the DC medical program but they are able to purchase from a DC licensed dispensary if they are a patient of one of the other 38 States with medical programs through a reciprocity program. Residents are able to possess two ounces or less, with the ability to transfer one ounce or less to another person as long as no money, goods, or services are exchanged and the recipient is 21 or older. Residents can grow up to six plants in their home as well, no more than three of which can be mature, and cannabis can only be consumed on private property.
Adult-use legalization will be on the ballot in Missouri this November. The Missouri Secretary of State Jay Ashcroft recently announced that petition 2022-059 received a Certificate of Sufficiency, meaning a minimum number of valid signatures were obtained from six of the eight congressional districts, putting it on the November 8 ballot. The 38-page ballot measure proposes an amendment to the Missouri Constitution that would remove state prohibitions on purchasing, possessing, consuming, using, delivering, manufacturing, and selling marijuana for personal use for adults over 21 and over. The new laws would allow purchases of up to three ounces of marijuana at a time; require a registration card for personal cultivation with prescribed limits of up to six mature plants, six clones, and six immature plants, allow persons with certain marijuana-related non-violent offenses to petition for release from incarceration or parole and probation and have records cleared, establish a lottery selection process to award licenses and certificates, issue equally distributed licenses to each congressional district, and impose a 6% tax on the retail price of marijuana which would be dedicated to implementing provisions for the automatic expungement of convictions of past marijuana-related offenses, substance abuse programs and health care for veterans. Should the amendment pass in November, the department will accept and consider input from the public on how the new law should be implemented.
The Missouri Department of Health and Senior Services will be regulating the recreational marijuana initiative which calls for the agency to issue 144 licenses for cannabis microbusinesses with priority given to low-income applicants and those harmed by marijuana prohibition. Medical marijuana companies would be allowed to apply to sell recreational marijuana on December 8, with regulators required to approve these new licenses within 60 days. We can expect legal sales of recreational marijuana to begin in Missouri early next year.
The amendment takes effect exactly 30 days after the vote, on December 8, 2022. “State governmental entities estimate initial costs of $3.1 million to implement the program, but will be offset by initial revenues of at least $7.9 million, annual costs of 5.5 million, and annual revenue of at least $40.8 million. Local governments are estimated to have annual costs of at least $35,000 and annual revenues of at least 13.8 million.”
The Maryland legislature approved two cannabis measures in April—one to put the question of legalization to voters as a constitutional amendment on the ballot and a complementary measure that will lay out the implementation framework if voters approve the initiative. The legislation would allow adults 21 and up to be able to purchase and possess up to 1.5 ounces of cannabis. It also would remove criminal penalties for possession of up to 2.5 ounces. Adults 21 and older would be allowed to grow up to two plants for personal use and gift cannabis without remuneration. Past convictions for conduct made legal under the proposed law would be automatically expunged, and people currently serving time for such offenses would be eligible for resentencing. The legislation makes it so people with convictions for possession with intent to distribute could petition the courts for expungement three years after serving out their time. The legalization bill was amended to include language to create a community reinvestment fund and allow state tax deductions for certain cannabis-related expenses that marijuana businesses are barred from claiming under the current federal tax code.
If voters pass the referendum, the reform wouldn’t take effect immediately. Possession of small amounts of cannabis would become a civil offense on January 1, 2023, punishable by a $100 fine for up to 1.5 ounces, or $250 for more than 1.5 ounces. Advocates have taken issue with this protracted timeline.
Illinois has issued all 185 conditional adult-use licenses to social equity candidates that were awarded back in the summer of 2021. This expansion of the Illinois Cannabis program is a historic milestone, which is the result of policy that puts equity at its forefront by prioritizing communities that have been targeted by the war on drugs. Of the businesses selected through the lottery, 41% are majority Black-owned, 7% are majority White-owned, and 4% are majority Latino-owned, while 38% of awardees did not disclose the race of their owners. Per the State’s press release “To date, Illinois has made and executed the greatest commitment of adult-use cannabis tax revenue to community reinvestment, expunged the most criminal history records involving cannabis, and has the highest rate of minority ownership of any state, reporting/collecting ownership demographic data in the country.” The next steps are getting the businesses up and running, creating jobs in the communities most harmed by the war on drugs. Through a separate program administered by the Illinois Department of Commerce and Economic Opportunity (DCEO), the State of Illinois offers low-interest loans to qualified licensed companies through its Social Equity Cannabis Loan Program. The first round of social equity license applicants are expected to finalize loan agreements directly with DCEO’s partner lending institutions in the coming weeks. The next phase of the loan program will be launched in the near future. DCEO also funds free licensing and post-licensing technical assistance through their partners at Oakton Community College, The Trep School, the Women’s Business Development Center, and the University of Illinois Chicago Law School. The Cannabis Regulation and Tax Act also authorizes the Department to issue additional licenses in 2022 and future years
Nebraskans for Medical Marijuana were unable to meet the requirements to get a legalization initiative on the ballot. On August 19th, the secretary of state’s office announced that the two petitions submitted by the marijuana group had each fallen about 9,000 signatures short of submitting the required 86,776 signatures of registered voters. They were declared to have failed another requirement—to submit signatures from at least 5 percent of registered voters in 38 of the state’s 93 counties.”
Top cannabis regulators in New York announced this week that the application period for most marijuana businesses would begin in the middle of next year, marking a significant timeline shift from prior statements that the entire adult-use market would likely be online by then. They went on to say the long-awaited regulations should be launched in the next two months. Only businesses that received conditional cultivation and processing licenses will be able to start growing and processing weed for sale to retailers by receiving a license through the Conditional Adult-Use Retail Dispensary (CAURD) license program managed by the Office of Cannabis Management. Industry Insiders fear that the delay could cause NY to run out of legal marijuana during the adult-use market’s first year. It’s unlikely conditional growers and processors will produce enough in their first year to supply the entire NY legal weed market, and the delay in full licensing could exacerbate that. To date, the CCB has approved 242 conditional cultivator licenses, and 15 conditional processing licenses, but these licenses are available to a limited number of applicants who fit specific criteria. The shift in timeline on regulations could also make it more difficult for marijuana businesses to find investors, as it’s not yet clear how many marijuana businesses investors will be allowed to finance, which makes venture capitalists nervous about putting money into NY marijuana companies. Investors are a bit hesitant to make any moves quite yet prior to the regulations being released.
This month Senator Booker (D-NJ) formally introduced S 4591, the Cannabis Administration and Opportunity Act (CAOA) cosponsored by Senators Wyden (D-OR), Schumer (D-NY), Murray (D-WA), and Peters (D-MI). This may prompt deja vu for those that remember that the CAOA was announced last year, but up to this point it has technically always been an unofficial draft. This is the legislation that Senate Democratic leadership has been focused on to the exclusion of other cannabis-related reform bills like the SAFE Banking Act.
Meanwhile, the House of Representatives voted in favor of including the SAFE Banking Act’s language in the National Defense Authorization Act of 2023 (HR 7900). This may also lead to feelings of deja vu as Representative Perlmutter (D-CO) successfully pushed to have it included in the House’s version of the previous bill, the National Defense Authorization Act of 2022. Its inclusion in 2023’s version marks the seventh time the SAFE Banking Act has passed with bipartisan support on the floor of the House as either stand-alone legislation or added as an amendment to a budgetary bill or stimulus package. It was ultimately dropped from the previous version of the NDAA once the Senate and House bills were reconciled, and it’s possible the same will happen again this time. This is one of Perlmutter’s last chances to push SAFE through before he retires at the end of this term. Perlmutter has suggested that his colleague David Joyce (R-OH), co-chair of the Congressional Cannabis Caucus, would be a good choice to “pick up the mantle.”
SAFE Banking is not the only cannabis-related item in HR 7900. Section 743, entitled “Study and awareness initiative regarding use of medical cannabis to treat certain members of the Armed Forces on terminal leave,” would permit the Secretary of Defense to “conduct a study on the use of medicinal cannabis as an alternative to prescription opioids.” While this section isn’t getting a lot of attention, it’s significant because many veterans groups advocate for the use of cannabis in the treatment of pain and PTSD but up to this point the Veterans Health Administration hospital system has prevented healthcare providers from discussing its potential use with patients. Even if Section 743 does not make it past the finish line, there is some hope that these restrictions may ease due to the Senate’s confirmation of former New Jersey health commissioner Shereef Elnahal as undersecretary for health at the Department of Veterans Affairs. Dr. Elnahal tweeted in 2018:
“Marijuana needs to be descheduled at the federal level. Enough is enough.
Patients on #MedicalMarijuana deserve better.
Until then, we are stuck with:
-Scant research funding
-Limited to no access in hospitals/nursing homes
-High costs for patients”
Other legislation aimed at promoting medical studies of the use of cannabis includes HR 8454, the Medical Marijuana and Cannabidiol Research Expansion Act, introduced by Representative Blumenauer (D-OR). While it still hasn’t attracted a lot of attention, some Senate Republicans have indicated that they would be amenable to passing legislation facilitating research where they wouldn’t necessarily support the CAOA or other comprehensive marijuana reform bills. Senator Grassley (R-IA) has been quoted as saying, “Researching marijuana is widely supported on both sides of the aisle, and it’s a smart step forward.” HR 8454 would require the DEA to put more systems in place to support cannabis studies, provide some protections to those who study its effects, and would permit healthcare providers to discuss the use of cannabis with their patients (like those in the VA system).
Returning to financial services, Representative Carter (D-LA) introduced the Capital Lending and Investment for Marijuana Businesses Act (HR 8200), also known as the CLIMB Act. This bill would not only offer protections to banks and credit unions that choose to bank state-legal marijuana businesses similar to what’s in the SAFE Act, but it would also go beyond that to include brokerage, credit card, accounting, and money transfer services, among others. Further, it would also extend a protective umbrella over those that provide non-financial services like legal and compliance, IT, packing and logistics, marketing, management consulting, etc. It would also permit cannabis businesses to list on the national securities exchanges, something that’s prohibited today.
Rhode Island legalized adult-use, and while all the details of the program are being sorted out we do know that the basic license types will include Cultivator, Retailer, Hybrid Retailer, Laboratories (Testing & Research), Employees, and Transporters. This marks a major shift away from the vertically-integrated model used in the current medical program, though that’s not unexpected as we have seen the same shift in nearby states like New York and New Jersey. The number of licenses will be limited in a few ways: the number of available licenses is tied to a number of defined “geographic zones,” in each zone several licenses must be made available to social equity candidates, and municipalities will be able to either entirely or in a piecemeal fashion restrict the operation of cannabis-related businesses (CRBs) in their area. Sales aren’t expected to begin until the end of 2022 (at least).
In an unexpected turn of events, a lack of specificity in a recent bill in Minnesota seems to have inadvertently legalized Delta-9 THC beverages and edibles for all adults over the age of 21. While the bill seems to have been intended to prohibit the sale of hemp-derived CBD and Delta-8 THC to minors, this section has led many to arrive at the conclusion that Delta-9 products have also been legalized:
“An edible cannabinoid product must not contain more than five milligrams of any tetrahydrocannabinol in a single serving, or more than a total of 50 milligrams of any tetrahydrocannabinol per package”
Whether or not this was intentional, the legislation as written includes the phrase “any tetrahydrocannabinol” without excluding Delta-9 THC. This seems to have taken everyone by surprise, and several municipalities quickly imposed bans on the sale of any and all hemp-derived THC products. It remains to be seen whether attempts will be made to revise the legislation or leave it as is.
For years now Washington DC residents have pushed to legalize adult-use cannabis, but due to the city’s unique status as a federally-controlled district Congress has been able to block these initiatives. However the DC government has come up with an interesting solution to this problem by granting any resident above the age of 21 the right to self certify their eligibility for the existing medical marijuana program, meaning they do not need a recommendation from a healthcare provider to register. This has, for all intents and purposes, legalized adult-use marijuana in DC.
Finally, in early July the Federal Reserve, FDIC, FinCEN, NCUA, and the OCC issued a “Joint Statement on the Risk-Based Approach to Assessing Customer Relationships and Conducting Customer Due Diligence”. While there is no specific mention of cannabis-related businesses, the guidance notably includes sections that could easily be plucked from the 2014 FinCEN guidance on banking marijuana businesses. For instance:
“The Agencies recognize that it is important for customers engaged in lawful activities to have access to financial services. Therefore, the Agencies are reinforcing a longstanding position that no customer type presents a single level of uniform risk or a particular risk profile related to money laundering, terrorist financing, or other illicit financial activity.
Banks must apply a risk-based approach to CDD, including when developing the risk profiles of their customers. More specifically, banks must adopt appropriate risk-based procedures for conducting ongoing CDD that, among other things, enable banks to: (i) understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and (ii) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.”
We don’t know whether the responsible regulatory agencies responsible had CRBs in mind at all when drafting the joint statement, but it is sound advice for those banking the industry.
America COMPETES ACT
The America COMPETES Act also known as the United States Innovation and Competition Act of 2021 (H.R. 4521) is the latest congressional bill to include Representative Earl Blumenauer’s (D-OR) Secure and Fair Enforcement (SAFE) Banking Act. Blumenauer is a conferee on the America COMPETES Act and reported that there is a concerted effort to make sure that the SAFE Banking Act, passed by the House of Representatives in April, is attached to the America COMPETES Act for final signature by the president. Earlier this month a bipartisan group of senators wrote a letter to Congress stating that passing the SAFE Banking Act would help cannabis-related businesses, support innovation, create jobs and strengthen public safety in our communities. To date, there is no word on whether the final draft for review and signature by President Biden will contain the SAFE Banking Act, but this would be the next and final phase of this bill. Similarly, in late 2021, the SAFE Banking Act was attached to the National Defense Authorization Act (NDAA) of 2022 but was removed prior to the NDAA becoming law.
On Wednesday, May 24th, Rhode Island became the 38th state to legalize marijuana (19th state to do so recreationally). As reported in an official press release, Gov. Dan McKee signed the Rhode Island Cannabis Act after a House vote of 55 yeses and 16 nos as well as a Senate vote of 32 yeses and 6 nos. The passing of this Act goes in tandem with Gov. McKee’s Budget Proposal for Fiscal Year 2022 that his office released last year in which he proposed legalizing adult use marijuana and included compliance, social equity and safety measurements. The Rhode Island Cannabis Act allows:
- Adults 21 and older can purchase up to 1 ounce of cannabis and grow up to 6 plants at home.
- The expungement of all marijuana convictions no later than July 1, 2024.
- A sales tax of 7%, 10% excise tax and a local 3% excise tax for municipalities that opt to do so.
- An initial rollout of 33 marijuana retailers, 24 of which will be standalone adult use dispensaries. A quarter of these licenses will go to social equity applicants.
- Investors to allot capital into multiple marijuana businesses but business entities may only possess 1 license.
- Hybrid grow and manufacture licenses already in production for medical marijuana use in the state will be allowed to grow for adult use no later than August 1, 2022.
- Adult-use retailers to open no sooner than December 1, 2022.
The Garden State’s first month of adult use sales (April 21st to May 21st) has proved to be extremely profitable. In a meeting held on Tuesday, May 24th, the New Jersey Cannabis Regulatory Commission Reported that over $24 million had been sold in New Jersey’s newly legalized adult-use marijuana market that opened on April 21st. Although during this time period only 11 alternative treatment centers (dispensaries) were approved to sell adult-use marijuana throughout the state, the total sales amount for the first month is impressive for a state with roughly 9 million residents. In comparison, Arizona’s (population 7 million) 73 dispensaries reported $32 million in sales for its first month and New Mexico (population 2 million) with 100 stores similarly reported $40 million in sales.
In the same meeting, the NJ CRC approved an additional 22 cultivation licenses, 13 manufacturing licenses, 11 recreational licenses and 4 testing labs. Currently, the total number of awarded licenses in the state is 92 cultivation licenses, 45 manufacturing licenses, 11 retail licenses and 4 testing labs.
A campaign to decriminalize marijuana in the Lone Star State’s capital was approved earlier this month. Ground Game Texas, a statewide community organization that exists to mobilize voters, spearheaded a campaign in Austin to decriminalize cannabis within the city. Called The Austin Freedom Act, the measure halts arrests and citations for misdemeanor marijuana possession and prevents police from issuing citations for any residue or paraphernalia related to marijuana use. This comes as Texas, a state with a small medical marijuana program that allows for only low-THC, sees more movement related to marijuana decriminalization and the possible expansion of the state’s current program.
On Monday, May 16th, the State of Ohio Board of Pharmacy issued 70 provisional dispensary licenses for dispensary operations throughout the state. This comes after the Board of Pharmacy released a proposal (p.183) in 2021 to expand the state’s medical marijuana program. The expansion was deemed necessary after it was found that the population of the state was roughly 12 million with only 52 dispensaries whereas neighboring states such as Michigan and Pennsylvania each had respectively 10 million residents and 364 dispensaries, and 12 million residents with 109 dispensaries. The Board of Pharmacy also took into consideration the increase in number of active medical marijuana patients in addition to travel time to dispensaries. Ohio plans to increase the number of dispensaries in the state to roughly 130. Licensees that were awarded the provisional licenses have up to a year to show to Ohio regulators that their facilities meet all requirements set forth by the Board of Pharmacy prior to receiving a Certificate of Operation. So far this year the state has collected $180,426,019 in total sales from its medical marijuana program.
Earlier this month Connecticut Innovations (CI), the state of Connecticut’s strategic venture capital arm and the leading source of financing and ongoing support for Connecticut’s innovative and growing companies, completed a 7-figure investment in a cannabis edibles company called 1906. CI’s investment stemmed from recognizing the critical role that the cannabis industry plays in Connecticut’s newly legalized adult-use market, most importantly its positive economic and social impact on the state. This is a major milestone for the cannabis industry as it shows that major investors, including those operated by states, do not need to wait for federal legislation to be passed in order to participate in and develop the cannabis industry.
A recent study issued by the Journal of Safety Research shows that California retailers are 100% compliant with ID requirements and making sure that those under the age of 21 (for adult use) and 18 (for medical) are prevented from entering their shops and purchasing cannabis. For the study, people who looked underage were sent to some 50 retail shops throughout the state to purchase marijuana. In each scenario, the retailers were stopped and asked for identification which is the typical procedure for every state cannabis program. This debunks the myth that underage youth are purchasing cannabis from licensed retailers and also provides confidence that financial institutions can safely bank these businesses since they’re 100% compliant with state authorities.
Per California regulations, penalties for providing marijuana to those underage include up to 6 months in jail and a first offense fine of up to $500. Retailers may lose their license among other penalties.
For the month of April, federal matters concerning marijuana legalization have been quiet. Of the four marijuana legalization bills currently pending in Congress, the SAFE Banking Act, the Cannabis Administration and Opportunity Act, the States Reform Act and the MORE Act, the MORE Act as of late has received the most momentum. In early April, the US House of Representatives passed the MORE Act by a slim margin of 220 to 204. If passed by the Senate and signed into federal law, the MORE Act would decriminalize marijuana, expunge previous marijuana convictions, and add a 5% sales tax on marijuana purchases that would be funneled into social equity programs for communities harmed by marijuana prohibition. The fate of the MORE Act continues to be undecided; however, the majority of polls show that Americans are in favor of marijuana legalization.
Arizona (Medical and Adult Use)
On Friday, April 8th, the winners for Arizona’s new 26 social equity licenses were announced via a live streamed drawing inside the Arizona Department of Health Services Office in Phoenix. Nearly 1,300 applicants applied for the few spots in a state that has capped their dispensary license count at 169; the newly added 26 licenses brings it to this maximum total. Because there are no longer any more dispensary licenses to be issued, the value per each of these licenses is lucrative at roughly $8 to $15 million.
Per Arizona adult use regulations, a dual licensee (meaning an entity that holds both a nonprofit medical marijuana dispensary registration and a marijuana adult use establishment license) cannot separately transfer or assign each license. This means that for entities holding both licenses, both must be transferred. And for entities holding only one license, one must be transferred. Because of this, Arizona has seen its share of private investors flooding the state to pick viable social equity candidates with marijuana convictions to be at the forefront of their license applications in order to obtain a license. These types of deals are often problematic and represent an ongoing issue among social equity applicants and business owners in which the capital required to complete and submit an application for a social equity license is often difficult to obtain via traditional lending causing some social equity applicants to seek funding elsewhere.
Oftentimes with a lottery being chosen as the method for a state to decide the outcome of the licensing process, lawsuits will arise. Prior to April 8th, a lawsuit was issued in Maricopa County Superior Court alleging that only 1,300 out of a total 1,500 applicants were properly vetted to enter the licensing lottery. The state may continue to see lawsuits as newly licensed entities face hurdles due to zoning regulations.
New Jersey (Medical and Adult Use)
On Thursday, April 21st, New Jersey officially commenced adult use sales. 12 of the state’s alternative treatment centers were approved to begin selling to the adult use consumer market. Per a state press release, New Jersey saw approximately 12,438 retail cannabis consumers and made gross sales of almost $2 million on that day alone. Analysts expect the state to see annual cannabis revenue reach at least $2 billion within the first couple of years. Additionally, Gov. Murphy anticipates the state to see $121 million in tax and fee revenue from cannabis sales in 2023.
New Mexico (Medical and Adult Use)
On Friday, April 1st, New Mexico opened its adult use program and the state saw 27,981 adult-use recreational cannabis transactions for a total sales amount of $1.9 million. The New Mexico Regulations and Licensing Department has issued 151 retail licenses across the state; however, not all of them offer products to the adult use market. Within the Albuquerque metropolitan area there are at least 83 facilities approved for adult use sales. The weekend rounded out with sales topping $3.5 million for the state. Estimates predict that adult use sales can expect to reach $300 million annually and bring in at least $50 million annually in state revenue.
New Hampshire (Medical)
The New Hampshire Senate vetoed two bills that would have allowed possession and home cultivation for adults not participating in the state’s medical marijuana program and one that would have authorized a state-run cannabis program. Of the two, the more critical bill proposed by Rep. Darryl Abas (R) would have created an adult use retail market ran by the New Hampshire Liquor Commission. New Hampshire currently has 3 licensed marijuana companies each with 2 to 3 dispensary locations across the state. State medical sales are forecasted to reach $40 million in 2022. A small-scale program, New Hampshire is surrounded by states with larger adult use markets and advocates have been pushing for recreational sales within the state.
Detroit, Michigan (Medical and Adult Use)
The City of Detroit has its own laws regarding adult use marijuana licenses. Last April, the city opened up its licensing program with social equity applicants known as “Legacy Detroiters” first in line for the applications. Issues arose when a candidate who had lived in Detroit for 11 years was barred from applying for a license due to the residency requirement for Detroit Legacy applicants who must have lived in the city for 15 out of the last 30 years. The candidate issued a lawsuit in which a U.S. District Judge ruled in favor of banning the residency requirement citing that it gave an unfair, irrational and likely unconstitutional advantage to long term Detroit residents.
On Tuesday, April 5, 2022, city council passed a new ordinance that would permit separate tracks for Detroit residents and non-residents on obtaining an adult use license, and would increase the number of available adult use retail licenses from 76 to 100. Before passing this new ordinance only medical dispensaries were allowed in the city. Adult use sales for March 2022 totalled $121 million for the entire state of Michigan.
Illinois (Medical and Adult Use)
As an update on the current licensing process, in November Green Check Verified provided the latest information on the fate of the 185 dispensary licenses that were held up by a court order due to an alleged unfair applicant scoring process. The current situation is that the 185 dispensary licenses are still held up. A third lawsuit has been filed challenging Illinois’ residency requirement. Finch, et al. v. Mario Tretor, Acting Secretary of IDFPR, (“Finch”), scrutinized the additional points awarded to Illinois residents as part of the application process for the 185 dispensary licenses in question and argued that this requirement should be deemed unconstitutional under the Dormant Commerce Clause. The outcome of this case could impact the entire process and delay it until 2023.
In better news, Illinois has finally granted the allowance of 60 new craft grower licenses in the state. For Illinois craft grower licenses, the canopy space is capped at 5,000 sqft which does not yield an optimum profitability so pending legislation has been created to increase square footage to 14,000 sqft.
New York City, New York (Medical and Adult Use)
New York City Mayor Eric Adams proposed to allow cannabis gardens on the rooftops of public housing projects throughout the city. In a meeting with the New York State Association of Black, Puerto Rican, Hispanic and Asian Legislator’s 51st Annual Legislative Conference, Mayor Adams discussed having cannabis gardens on top of New York City Housing Authority (NYCHA) buildings that would be operated by NYCHA residents interested in the program. The cause for this idea is the issue that plant cultivation in and around NYC is difficult given the area’s dense population and lack of open space. The mayor proposed hydroponic greenhouses on rooftops, including those belonging to NYCHA, which would coincide with New York’s efforts to build an equity cannabis program. Mayor Adam’s proposal however likely will not come into fruition as NYCHA receives over half of its subsidies from the US Department of Housing and Urban Development (HUD). Because HUD is a federal administration and marijuana is still federally illegal, cannabis greenhouses located on various NYCHA rooftops would be illegal. The city continues to find ways to incorporate other areas of the cannabis supply chain even as real estate regulations and zoning laws have yet to be administered by the Office of Cannabis Management.
April 20th Sales
For the cannabis holiday of April 20th, Akerna released data showing that sales hit $154.4 million on that day alone for both medical and adult use sales across the country. The weekend prior to Wednesday, April 20th saw high sales as well with a total of $485.3 million being reported nationally. Roughly 10% of the sales on April 20th were transactions that went through Green Check Verified’s software which accumulated to about $15.22 million in sales transactions that were received by our financial institutions.
The U.S. House of Representatives passed the Marijuana, Opportunity, Reinvestment and Expungement (MORE) Act sponsored by Rep. Jerrold Nadler (D-NY) on April 1st. The new bill contains identical language as the original MORE Act that was previously introduced to congress in 2019 by Nadler and then Senator Kamala Harris (D-CA). To sum, the MORE Act if signed into law would remove marijuana as a Schedule I Controlled Substance and implement certain social equity initiatives to redress the outcome of marijuana prohibition such as, the availability of affordable loans from the Small Business Administration to licensed cannabis businesses, a trust fund to support underserved communities and businesses that operate therein and record expungement for past marijuana related convictions. The MORE Act was previously passed by the U.S. House of Representatives in December 2020 but died in the Senate the following year. It remains uncertain whether this version of the bill will pass the Senate next.
More financial institutions across the US are offering banking services to cannabis related businesses. The latest quarterly data on SAR filings collected by the US Department of Treasury, showed that 553 banks (roughly 11% of total US banks) and 202 credit unions (roughly 4% of total US credit unions) recorded marijuana-related suspicious activity reports (SARs) during this period. This is an increase from 2021’s first quarter data in which 510 banks and 174 credit unions reported marijuana-related SARs. Because marijuana-related SARs must be filed on accounts with suspicious activity regardless of whether or not a financial institution has an active cannabis banking program, the data infers that more financial institutions are both actively banking cannabis related businesses as well as properly identifying and removing accounts when needed.
Colorado (Medical and Adult Use)
The City of Denver has awarded its first social equity hospitality license to The Tetra Lounge, a premier social club where patrons can take part in cannabis consumption while enjoying music and artwork. The approval comes as the city moves towards its final stage in marijuana licensing which includes hospitality establishments and consumption lounges. Per Denver city rules, social equity applicants have priority status until July 1, 2027 for various license types in addition to waived application fees and reduced licensing renewal fees. In last month’s blog, Consumption Lounges: The Next Frontier in Cannabis, Green Check Verified reported that consumption lounges and cannabis hospitality are increasingly becoming popular and lucrative facets of the cannabis industry that financial institutions should look out for and consider when accepting new cannabis businesses. To date, Colorado has 6 licensed hospitality retailers. Total 2021 sales for the state’s marijuana industry were $2.2 billion. Denver alone reported $41.5 million in marijuana sales for the month of January 2022.
Michigan (Medical and Adult Use)
Michigan’s Marijuana Regulatory Authority (MRA) has finally issued its first consumption lounge license. The license was awarded to Hot Box Social, a private event club owned by Trucenta which also owns a dispensary called Breeze in Hazel Park, Michigan. The MRA’s process of reviewing and approving consumption lounge licenses was delayed due to the pandemic which was a setback for towns across the state that had already approved businesses like these to operate. Back in 2021, city planner Alexis DiLeo of Ann Arbor approved 28 consumption lounges to be located in the college town but so far none have been licensed to open by the MRA. Michigan continues to be one of the hottest markets in the country for the cannabis industry. Medical sales for February totaled $26 million and adult-use sales were $129 million per MRA data.
Mississippi’s new medical marijuana program was signed on February 2nd by Gov. Tate Reeves (R). The program is expected to move fast as the application period will open this June and there will be a 30-day review period for business license applications and a 5-day approval period for program patients. As of now, regulations have not been developed yet but the state has said thus far that there are not any license caps for the various licenses. Businesses that may be interested in applying for a license must prove 35% equity ownership belonging to those that have been residents of the state for at least 3 years. Background checks and other disclosures are required for those who directly or indirectly own 10% or more of a medical dispensary. Taxation estimates report that for the first few years of the program, Mississippi may see revenue of up to $47 million from its imposed 7% sales tax.
Massachusetts (Medical and Adult Use)
MJBizDaily reported that more financial institutions in the state are offering financial services to cannabis businesses throughout Massachusetts. The institutions that were identified include Dedham Savings Bank, which sees an opportunity in cannabis banking given Massachusetts’ lucrative market. From January to March 2022, Massachusetts sold $350 million in adult-use marijuana sales and $67 million in medical marijuana sales.
New Jersey (Medical and Adult Use)
New Jersey’s Cannabis Regulatory Commission held its long-awaited public meeting on Thursday, March 24th, regarding the decision to allow medical dispensaries currently in operation throughout the state to start selling adult-use marijuana. It was announced at the meeting that the eight (8) Alternative Treatment Centers that applied for an expansion to begin selling cannabis to adult-use consumers age 21 or older must first be evaluated by regulators from the Cannabis Regulatory Commission to ensure that each establishment is in compliance with the regulations set forth by the state for adult-use dispensaries. To sum, state regulators of the Commission relayed that the current Alternative Treatment Centers are not yet ready to serve the influx from adult-use consumers. Factors that were weighed in this decision included patient enrollment, statewide inventory, statewide sales and production capacity.
During the same meeting, the Cannabis Regulatory Commission approved 68 new conditional license applications for cultivation and manufacturing facilities (list of companies); more than half of which are social equity applicants. This approval comes as the state ensures production capacity for its adult-use market. The fee schedule for licenses is included in the Commission’s website but a South Jersey microbusiness applicant reported that their application fees totaled roughly $90,000.
New York (Medical and Adult Use)
Earlier in March, Gov. Hochul announced that the first 100 to 200 Conditional Adult Use Retail Dispensary licenses would go to applicants with prior marijuana convictions that occurred on or before the Marihuana Regulation and Taxation Act (MRTA) was signed by Gov. Cuomo on March 31, 2021. The social equity component of the Conditional Adult Use Retail Dispensary criteria includes: residency or a significant presence in the state of New York for no less than 180 days during the current year or 540 calendar days over the course of 3 years, and persons with a marijuana conviction or persons with a parent, caretaker, spouse or dependent convicted of the same. Once approved, the licenses will be available for 4 years and business applicants that apply must have held at least 10% ownership in the business for the previous 2 years.
To combat issues surrounding capital for social equity applicants and businesses, the Dormitory Authority of the State of New York (DASNY) drafted a Social Equity Cannabis Investment Fund to be initiated in Spring 2022. The projected size of the fund is $200 million in public investment with a term of 10 years from the date fully capitalized which will be in 2024. There will be an initial 2-year investment period where interest will accrue on fund notes held by private investors. Repayment is between the licensed cannabis business and the DASNY. In addition to funding, the DASNY will also provide support to social equity businesses through identifying and helping applicants acquire retail spaces, and assisting with the construction, design and furnishing of said spaces.
Relatedly, it was recently discovered that the Office of Addiction Services and Support and Division of Criminal Justice Services have not used the $1.6 and $1.4 million in funding that has been accumulated since 2014 from New York’s medical marijuana program. New York’s medical marijuana program requires a 7% tax on sales of which 5% goes towards the Division of Criminal Justice Services and another 5% to the Office of Addiction Services and Support. There’s an additional $15 million in the state’s Medical Cannabis Collection fund as well as $8.4 million in a fund for health operators and medical oversight. The state plans to roll these funds over to the efforts set forth by the Office of Cannabis Management.
New York – Indigenous Nations
Politico recently ran an article reporting that over 20 dispensaries have opened up across New York’s various indigenous tribal nations. The nations include: the Seneca Nation of Indians, the Cayuga Nation and the Saint Regis Mohawk Tribe. The Shinnecock Nation on Long Island plans to begin marijuana sales as well but they, along with the Cayuga Nation, will opt to create a central Native-owned and operated dispensary. Like most states, New York permits tribal nations to enter a pact to integrate their cannabis programs with the state’s program but the state has no authority over each tribe’s marijuana market due to tribal sovereignty. As for banking, it remains unclear as to whether these nations are using tribal-owned financial institutions or partnering with local banks and credit unions outside of their territories.
Mergers & Acquisitions
Cresco Labs and Columbia Care
Cresco Labs Inc. recently acquired Columbia Care Inc. in a deal worth an estimated $2 billion. The acquisition was one of the biggest to date for the cannabis industry. Both Cresco Labs and Columbia Care are large, vertically-integrated multi-state operators (MSO’s) in the cannabis space. The 2021 full-year revenue performance for Columbia Care was $81 million and for Cresco Labs was $822 million, a 73% year-over-year growth due to increasing their number of dispensaries and acquiring smaller firms in the cannabis space. Overall, Forbes reports that the cannabis industry continues to grow exponentially with international sales predicted to reach $35 billion this year alone.
On February 8, 2022, Congresswoman Chellie Pingree (D-Maine) introduced the Hemp Advancement Act of 2022 to Congress in an effort to improve the 2018 Farm Bill’s hemp provisions and provide greater clarity and flexibility to hemp growers and processors. According to Congresswoman Pingree, the Hemp Advancement Act of 2022 was submitted in order to eliminate unworkable testing requirements, set reasonable THC thresholds for producers and processors while protecting consumers, and end the discriminatory policy that bans people with drug convictions from growing legal hemp. Specifically, the Act would:
Raise the allowable THC threshold to 1% (currently set at 0.3% THC threshold) for hemp and in-process hemp extract to make rules more workable for growers and processors while ensuring that final hemp products sold to consumers aren’t intoxicating.
Remove the requirement that hemp testing occur in DEA-registered laboratories, which is a particular challenge in Maine where there currently aren’t any of these facilities.
End the 10-year ban on people with drug-related felony convictions receiving a hemp license, which disproportionately excludes communities of color from participating in this emerging market.
The bill is supported by a number of organizations affiliated with the hemp industry including, U.S. Hemp Roundtable, which assisted Rep. Pingree in drafting the bill and making sure that the hemp industry’s concerns were taken into consideration.
Overall, the Hemp industry in the U.S. is valued at $824 million as of 2021 in a recent survey conducted by the United States Department of Agriculture for its latest National Hemp Report.
On Thursday, February 3, 2022, the U.S. House of Representatives approved attaching the SAFE Banking Act to the America COMPETES Act of 2022, a bill proposed by Representative Eddie Bernice Johnson (D-Texas) that would address scientific research and economic competitiveness in manufacturing, engineering and technology. Addressed at a Rules Committee hearing, Representative Ed Perlmutter (D-Oregon) who is spearheading the advancement of the SAFE Banking Act, said that he is planning to offer the SAFE Banking Act as an amendment to “every single bill I possibly can until it’s passed.”
California (Medical and Adult Use)
New data is out that suggests that the lack of access to equitable cannabis banking and financing for cannabis businesses in California has kept the illicit market in the state booming. Recreational marijuana was legalized in 2016 and thus far the market has blossomed into an industry worth an estimated $16 billion. Researchers found that California counties that legalized marijuana had increased economic output, with banks and credit unions reporting an increase in assets held by $750 million and an increase in loan activity by $500 million from 2015 to 2020. However, because banks are not able to disclose which loans are for cannabis operations, the study concluded that specific counties with cannabis operations were financially doing better thus allowing financial institutions located in the same area to perform better, lend more money to businesses and earn more interest.
Narrowing the research into the supply chain, the study found that for each new manufacturing or retail license, bank assets and lending capacity multiplied but cannabis cultivation licenses had little to no impact on banks holdings. This suggests that financial gains from cannabis banking can come from other areas of the supply chain. Overall, of the California financial institutions that were contacted by researchers, most were not actively banking cannabis businesses. The reasons given for their lack of service to the industry include hard to follow federal guidelines that pose a risk to financing cannabis and costs associated with taking on the risk and being in compliance with all state guidelines. Of the cannabis businesses that were contacted, growers reported paying fees from $200 to $3,000 a month to maintain a bank account which these businesses believed were cost prohibitive.
House Bill 305 also known as the Delaware Marijuana Control Act has passed the Delaware House Appropriations Committee and is now scheduled to be heard by the Delaware House of Representatives. Sponsored by Representative Edward Osienski (D), the Delaware Marijuana Control Act would legalize adult use marijuana in the state for persons 21 and older. Consumers would be allowed to purchase up to 1 ounce of marijuana and 5 grams of concentrate a day, an appointed Commissioner affiliated with the Division of Alcohol and Tobacco would oversee all marijuana business licensing, 30 retail licenses – 15 of these reserved for social equity applicants and 60 cultivation licenses. There would be no home cultivation or marijuana delivery licenses.
On Monday, February 14, 2022, the Hawaii Senate Committee approved Senate Bill 2718 that specifically exempts anyone who has reached the age of 65 from the requirement of having a debilitating medical condition to be eligible for the use of medicinal cannabis. The purchase limits would remain the same – 4 ounces every 15 days and no more than 8 ounces every 30 days; however, those 65 and older would bypass the requirement that a diagnosed medical condition is necessary for medical marijuana purchases. Currently, the bill needs to be reviewed by the Senate Judiciary Committee by March 4, 2022.
Relatedly, the state has called for less regulations for its marijuana industry. A report conducted by the Hawaii Cannabis Industry Association, showed that 31% of marijuana patients are getting their cannabis from licensed dispensaries and some 61% of marijuana patients are getting their cannabis from elsewhere. Additionally, growth has plummeted from 110% in 2019, to 685 in 2020, to 12% in 2021. The Hawaii Cannabis Industry Association concluded that in order to address these issues, the industry needs to: increase the allowable number of retail outlets per licensee (2 is the maximum), increase the amount of allowable production per licensee under the seed-to-sale model (no more than 3,000 cannabis plants is the standard set for by the state with the option to increase to no more than 5,000 cannabis plants per production facility), allow business-to-business relationships among licensees, enabling them to sell to each other in a wholesale market which could cut costs and increase supply levels for struggling businesses.
The Maryland House of Delegates advanced two legislative proposals that would legalize adult use marijuana in the state. House Bill 1 is a constitutional amendment that would ask Maryland votes of people 21 and older may use and possess marijuana. If the majority of voters approve the amendment in November, then House Bill 837 becomes law which would require the Natalie M. LaPrade Medical Cannabis Commission to legalize the use and possession of cannabis by those 21 and older. Current marijuana laws would stay in effect until 2023. If passed, HB 837 authorizes the Commission to conduct a study on the health benefits and social concerns related to cannabis use, in addition to the state being required to expunge marijuana convictions and allow those currently incarcerated on marijuana charges to apply for their sentences to be reduced.
New Jersey (Medical and Adult Use)
No official date has been set for adult use sales but state officials have reported that sales can start in a matter of weeks. The delay is in ensuring that currently operating medical marijuana dispensaries have enough product to meet the increase in demand from adult use consumers. Applications for adult use marijuana retailers will begin on March 15, 2022.
On February 24th, the New Jersey Cannabis Regulatory Commission passed a waiver allowing medical marijuana providers to sell marijuana concentrate. Currently, medical marijuana patients in the state are allowed to buy flower, oil, topicals, vape pins and lozenges. Concentrates, which are sold in the form of dabs, wax and oils, usually contain much higher amounts of THC. Purchase amounts for medical patients is 3 ounces every 30 days. For recreational users over the age of 21, the purchase amount is 1 ounce daily per single transaction once adult use sales start.
New York (Medical and Adult Use)
New York has made a pathway for currently licensed hemp farmers to apply for a conditional license to grow marijuana for the forthcoming adult-use marijuana market. The Conditional Adult-use Cannabis Cultivator license permits a two year term for farmers to grow marijuana either in indoor or outdoor facilities. It also allows them to manufacture and distribute marijuana flower products without holding an adult-use processor or distributor license until June 1, 2023. Cultivators are limited to one acre of flowering canopy outdoors or 25,000 square feet in a greenhouse and can use up to 20 artificial lights. If split between outdoor and indoor, the total square footage may not exceed 30,000. Hemp farmers eligible to apply must be authorized to grow hemp under the Department of Agriculture and Markets Industrial Hemp Research Pilot Program, be in good standing with the Department of Agriculture and Markets, be authorized to grow CBD hemp for the past 2 – 4 years (2018 – 2021) as opposed to hemp for grain or fiber and hold at least 51% or more ownership in the entity that holds the industrial hemp grower authorization from the Department of Agriculture and Markets.
Puerto Rico (Medical)
On February 2nd, state representative and member of the Popular Democratic Party, Hector Ferrer Santiago, introduced House Bill 1191 (Proyecto 1191) that would legalize adult use marijuana in Puerto Rico. If passed, the proposal would allow those 21 and older to purchase and possess up to 28 grams of marijuana flower, 8 grams of THC in concentrated products and 800 milligrams of THC in edibles. Consumption would be outlawed in public places, including beaches, with a fine of up to $500. A study on adult legalization in Puerto Rico concluded that the commercial impact within the first year of adult sales would amount to $522 million.
New York Hemp Program (Medical and Adult Use)
The State of New York now has a fully regulated hemp cultivating, processing and retail program. The Cannabinoid Hemp Program was established as of March 31, 2021 after passing the Marijuana Regulation & Taxation Act (MRTA). Prior to this, New York operated on a hemp pilot program which initially allowed a small number of educational and research institutions to grow, process and research hemp. With 48 labs and 16 producers currently, New York’s hemp program recently underwent new regulations that would create sustainability and consistency in the program for years to come. New regulations include:
- Current cultivation license holders must reapply under the new program for a license to operate in 2022.
- A new $100 non-refundable fee has been included for amendments made to an application. The original non-refundable $500 application fee for a three-year license remains the same.
- Growers must submit FBI-criminal history reports for business owners within 60 days of the license application. Growers are also obligated to hire a sampling agent certified by the New York Department of Agriculture and Markets to conduct private lab testing in order to ensure that the hemp produced is under the 0.3% THC threshold.
- Grow locations must be registered in person with the local USDA Farm Service Agency office.
Ohio recently issued its first round of lottery winners for the expansion of the state’s medical marijuana program. In April 2021, the State of Ohio Board of Pharmacy approved increasing the number of dispensary licenses by 73 to bring a total number of dispensaries in the state to 150. On January 27th, the State of Ohio Board of Pharmacy prequalified nearly 1,400 applicants for the 73 new dispensary licenses. The drawings were conducted by the Ohio Lottery Commission. To be clear, this means that these applicants will be eligible for the official lottery for the 73 new licenses. No licenses have currently been issued yet; however, the Board of Pharmacy identified issues that would disqualify applicants from receiving provisional dispensary licenses.
Connecticut (Medical and Adult Use)
Applications for Connecticut’s adult use program opened up as of February 3, 2022. Per the Connecticut State Department Consumer Protection website the first application period for each license type will open for a period of 90 days on the following dates:
- Disproportionately Impacted Area Cultivator: February 3, 2022 (non-lottery)
- Retailer: February 3, 2022
- Micro-cultivator: February 10, 2022
- Delivery Service: February 17, 2022
- Hybrid Retailer: February 24, 2022
- Food and Beverage: March 3, 2022
- Product Manufacturer: March 10, 2022
- Product Packager: March 17, 2022
- Transporter: March 24, 2022
The applications that were made available as of February 3rd include:
- Lottery applications for adult use cannabis retailers.
- Non-lottery applications for Cultivators located in a Disproportionately Impacted Area (DIA).
- Equity Joint Ventures.
- Non-lottery applications for conversion from Medical Marijuana Producer to Expanded Producer.
- Non-lottery applications for conversions from Medical Marijuana Dispensary to Hybrid Retailer.
An equal number of licenses will be available for social equity and general applicants broken down as follows:
- Retailer: 6 general licenses, 6 social equity licenses
- Micro-cultivator: 2 general licenses, 2 social equity licenses
- Delivery Service: 5 general licenses, 5 social equity licenses
- Hybrid Retailer: 2 general licenses, 2 social equity licenses
- Food and Beverage: 5 general licenses, 5 social equity licenses
- Product Packager: 3 general licenses, 3 social equity licenses
- Product Manufacturer: 3 general licenses, 3 social equity licenses
- Transporter: 2 general licenses, 2 social equity licenses
Adult use sales predictions for Connecticut’s first year are estimated to be roughly $216 million.
The Mississippi Medical Cannabis Act (Senate Bill 2095) was enrolled as of Wednesday, February 2, 2022 by signature from Governor Tate Reeves. Back in November 2020, the majority of Mississippi voters approved a medical marijuana ballot, Initiative 65, which would have allowed patients to buy up to 5 ounces of marijuana a month. The state Supreme Court invalidated the initiative for being constitutionally flawed since the provision requiring an equal number of signatures from Mississippi’s 5 congressional districts could not be met since Mississippi has only four congressional districts – essentially, Initiative 65 was not legal before voters. This newly approved medical marijuana program will allow patients to buy up to 3.5 grams of marijuana per day for up to 6 days a week, which is roughly 3 ounces a month.
The State of Mississippi already has active marijuana programs. The University of Mississippi established the The National Center for Cannabis Research and Education to “foster and conduct scientific research, data analysis, education and training on the health effects of cannabis”. This is in addition to the School of Pharmacy’s National Center for Natural Products Research that holds a contract with the National Institute on Drug Abuse (NIDA) to produce marijuana for research.
A candidate in congress made a stir by appearing in a campaign ad smoking cannabis. Senate candidate Gary Chambers (D) was filmed smoking a blunt in a campaign ad titled “37 Seconds” with the hashtag JustLikeMe on Twitter. Thus far the ad has received 6.6 million views and over 2,000 comments. Louisiana has had a medical marijuana program since 2015 with 9 dispensaries throughout the state. On January 1, 2022, smokeable flower became available for patients to purchase up to 2.5 ounces every 2 weeks.
Massachusetts (Medical and Adult Use)
By the end of 2021, adult use sales in Massachusetts hit $2.54 billion since sales were allowed in November 2018. 2021 became the year when for the first time ever, Massachusetts’ excise tax on marijuana was greater than the tax revenue collected from alcohol sales in the state. In December 2021, Massachusetts collected %74.2 million in sales tax from marijuana and $51.3 million in alcohol excise taxes.
Maine (Medical and Adult Use)
Maine has proposed updated regulations to the state’s medical marijuana program. HP 1435 “An Act to Update and Clarify the Maine Medical Use of Marijuana Act and Provide Greater Transparency”. Proposals listed in HP 1435 include:
- Required testing prohibited. The department may not require testing of harvested marijuana unless the Legislature approves a testing standard that is reliable, consistent and science-based and provides useful information to qualifying patients or medical providers.
- The department may not require a registered caregiver, registered dispensary, marijuana testing facility or manufacturing facility to submit its standard operating procedures to the department.
- Electronic tracking system. The department may not require a registered caregiver, registered dispensary, marijuana testing facility or manufacturing facility to use a particular electronic system for tracking marijuana plants and harvested marijuana, including, but not limited to, during any point of sale.
The basis for these new measures is to uphold the confidentiality of Maine’s caregiver program, of which there are over 3,000 with almost 7,500 patients.
South Dakota (Medical)
South Dakota has issued its first medical marijuana dispensary licenses. Thus far, the state has not issued licenses for manufacturing, cultivation or testing facilities. South Dakota’s program does not have a cap on any of its licenses. Rather, it’s up to each municipality and the municipalities are allowed to opt out of licenses in the supply chain (i.e., cultivator, grower, manufacturer) but these localities may not opt out from having a dispensary. Because of this, towns have allowed for 1 dispensary but not any other business. Rapid City has capped their number of dispensaries at 15, Pierre will have 3, Sioux Falls will have 5. The program is not set to begin until either late spring or early summer of this year.
New Mexico (Medical and Adult Use)
New Mexico has issued its first adult use retail and manufacturing licenses. Retail licenses went to Enchanted Botanicals and Dulce Cannabis both based out of Albuquerque. The manufacturing license went to Vana, based out of Clovis. After legalizing adult use in June 2021, sales are set to start as of April 2022. Estimates predict that adult use sales could hit $300 million within its first year.
Amazon tweeted support for Representative Nancy Mace’s (R-SC) proposed marijuana legalization bill, HR 5977, the States Reform Act. Introduced in November 2021, Mace’s bill would remove marijuana from the Controlled Substance Act, impose a 3% federal excise tax, facilitate the expungement of prior non-violent marijuana-related crimes, and transfer regulatory authority to the FDA, USDA, ATFE, and the Department of Treasury. Seeking prime markets that are poised for large returns, Amazon continues to be one of the main proponents of national legalization among large corporations.
The States Reform Act
A draft federal legalization bill called the States Reform Act, was filed on November 15th by State Representative Nancy Mace (R-SC). Highlights of the bill include: the removal of marijuana from the list of federally Controlled Substances with regulation by the Secretary of the Treasury, acting through the Alcohol and Tobacco Tax and Trade Bureau of the Department of the Treasury; 21 age minimum not including medical marijuana patients; interstate and international cannabis trade; allowance of loans issued by the Small Business Administration; 3% excise tax per category of marijuana sold; expungement and/or sentencing release for those with federal marijuana related charges; and establishment of a Law Enforcement and Second Chances Fund to support community reinvestment, drug treatment, education and research, law enforcement, support for veterans, opioid addiction treatment, youth use prevention and small business funding.
United States Department of Veteran Affairs
Representatives Lou Correa (D-California) and Peter Meijer (R-Michigan) introduced the VA Medicinal Cannabis Act of 2021, which would require the Department of Veterans Affairs to conduct clinical trials of the effects of medical-grade cannabis on the health outcomes of covered veterans that have been diagnosed with chronic pain and those diagnosed with post-traumatic stress disorder. On November 4, 2021, the House Veterans Affairs Committee passed the legislation 18 to 11, with only one Republican committee member in opposition. Afterwards, a vote is needed from both the U.S. House and Senate; however neither chamber has reached a floor vote on the proposed bill.
The VA has in the past opposed proposals related to the medicinal benefits of marijuana consumption for Veterans. Current research on marijuana’s benefits is nonexistent which makes passing federal legislation quite difficult since there is still a lack of empirical, FDA-approved evidence. Nonetheless, this presents a catch-22 since proposals for research on this topic never receive approval from the US House and Senate, rendering federal legalization under the Biden administration a no-go. More understanding of cannabis use among Veterans has increased since the United States withdrew from Afghanistan. This article reported that calls to the Veterans Crisis Line, which is operated by the VA, increased by 6% in the weeks immediately following the U.S. withdrawal from Afghanistan, and veterans of America’s longest war use cannabis at the highest rates among veterans to self-medicate their ailments.
United States Poll
A new poll conducted by Rasmussen Reports found that 62% of Americans say they support the national legalization of marijuana. When broken down by political affiliation, 54% of those surveyed who identify as Republican said they back legalization, 68% of those who identify as Democrat said yes, and 68% of those surveyed with no party affiliation agreed that marijuana should be nationally legalized. Those surveyed who did not express support were individuals 65 and older (40%) and those with incomes over $200,000 or more (38%).
The poll was done with 1,000 Americans from October 21-24 of this year and coincides with similar studies that show that at least 60% of Americans are in favor of national marijuana legalization.
Regional and State Updates
Missouri (Medical Only)
The Missouri Department of Health and Senior Services released new regulations for its medical marijuana program. These updates include:
- Promotional activities are now required to include a disclaimer that reads: Medical decisions should not be made based on advertising. Consult a physician on the benefits and risks of particular medical marijuana products.
- Delta-8 THC is banned.
- Onsite telehealth clinics where patients can immediately obtain ID program cards are banned.
- Requirement that all dispensary workers must be 18 or older.
- Only plants less than 8 inches tall may be sold by dispensary facilities, and dispensary facilities may not alter the plant or care for it in any way other than watering.
Unrelated to these new regulations, the Missouri Department of Health & Senior Services was hit with federal grand jury subpoenas from 2019 to 2020. The first subpoena issued in November 2019, demanded from the Department any and all records pertaining to medical marijuana applications from four individuals. The second and third subpoenas issued in September 2020 requires marijuana regulators to provide records but the information requested is redacted. All of these subpoenas were issued by the U.S. District Court for the Western District of Missouri and the feds have not confirmed any targets. Despite this, Missouri lobbyist and political consultant, Steve Tilley, is one of the names that in the past has been tied to unscrupulous activities in Missouri politics and in the state’s medical marijuana industry. Tilley oversees a number of marijuana businesses, including the Missouri Medical Cannabis Trade Association. The Association faced controversy over how licenses were granted by that 16 dispensary locations were issued to Greenlight Dispensary and 14 locations to Justice Grown, when Missouri law prohibits the state from granting more than 5 dispensary licenses to any single entity or individual.
Massachusetts (Medical and Adult Use)
Marijuana legalization in the state has fallen short in two areas – municipal government and social equity entrepreneurs. Before the application process even starts, pre-applicants must receive approval from the municipality that they wish to operate their business in via Massachusetts’ Host Community Agreement. The Agreement is a contract between the owners or otherwise authorized representatives of the Marijuana Establishment and the contracting authority of the municipality. Each party is responsible for negotiating and agreeing to their respective responsibilities. Without this contract approval, pre-applicants must choose another municipality to operate their business in, which means that municipalities in this case have the upper hand on whether businesses may operate within their communities. Furthering this issue is that once approved, these businesses are then charged heavy fees to operate. Massachusetts allows municipalities to charge an optional 3% local excise tax on retail transactions known as the community impact fee, which is the fee acquired by the municipality related to the costs associated with hosting the business. As in the case with Haverhill Stem LLC vs. City of Haverhill, communities have been accused of charging exorbitant fees without reason. Essentially, these fees are used to cover costs that do not exist given that since dispensaries have been open, there have been no reported increases in crime or nuisance.
For social equity graduates from the Massachusetts Cannabis Control Commission’s Economic Empowerment Program additional problems persist. The capital necessary to open a business continues to be an issue since most banks and credit unions continue to forgo lending to cannabis businesses. Additionally, the Marijuana Delivery Operator license issued first to Social Equity applicants requires there to be a minimum of two Marijuana Establishment Agents in any vehicle that undertakes delivery service, and the use of body cameras when carrying out the delivery. This has been a challenge because if one driver calls out, the other driver cannot work.
To remedy these problems, Massachusetts Senate president Karen Spilka reported that the Senate would be taking a closer look at host community agreements, social equity, and automatic expungement of eligible offenses related to cannabis. The Senate is currently considering bills that would allow for a portion of marijuana tax revenue to be converted into a loan fund for social equity applicants. Municipal lobbyists on the other hand have reported that while they’re willing to negotiate clearer limits on fees, they oppose legislation that would give the cannabis commission authority to review host agreements.
New Jersey (Medical and Adult Use)
New Jersey has finally opened up its adult use application process. On Tuesday, November 9th, the Cannabis Regulatory Commission announced that it would begin the process of reviewing Cultivator, Manufacturer and Laboratory licenses for its recreation market. On Wednesday, December 15, 2021, the CRC will begin accepting applications for: Class I Cultivator Licenses, Class II Manufacturer Licenses and Testing Laboratories. Application for Class 5 Retailers will begin on March 15, 2022. Applications will be reviewed on a rolling basis; however, Social Equity Businesses, Diversely-owned businesses, Economically Disadvantaged/Impact Zone Businesses and applications that receive bonus points will be afforded priority review, scoring and approval. A list of license types is available here.
New York (Medical and Adult Use)
New York is expected to have a slow rollout for its adult use program. Initially estimated to begin in 2022 and parallel New Jersey’s timeline, New York now will not come online with adult use sales until the middle of 2023. Factors that have influenced the decision to extend the state’s timeline include not repeating the same mistakes as California’s adult use program, home to the world’s largest legal cannabis economy, which still has state regulators cracking down on the illicit market that still outpaces the current legal market. Other factors include developing proper Social Equity requirements for applicants and businesses, capital for Social Equity applicants, continued staff hiring and development of the New York Office of Cannabis Management and current Governor Kathy Hochul needing to run for official election in New York’s gubernatorial race in November 2022.
Alaska (Medical and Adult Use)
Competition is fierce in Alaska’s open marijuana market. The state’s cannabis industry has no cap on licenses, and a residency requirement for business owners proving residency in the state for 1 full calendar year. This is to meet the obligation of Alaska’s Permanent Fund Dividend, which is a state dividend paid out to Alaskan residents derived from surplus revenues gained from the state’s oil and gas industries. These factors have blocked outside investors and large corporations from entering the state. This would be an ideal scenario in states with smaller programs to support local businesses; however, the lack of a license cap has created a cutthroat environment amongst the hundreds of cultivation, manufacturing and dispensing facilities. Alaska currently has the most retail shops per capita in the country with almost 21 licensed dispensaries per 100,000 residents. The state has a total of 150 retailers. One consideration that businesses have taken to fix this is to consolidate operations by vertically integrating their supply chain; however, this is more so a last resort effort. Since Alaska’s medical and adult use programs went live in 2016, dozens of businesses have closed due to low sales.
Vermont (Medical and Adult Use)
By Fall 2022, Vermont’s adult use program is scheduled to be up and running. The Chair of Vermont’s Cannabis Control Board, James Pepper, reported that the Board’s goal is to fill the state’s estimated demand for retail cannabis which he has capped at 450,000 square feet of cannabis cultivation. The Board wants to fill up that estimated space with licenses geared towards smaller indoor grow facilities maxed out at 1,000 square feet. In favor of supporting smaller, local businesses, the Board will allow a company to hold only one license in each license category: retail, cultivation, manufacturing, wholesale and laboratory testing (adult use act here). Ultimately, the Board’s goal is to bring over illicit, or “legacy”, growers into the legalized market which is why it’s starting first with small grow facilities. MJBiz Daily reported that Vermont’s adult use program is estimated to generate $200 million in annual sales by 2024.
South Dakota (Medical Only)
South Dakota still does not have a decision from the state’s Supreme Court on its voter-approved Amendment A which would legalize adult use marijuana in the state. In November 2020, 54% of South Dakotan voters voted in favor of legalizing adult use marijuana via Amendment A; however, the state’s anti-legalization governor, Kristi Noem, issued a lawsuit claiming that Amendment A violated the state’s requirement that amendments be limited to only one subject. The plaintiffs backed by Gov. Noem argued that Amendment A contains 5 subjects: legalizing cannabis, regulating cannabis, taxing cannabis, requiring South Dakota Legislature to pass hemp laws and ensuring access to medicinal cannabis.
Point of Sale Vendors
An MJBizDaily article was released showing that the number of cannabis point-of-sale (“POS”) providers has increased to 79 vendors in 2021. This is up 16% from 2020 and up 75% from 2018 when Cannabiz Media began tracking the data. Major POS vendors include: Greenbits, BioTrack, Flowhub, MJ Freeway, LeafLogix, IndicaOnline, Cova, WM Retail, GrowFlow and Adilas. Estimates suggest that the increase in vendors will cause downward pricing and the consolidation of businesses. Larger companies such as Dutchie and Akerna have already begun to acquire vendors such as LeafLogix and Greenbits.
The IRS Wants to Get Paid from Marijuana Taxes
At the 37th Annual Tax Controversy Institute hosted by UCLA Extension, Cassidy Collins, Senior Counsel of the IRS Office of Chief Counsel, Los Angeles discussed how because marijuana remains a Scheduled I Controlled Substance, this leaves most cannabis businesses, in particular dispensaries, operating on a cash-only basis. This in turn, creates complications for the IRS to collect taxes from cannabis businesses due to the lack of business banking accounts. If such accounts were more widely available, this would facilitate the IRS’ tax collection that would ideally be sent to the IRS directly from the CRB’s bank account. Collins mentioned that some marijuana operators have to visit designated IRS “tax assistance centers” where tax payments in excess of $50,000 are able to be paid. However, the wait time for operators is usually lengthy as the center counts the money multiple times to ensure accuracy.
Are These States Really for Social Equity?
Are these states really for social equity? Last week’s MJBizCon hosted in Las Vegas featured a panel of Social Equity entrepreneurs currently operating within the cannabis space. The panelists gave their opinions on what it means for various state programs to implement Social Equity initiatives and whether or not these measures actually help those who were harmed by marijuana prohibition. Christine De La Rosa, a well-known Chicana operating in the cannabis industry and CEO of The People’s Ecosystem, said, “Stop calling it Social Equity. None of you can point to any state that has a successful Social Equity program. They made it into Hunger Games for people of color.” This parallels the insight that was given by Laury Lucien, CEO of Major Bloom, who spoke at the Fifth Annual State of the Cannabis Industry Conference about how in Massachusetts there is a lack of education surrounding the application and licensing process for Social Equity applicants. She additionally went on to say how barriers to entry for transporter, delivery and consumption lounge licenses are often easier for Social Equity applicants but that licenses for cultivation and dispensaries are much harder given the capital needed.
Regional and State Updates
Senior Judge Nanette K. Laughrey of the United States Courts for the Western District of Missouri rejected Missouri’s requirement that 51% of owners related to operations that sell, grow or manufacture marijuana must be state residents that have lived in Missouri for at least a year. This decision in part was sparked by a lawsuit filed last year by Pennsylvania-based investor Mark Tiogo (Tiogo v. Department of Health and Senior Services, et al.) who cited the Dormant Commerce Clause to push his argument that Missouri’s residency requirement limits economic and valuable business opportunities for those looking to enter the medical marijuana industry in the state. Judge Laughrey struck down the residency clause and agreed with Tiogo citing that the constitutional right for Tiogo to fully participate in the medical marijuana industry in Missouri should be the same as a Missouri resident.
Per Arizona’s timeline of accepting Social Equity Applications no later than December 2021, the Arizona Department of Health Services (ADHS) announced the areas from which Social Equity Applicants must be from in order to apply for the 26 licenses set aside for Arizona’s Social Equity Campaign. The defined 87 postal codes are included on ADHS’ website here. Arizona explicitly states that one or more of the principal officers or board members of the applying entity holding an aggregate of at least 51% ownership in the entity must meet three (3) of the following four (4) criteria:
- Had an annual household income in at least three of the years 2016 through 2020 that, for the respective year, was less than 400% of the poverty level.
- Has been adversely affected by the enforcement of previous marijuana laws because the individual; (1) has been granted expungement; or (2) was convicted in Arizona of a violation of federal or state law related to marijuana or marijuana paraphernalia.
- Has been adversely affected by the enforcement of previous marijuana laws because the individual is related, as one of the following, to another individual who was convicted in Arizona of a violation of federal or state laws related to marijuana or marijuana paraphernalia.
- Has lived for at least three (3) of the years 2016 through 2020 at a physical address in an area that has been identified by the Department as being disproportionately affected by the enforcement of Arizona’s previous marijuana laws.
Arizona’s marijuana program is capped at 169 licenses.
On Friday, October 15th, New Jersey’s Cannabis Regulatory Commission awarded 14 licenses (cultivation and vertically integrated operations) for 2019 medical marijuana business applications. The new license applications were previously delayed due to a court-mandated stay of the review process after disqualified applicants presented a lawsuit against the New Jersey Department of Health alleging unfair applicant scoring.
Additionally, due in part to the state’s population of 9 million residents, New Jersey’s cannabis market is poised to hit $650 million by the end of 2022. This has caused commercial property owners and real estate investors to scramble for locations in the state’s densely populated urban areas. A recent article posted in MJBiz explains that the 25 most-populous New Jersey municipalities are home to roughly 2.2 million people, and considering certain operational restrictions (i.e., distance from a school or place of worship), this has caused a huge increase in demand for commercial property where some landlords are seeking premiums in excess of 30% – 50% higher than market value. Hot urban areas in the state include: Jersey City, Hoboken, Fort Lee, Newark, East Orange and Flemington.
New York has banned marijuana testing for most workers. On October 8, 2021, New York State Department of Labor issued Adult Use Cannabis in the Workplace New York Labor Law 201-D. Within the guidance are Frequently Asked Questions corresponding to New York’s new adult use marijuana legalization and it explicitly states that employers are prohibited from discriminating against employees based on the employee’s use of cannabis outside of the workplace, outside of work hours, and without use of the employer’s equipment or property. The exception to this rule includes federal employees that work within the state of New York, and if an employee is visibly impaired at work thus interfering with the employee’s obligation to provide a safe and healthy workplace and lessens the employee’s work performance.
The New York State Cannabis Control Board held its 2nd meeting on October 21, 2022 where the Board approved home cultivation of medical cannabis for certified patient use. New York law states that certified patients 21 or older may cultivate cannabis for personal use with a limit of 6 plants (3 mature and 3 immature), and that designated caregivers can cultivate no more than 6 cannabis plants for any patient. However, caregivers cultivating for multiple patients may cultivate 1 additional cannabis plant for each subsequent patient.
Nevada will open consumption lounges for the public to safely consume cannabis in designated areas. The Cannabis Compliance Board for the State of Nevada released an overview of the timeframe for licensing new cannabis consumption operations. The overview can be viewed here. Nevada will authorize two types of consumption lounges: retail cannabis consumption lounges – to mean a business at which the consumption of a single-use or ready-to-consume cannabis product is allowed and which is attached or immediately adjacent to an adult-use cannabis retail store; and an independent cannabis consumption lounge – to mean a business at which the consumption of single-use or ready-to-consume cannabis products is allowed and which is not attached or immediately adjacent to an adult-use cannabis retail store. Per Assembly Bill No. 341, at least 10 of the first 20 adult-use cannabis establishment licenses for an independent cannabis consumption lounge must be issued to social equity applicants. The state plans to open consumption lounges no later than Summer 2022.
The adult-use marijuana licensing saga continues for Illinois as the Illinois Supreme Court ordered the consolidation of lawsuits against the Illinois Department of Finance and Professional Regulation (IDFPR) for alleged unfair applicant scoring during the licensing process. The move comes after the 185 newly granted marijuana business licenses remain frozen in a court order issued by Cook County Circuit Court Judge Moshe Jacobius on July 28th barring regulators from issuing licenses. A recap of licensing issues in the state include:
- Applications that qualified for perfect scores were mostly owned by wealthy, politically connected white men in contrast to the goal of Illinois’ Social Equity program.
- The scoring process conducted by the consulting firm KPMG contained numerous errors resulting in identical application exhibits receiving different scores.
- Applicants with veteran status received 5 points out of the total score, and non-veteran status applicants considered this to be unfair because there was no way for their applications to receive a perfect score.
Ohio Representatives Jamie Callender (R) and Ron Ferguson (R) announced their proposal, the Ohio Adult-Use Act, that would legalize, tax and regulate adult use marijuana in the state. The draft bill carries similar regulations contained within Ohio’s current medical marijuana program, although Callender and Ferguson propose to have the Department of Commerce oversee the entire adult use program (as it stands the Ohio DOC currently regulates medical cultivators, processors and testing labs) and allow existing medical businesses to apply for adult use licenses. Highlights of the legislation include:
- 10% tax on adult use sales.
- Creating the Division of Marijuan Control from the current Medical Marijuana Control Program to reflect both the adult use and medical programs.
A recent article published in Politico, California’s legal weed industry can’t compete with the illicit market, explains that the legacy market in the state is still by-far outpacing the current regulated cannabis industry. With an excise tax of 15% combined with a state tax of 10% which is then combined with local cannabis business tax ranging from 5% to 15% charged at the discretion of the municipality where the CRB is located, Californians are keeping the illicit market thriving. Aside from high taxes, major hurdles for the legal market include government opposition and competition from discreet and unlicensed operations. On a municipal level, fewer than one and three towns and cities across the state allow cannabis operations within their borders (a database containing marijuana laws per municipality is located here). Thus, there are only 2 cannabis businesses per 100,000 residents in the state; as a comparison, Oregon has 18 retail shops per 100,000 residents. Culturally, California’s unregulated market has thrived for decades but went underground since Proposition 64 was passed in 2016 legalizing adult use.
Rhode Island’s long awaited medical marijuana dispensary lottery has finally happened! Rhode Island’s Department of Business Regulation held the lottery on Friday, October 29th after a lengthy delay due to a notice of appeal that was filed with the state by Atlas Enterprises, a business that was disqualified for licensing due to them selecting a site within a municipality that bans marijuana businesses and for not disclosing full ownership interest in their application. The five (5) new licenses were granted to: RMI Compassion Center in Woonsocket, Pinnacle Compassion Center in Central Falls, Green Wave Compassion Center in Foster, Solar Therapeutics in Cranston and Plant Based Compassionate Care in South Kingstown. The newly licensed have nine (9) months to open their dispensaries.
On Thursday, September 30th, the House Judiciary Committee passed H.R. 3617 also known as the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. It’s unclear as to how this act will be voted on in the Senate and neither Senators Cory Booker (D-NJ) nor Chuck Schumer (D-NY) have released statements on this progress seen with the MORE Act. In the past, both Senators have discussed working towards passing comprehensive marijuana reform bills such as their Cannabis Administration and Opportunity Act along with Senator Ron Wyden (D-OR), before banking legislation such as the SAFE Banking Act gets passed.
News and Media
Cannabis Health Effects
Major media conglomerate CNN recently published articles that sparked a flurry among cannabis professionals pertaining to cannabis’ health effects on the human body. CNN’s article released last month, Young adult cannabis consumers nearly twice as likely to suffer from a heart attack, research shows, claimed that adults under 45 years old, who consumed cannabis within the last 30 days, suffered from nearly double the number of heart attacks than adults who didn’t use the drug. The claim comes from a survey from the US Centers for Disease Control and Prevention of roughly 33,000 adults ages 18 – 44 in 2017 and 2018, of whom 17% reported using cannabis within the previous month. Within that 17%, 1.3% later had a heart attack while only 0.8% of non-cannabis users reported the same. The claim is deceptive, first because it does not prove a correlation between cannabis use and heart attacks with lack of acknowledgment of other lifestyle factors at play in addition to the small sample study. Second, the percentages are based off of a survey and not an actual medical analysis and it’s later reported in the article that, “the study did not research how cannabis affects heart health.” Essentially, CNN’s headline is major clickbait; however, the reasoning as to why this article was released remains clear – there are still stigmas that persist with cannabis and its consumption.
Along the lines of biased reputational risks associated with cannabis consumption, Forbes released an article in December 2020 titled, New Data Reveals No Link Between Increased Cannabis Use in Teens and Legal Markets. The data comes from a team of researchers from Boston College that studied whether access to legalization policies and living in a recreational state are associated with shifts in the use of marijuana among adolescents. The article reports that there is no evidence of a correlation between states that have legal adult-use cannabis markets and a surge in teen cannabis use, that the frequency of use among adolescents in states with legal recreational marijuana declined by 16% after recreational marijuana legalization, and that the Centers for Disease Control and Prevention reported that the number of young people admitted to drug treatment programs for “marijuana related issues” had dropped sharply in states that have legalized and regulated its adult use.
This is quite contrary to the recent headlines made by CNN; however, these studies provide real context as to what is happening when states actually develop an adult-use legalized program. Though marijuana still carries certain societal stigmas, evidence suggests that the negative reputation surrounding its consumption especially among younger individuals is unfounded.
Companies Remove Drug Testing
Due to a global labor shortage caused by the pandemic in addition to changing attitudes surrounding cannabis use, a number of companies worldwide are opting to do away with marijuana drug testing for potential and current employees. A survey done by ManpowerGroup found that roughly 9% of 45,000 employers worldwide eliminated job screenings or drug tests to attract and retain in-demand talent. Within the past year, 69% of employers reported difficulty filling roles. Amazon announced that it would no longer screen for marijuana for positions not regulated by the Department of Transportation and will instead do impairment checks on the job and test for drug or alcohol use after any incident.
Regional and State Updates
Maine – Dormant Commerce Clause Residency Restrictions
Back in May 2020, the Department of Administrative and Financial Services – Office of Marijuana Policy for the state of Maine, announced that it would cease to enforce its adult use marijuana program residency requirements. This announcement came after a lawsuit, NPG LLC et al v. Maine Department of Administrative and Financial Services et al., found that the residency requirement listed in Maine’s Marijuana Legalization Act is a violation of the Dormant Commerce Clause by favoring Maine residents over non-residents. The Dormant Commerce Clause, found within Article I, Section 8 of the Constitution, allows Congress to regulate commercial trade with foreign nations, among several states within the US and with Indian nations. Court rulings take precedence over State law if it mandates differential treatment of in-state vs. out-of-state competing businesses in a manner that favors one over the other. Maine’s Attorney General acknowledged that Maine’s Marijuana Legalization Act’s residency requirement, “is subject to significant constitutional challenges and is not likely to withstand such challenges.”
In August of this year, a similar ruling was given by a federal judge in the case of Northeast Patients Group, et al. v. Maine Department of Administrative and Financial Services, et al. The judge ruled it unconstitutional for Maine regulators to exclude out-of-state companies from running medical cannabis dispensaries in the state. Northeast Patients Group d/b/a Wellness Connection of Maine sued the state citing that the residency requirement harms Wellness Connection’s prospective business partners and potential investors.
Maine Municipalities Opt-Out
According to state data, 90% of Maine municipalities have opted out of allowing recreational marijuana sales. Only 47 of Maine’s 500 towns have opted in to allow recreational marijuana use.
Washington – Dormant Commerce Clause Residency Restrictions
In September, the Thurston County Superior Court in Olympia, Washington ruled in favor of the Washington State Liquor and Cannabis Board (WSLBC) during a court hearing re Todd Brinkmeyer v. Washington State Liquor and Cannabis Board. The Superior Court’s ruling comes after Todd Brinkmeyer, an Idaho businessman, challenged Washington’s marijuana business license residency law (WAC 314-55-020) which states that, “all applicants applying for a marijuana license must have resided in the state or Washington for at least 6 months prior to application for a business license. All members, governors, or agents of business entities must also meet the 6 month residency requirement.” Brinkmeyer claimed that Washington’s residency requirement violates state and federal constitutions since he is not a Washington resident and therefore cannot own any stake in a licensed marijuana business. The judge’s ruling stated that Brinkmeyer failed to meet the burden of proof to establish that Washington’s Residency Requirement is unconstitutional under Washington’s Privileges and Immunities Clause because Brinkmeyer is not a Washington citizen and the Privileges and Immunities clause does not apply to him. Unlike the events that unfolded in Maine, Washington’s residency requirement for marijuana business owners, investors and associates remains in place.
Newark, New Jersey Marijuana Expungement
On September 14th, Newark, New Jersey’s largest city and one of the state’s metropolitan areas most deeply impacted by marijuana prohibition, hosted a free marijuana expungement clinic. Those with prior convictions of nonviolent marijuana offenses were able to receive free legal assistance from attorneys offering pro-bono service. The event held at the Doubletree by Hilton Penn Station was hosted by 420NJEvents, a black-owned cannabis lifestyle company dedicated to cannabis culture, news and community outreach. A list of the convictions that were eligible for expungement is included here.
New York Completes Cannabis Control Board Members
After Gov. Andrew Cuomo legalized adult use marijuana in March of this year, current Gov. Kathy Hochul completed the selection of appointees to the Cannabis Control Board this month. The Cannabis Control Board along with the Office of Cannabis Management will regulate New York’s medical, cannabinoid hemp, and adult use programs. Members of the Cannabis Control Board include: Tremaine S. Wright, Christopher Alexander, Reuben McDaniel III, Adam Perry, Jen Metzger, and Jessica Garcia.
73 New Medical Marijuana Dispensaries in Ohio
The Ohio Board of Pharmacy has approved an additional 73 medical marijuana dispensary licenses for the state’s medical program. The pre-application period opened on September 20, 2021 when the Ohio Medical Marijuana Control Program released their Dispensary Applications – RFA II. This move comes after the Board of Pharmacy agreed to expand patient access to dispensaries – currently 57 dispensaries are in operation throughout the state. This new application process would cap the number of dispensaries in the state at 130, or 1,200 patients per dispensary. As a unique feature of the additional proposal, new dispensaries will be allowed to include a drive-thru for easier access while the state is also considering retrofitting drive-thru regulations for existing dispensaries.
The current pre-application phase includes two Q and A sessions with the OMMCP on October 6, 2021 and October 17-21, 2021. The application process will formally open on November 4, 2021 at 8:00am and close on November 18, 2021 at 2:00pm.
Washington state has dropped its previous seed-to-sale partnership with Leaf Data Systems by Akerna. The state will replace Leaf Data Systems with seed-to-sale software developed in-house called the Cannabis Central Reporting System (CCRS). This will allow the state to control and oversee the entire seed-to-sale supply chain, cut down on errors and reduce unnecessary complexities. The current contract that Washington has with Leaf Data Systems will terminate on June 30, 2022.
The Washington State Liquor and Cannabis Board named numerous issues with using third party seed-to-sale systems including: problems with traceability, system malfunctions, inaccuracies in reported data and time to train users to the new software. Given that Washington state is a major market in the cannabis industry, time will tell whether Washington’s decision to create an in-house system will influence other markets throughout the country to do the same.
California’s new proposed rules include instructions for a mandatory track and trace system account manager for all marijuana business licensees related to commercial cannabis activity. In Section 15048.1 Responsibilities of the Designated Account Manager it states: the licensee and their designated account manager(s) shall correct any errors in data that is entered into the system within 3 calendar days of discovery of the error. California’s track and trace system is referred to as the California Track and Trace (CCTT) system operated by METRC.
Last month, an article in the Arkansas Democrat Gazette reported data inaccuracies in the state’s BioTrack system for medical marijuana companies and that BioTrack had not been responsive to its user’s needs. Similar to issues found in Washington State, medical marijuana licensees in Arkansas reported that BioTrack: has glitches in the process including issues with products disappearing from the system then reappearing as a different product on a daily basis, delayed deliveries due to system malfunctions, and an almost “non-existent” tech support. The Arkansas Department of Health signed a $560,000 contract with BioTrack in 2017 that is up for renewal in 2024.
Adult Use Ballot Initiatives
Regulate Florida proposed the Florida Marijuana Use and Growth Legalization Initiative to appear on the state ballot as an initiated constitutional amendment (an amendment in the state’s constitution that comes from a ballot initiative) for the November 8, 2022 election. Activists need to first collect 222,898 valid signatures to prompt a judicial review and an additional 891,589 signatures to make it to the ballot. The initiative would not allow retail sales. A summary of the bill includes: legalizing marijuana for adults age 21 or older for personal use, to possess, use, process, transport marijuana, marijuana products and marijuana accessories, permits cultivating 9 live marijuana plants per adult with 18 plants max per household. Prevents the legislature from limiting marijuana THC percentage.
State representatives Joshua Adjutant (D), Renny Cush (D) and Andrew Prout (R) have each developed their own ballot proposals for adult use legalization in the 2022 election season. Each proposal received 60% approval from both chambers of the House and 67% of voters would need to vote in favor of it for it to be enacted. A brief summary of the proposals are included here.
A 10-member house working group that was appointed by House Speaker Adrienne Jones (D) earlier this year has been formed to study marijuana and prepare a legalization referendum to put on the ballot for 2022. Work group chair Maryland State Delegate Luke H. Clippinger, D-Baltimore said that the work group will develop a legalization plan for the 2023 Maryland General Assembly session so that lawmakers are able to work on it immediately if voters approve of the referendum. The group plans to discuss several topics including business licensing, equity in ownership of marijuana facilities, conviction expungements, criminal and traffic laws related to marijuana, social equity and cannabis tax policies. Maryland legalized medical marijuana in 2012.
The latest bill to legalize adult use marijuana in the state is H.B. 2050 filed by Representative Jake Wheatley, Jr. (D – Allentown). Highlights from the bill include: Growers and processors of marijuana would have to contract with an independent lab to test marijuana at multiple points before sale, social equity initiatives, record expungement as a “clean slate” provision, and the creation of more jobs in a state with a booming medical marijuana industry.
The advocacy group Nebraskans for Medical Marijuana will begin campaigning on Saturday, October 2nd in an effort to collect 250,000 signatures to qualify their two marijuana initiatives to be included on the 2022 ballot. The first initiative would require the state legislature to enact new statutes protecting physicians who recommend and patients who possess or use medical cannabis from criminal penalty. The second initiative would require lawmakers to pass legislation creating a regulatory framework that would protect private entities that produce and supply medical cannabis. The group proposed a previous cannabis reform bill but it was rejected by the state’s Supreme Court because it violated the single-subject rule for citizen initiatives which requires ballot proposals to address one single topic.
The Coalition to Regulate Marijuana Like Alcohol (CTRMLA) received approval from the state’s Attorney General to start gathering signatures for its 2022 ballot initiative to legalize adult use marijuana. Titled, An Act to Control and Regulate Adult Use Cannabis, the initiative is a statutory proposal that would legalize possession of up to 2.5 ounces of marijuana for adults 21 and older, and they could have up to 15 grams of marijuana concentrates. Homegrow would be included as well with individuals being allowed to grow up to 6 plants for personal use and 12 plants per household. A summary of the proposal including sales tax percentages, revenue allocation and regulatory measures is included here.
Missouri currently has several ballot initiatives pending for 2022 adult use marijuana proposals. Legal Missouri 2022 filed an initiative with the state in August to amend the Constitution in order to make it so that adults 21 and older could purchase, possess, and cultivate cannabis for personal use. The proposed legal limit would be up to 3 ounces of marijuana and regulators would be tasked with developing rules for homegrow registry in addition to a marijuana sales tax. Fair Access Missouri has filed a handful of initiative petitions, some of which would legalize adult use sales whereas others would amend current regulations within the state’s medical marijuana program. Additionally, Republican lawmaker Shamed Dogan proposed a constitutional amendment to enact an adult use program.
Arkansas, a state with a maximum number of dispensaries capped at 40 with roughly 80,000 registered medical marijuana patients, may see a legalized adult use program come 2022. The grassroots organization, Arkansas True Grass, has released their proposed amendment, The Arkansas Recreational Marijuana Amendment of 2022, which would allow for adult use sales regulated by the Arkansas Department of Agriculture, expungement of marijuana related arrests and homegrown of up to 12 plants.
As the South Dakota Supreme Court still has yet to make a final decision on Amendment A, which voters approved of and if enacted would fully legalize adult use marijuana, activists, most notably South Dakotans for Better Marijuana Laws, are soliciting volunteers for a signature collection on any of the four proposed ballot initiatives for the 2022 election. November 8th is the deadline to collect at least 33,921 signatures for constitutional amendments and 16,961 for a statutory measure. A list containing the details of the four proposed ballots can be viewed here.
Activists, such as the Oklahoma Cannabis Liberty Alliance (OCLA) and OK4U Approved, are doing work to bring awareness in Oklahoma City and Tulsa regarding two marijuana initiatives for the state’s current medical program and proposed adult-use program for the 2022 ballot. The medical proposal is a redraft of the Oklahoma Medical Marijuana Enforcement and Transparency Act that would create a new state agency – Oklahoma Cannabis Commission (OCC) – to oversee all legal cannabis in the state including hemp, and would allow for grants dedicated to research on environmental protection and the health and wellness of cannabis users. The adult use proposal would allow adults 21 and older to cumulatively purchase:
- 12 marijuana plants.
- 1 ounce of concentrated marijuana.
- 72 ounces of topical marijuana.
- 72 ounces of edible marijuana.
- 8 ounces of suppository marijuana.
- 8 ounces of marijuana that is commercially sold or gifted.
Wyoming currently has two marijuana legalization ballot proposals in queue for the 2022 ballot season. The Wyoming Medical Marijuana Initiative would authorize the Wyoming Department of Revenue’s Liquor Division to institute a medical marijuana program that would allow patients to purchase up to 4 ounces of marijuana flower and 20 grams of marijuana products in a 30-day period. The Department would have until July 1, 2023 to activate the program. Meanwhile, a second bill was filed that would decriminalize marijuana and allow possession of up to 4 ounces – Wyoming Reduce Criminal Penalties for Marijuana Cultivation, Possession, Use, and Transport Initiative (2022).
Regional and State Updates
In July, the Michigan Marijuana Regulatory Agency (MRA) proposed several changes to the sets of rules for businesses both licensed and seeking to become licensed by the MRA. The MRA will hold a public hearing to address these proposed rules on September 27, 2021 at 9:30am est. Public comments may be emailed to: MRA-Legal@michigan.gov. The proposed rules cover a wide range of topics including:
- Employees at marijuana businesses – Marijuana businesses may exclude employees based on factors ranging from patterns of conviction to theft, fraud and dishonesty. The new measure calls for a notice of exclusion in addition to an exclusion list to be made available to businesses and licensees to identify persons excluded from employment in the industry. Individuals identified to be excluded have the right to request a hearing at which the MRA has the burden of proof to confirm why the individual is excluded from being hired.
- Application requirements – Applicants for marijuana business licenses must disclose the identity of every person having a 2.5% or greater ownership interest in the applicant with respect to the license being sought.
On August 10, 2021, the MRA’s Veteran Marijuana Research Grant Program awarded $20 million in sales revenue to Wayne State University and the Multidisciplinary Association for Psychedelic Studies (MAPS) to conduct clinical trials for researching the efficacy of marijuana in treating various medical conditions of US armed services veterans.
On August 31, 2021, the MRA announced the creation of the Joint Ventures Pathway Program (JVPP) to connect social equity applicants with adult-use licensees, potential adult-use licensees, and any businesses that wish to work with social equity participants interested in pursuing partnerships.
The possession limit in Illinois is different for in-state and out of state consumers. In-state residents may possess: 30 grams of flower, 5 grams of concentrate and 500 milligrams of THC within a cannabis-infused product. Out of state consumers may possess: 15 grams of flower, 2.5 grams of cannabis and 250 milligrams of THC within a cannabis-infused product. Regardless of these different amounts, the marijuana industry in Illinois is booming as adult-use sales for August have exceeded $120 million. For the first time on record, the Illinois Department of Revenue reported that the state collected more tax revenue from marijuana than alcohol with $86.5 million being collected from adult-use tax revenue vs. $72.3 million from alcohol tax revenue from January to March 2021.
The Oklahoma Medical Marijuana Authority (OMMA) was sued by attorneys Ron Durbin and Rachel Busset, for violating Oklahoma’s Open Meeting Act by failing to notify Oklahomans of an upcoming meeting on June 16th where newly adopted emergency rules issued by the OMMA were to be discussed. The new rules address changes to license regulations, business conduct and inventory tracking and can be reviewed here. Regarding financial interest, the OMMA has made it a requirement for all medical marijuana businesses to submit to the Oklahoma State Bureau of Narcotics and Dangerous Drugs Control disclosing the existence of any foreign financial interest. Additionally, all businesses that operate in the marijuana industry in Oklahoma must be registered with the Oklahoma State Bureau of Narcotics and Dangerous Drugs Control. Fees and registration are included here.
The Washington State Liquor and Cannabis released data regarding June 2021 Underage Sales Compliance Rates for the alcohol, cannabis and tobacco industries in the state. The data shows that age verification is more consistently applied for cannabis sales than for both tobacco and alcohol sales:
- Alcohol sales (all categories):
- Compliance rate of 85 percent in 2019 fell to a rate of 75 percent in 2021.
- Cannabis sales:
- Compliance rate of 95 percent in 2019 increased to a rate of 96 percent in 2021.
- Tobacco Sales:
- Compliance rate of 90 percent in 2019 fell to 75 percent in 2021.
In August, the Board released an enforcement memo prohibiting the conversion of CBD into delta-9 THC for businesses licensed as a marijuana processor pursuant to RCW 69.50.363, citing that the conversion falls outside of the privileges allotted to licensed processors.
The New Jersey Cannabis Regulatory Commission released the Personal Use Cannabis Rules (N.J.A.C. 17:30) on August 19th. A full summary provided by the state regulatory agency can be viewed here. Highlights of the Rules include the establishment of microbusinesses (10 employees or less) to encourage entrepreneurship within the industry, allowing a municipality may adopt an ordinance imposing a transfer tax or user tax on the sale of any usable cannabis or cannabis products by a cannabis establishment located within the municipality, establishment of an application scoring system and lottery for capped licenses and home delivery.
Municipalities across the state can determine the hours of operation, the number and kinds of licensed businesses operating within their borders, and whether to enact a 2% transfer tax on any sales between cannabis businesses. Roughly 70% of New Jersey towns have prohibited marijuana sales, and only 6 cities throughout the state will allow consumption lounges. Here’s a full list of the municipalities in New Jersey and their legal cannabis ordinances.
Effective September 1, 2021, Alaska has increased the THC limit to 10 milligrams of THC for a single serving of marijuana product, and 100 milligrams of THC in a single packaged unit of marijuana product. Previously, the limits were set at 5 milligrams of THC per serving and 50 milligrams of THC per package. These newly increased limits are in line with several other marijuana programs across the US that typically allow 10mg per serving/100mg per package for consumption.
Voters in South Dakota legalized adult use and medical marijuana by approving Constitutional Amendment A (adult use) and Initiated Measure 26 (medical) in November 2020. Thus far, medical marijuana has been on its way with a hearing on August 18th to finalize the proposed rules to be implemented. The adult use program continues to be in limbo as South Dakota’s Governor Kristi Noem is a staunch opponent of legalization efforts. Additionally, there is an ongoing lawsuit proceeding in the state’s Supreme Court regarding Amendment A’s placement within the constitution.
Initiative 65, legalizing medical marijuana, in Mississippi received voter approval in November 2020. However, the medical program has not been developed due to the Initiative being “constitutionally flawed” in that the provision requiring an equal number of signatures from Mississippi’s 5 congressional districts could not be met since Mississippi has only four congressional districts – essentially, Initiative 65 was not legal before voters. The Mississippi Supreme Court has ruled Initiative 65 as invalid.
What Are State Lotteries and Why Are They Terrible?
Several state regulatory authorities use lotteries to award licenses to marijuana business applicants. Lotteries are usually used when there is a limited number of licenses that the state regulatory authority may grant to a business applicant. Lotteries, such as Arizona’s lottery in April where 13 dispensary licenses were awarded to rural businesses, are simply done by use of a lottery ball machine. This is oftentimes an ineffective way to manage applicants that have invested a considerable amount of time and money into their business proposals, prompting some applicants to challenge state licensing procedures.
Rhode Island – In April 2021, the Rhode Island Department of Business Regulation planned to hold a lottery to grant 6 Medical Marijuana Compassion Center licenses but the lottery was delayed due to a court appeal brought forward by Atlas Enterprises, Inc.. Atlas was denied from participating in the lottery due to improper zoning for the proposed dispensary’s location (the town did not allow marijuana retail facilities) and a conflict of interest from one of its chairmen. The lottery was supposed to resume during the first week of August yet it continues to be delayed since the court hasn’t established a date for the appeal hearing. The Department of Business Regulation planned to have the licenses issued by fall of 2021 but that will likely not occur.
Illinois (Medical and Adult Use) – The last monthly update in August detailed that Illinois will conduct three lotteries over the summer to grant 185 adult-use dispensary licenses. The lotteries were held on July 29th, August 5th and August 19th with winners announced but no licenses were granted because of an emergency order issued by Cook County Circuit Court Judge Moshe Jacobius due to an ongoing issue with the applicant scoring system. Illinois has an applicant scoring system where license applications are assigned point values based on a variety of factors including points awarded to applications with 51% or more of ownership from veterans. Wah Group LLC and Haaayy LLC issued an appeal against the state alleging that the five points awarded to veteran-owned businesses creates a special class of applicants with an unfair advantage over others. Wah Group LLC later learned that one of its co-partners was a veteran but only made this apparent during a supplemental scoring period. Judge Jacobius allowed Wah Group LLC to participate in the August 19th lottery where two licenses were issued to their business. In his July 28th order, Judge Jacobius ruled that the current status of the awarding of the license is stayed until the Court has reviewed the claims brought forth by both Wah Group and Haaayy. Industry estimates put the resale value of marijuana licenses at anywhere from $1 to $5 million.
Upon enacting marijuana programs, many states grant municipalities the authority to either opt-in or opt-out of the program. A number of states with newly developed marijuana programs, such as New Jersey’s August 21st deadline, will provide a timeframe for municipalities to opt-out of state marijuana programs or establish certain restrictions for marijuana businesses operating within their districts. Michigan allows municipalities to opt-in to the program and locally vote on the number of licenses and types of marijuana businesses to be allowed. Michigan MRA’s website contains a list of state municipalities that have opted out of the program here along with a list of municipalities that have opted in with restrictions here.
Unlike other states, New Mexico has prohibited municipalities throughout the state from banning the operation of licensees within its jurisdictions, meaning that all municipalities must allow marijuana operations.
Scott’s Miracle-Gro Has Invested in Cannabis
The Ohio-based lawn and garden company has decided to enter the cannabis market. Scott’s Miracle-Gro created a new subsidiary, The Hawthorne Collective, to invest $150 million in Canadian-based RIV Capital, an investment and acquisition company with 13 cannabis-related businesses throughout the cannabis supply chain. The goal of the strategic venture is to invest and explore new opportunities in the cannabis space that is poised for significant growth in the future. As of now, Scott’s Miracle-Gro cannot do business with plant-touching companies due to federal regulations and ties with the NYSE; however, a portion of the $150 million may be used as collateral to secure further capital with these companies.
Paul Pierce, former NBA star of the Boston Celtics, has announced his cannabis brand “Truth” that will be based out of Boston. Truth will work in collaboration with The Hub Craft for product roll out that will include edibles, concentrates, topicals and high-quality flower.
Brooklyn Nets star Kevin Durant has announced a collaboration with Weedmaps. The partnership will focus on the destigmatization of cannabis through a series of podcasts and videos. His efforts come during a time when sports officials are reconsidering their stance on marijuana prohibition in professional leagues.
We have seen quite a bit of action thus far this summer on the federal level concerning cannabis. First, we continue to see movement surrounding the new SAFE Banking Act of 2021 (H.R. 1996) passed by the House in April, that would provide a safety net for financial institutions by allowing them to provide banking services to legitimate cannabis-related businesses without being penalized. In June, Senators Jeff Merkley (D-OR) and Steve Daines (R-MT) wrote a letter to Senate Banking Committee Chairman Sherrod Brown (D-OH) and Ranking Member Pat Toomey (R-PA) urging the Senate Banking Committee to schedule a markup on the Act to push forward the legislative process; citing strong bipartisan support for the Act among members of the Senate, criminality due to unbanked large cash reserves, and the continued rollout of adult-use programs in various states this year. The letter follows comments on the Act made by Senator Brown regarding social discrepancies and the economic impact that marijuana has had on communities impacted by its prohibition, which he felt needed to be addressed further.
Furthering the push for social equity amendments, Senator Cory Booker (D-NJ) took the stance that he would block any marijuana banking legislation that does not include broader policy change to address the impact of the war on drugs. His comments come after he and Senators Ron Wyden (D-OR) and Chuck Schumer (D-NY) released the first draft of the Cannabis Administration and Opportunity Act, which not only would decriminalize marijuana as a controlled substance, but also proposes several social justice initiatives. Key highlights in the Cannabis Administration and Opportunity Act are included below:
- Decriminalization and descheduling of cannabis as a controlled substance. This includes state authority over the transportation of product into each state, which will be regulated in the same manner as though the product had been produced in that state.
- Three federal regulatory authorities: The Bureau of Alcohol, Tobacco, (Cannabis), Firearms, and Explosives; The Department of Health and Human Services; and The Department of Treasury. The Bureau would be recognized as the primary federal regulatory authority regarding the taxation of cannabis products as well as the tracking and tracing of cannabis products.
- Excise taxes starting at 10% during the first year of legalization, then increasing by 5% to 25% by years 4 and 5.
- Research and studies on the societal impact of cannabis legalization including the efficacy of medical marijuana as a treatment for certain diseases, community reinvestment programs, and expungements for certain cannabis records.
- Establishment of a Center for Cannabis Products within the FDA to properly regulate all cannabis products including CBD, product standards/safety and recalls; includes the creation of a Cannabis Products Advisory Committee to oversee product regulation.
Lastly, in June FinCEN released its first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy (the “Priorities”). The eight priorities highlight key areas that financial institutions will need to incorporate into their risk-based BSA/AML programs and procedures. Neither “cannabis” nor “marijuana” is explicitly mentioned throughout the priorities which may indicate that the federal government is softening its stance on marijuana prohibition.
Regional and State Updates
In January 2020, adult-use marijuana was legalized in Illinois after Governor JB Pritzker signed into law the Illinois Regulation and Tax Act in June of 2019. In July, the state announced three lotteries in July and August to distribute 185 adult-use dispensary licenses. The lotteries were based on scoring metrics that the Illinois Department of Financial and Professional Regulation (“IDFPR”) outsourced last February to accounting firm KPMG. The scoring did not come without objections as only 21 applicants received licensing approval after 1,667 applications were scored. Applicants that filed suit against the state’s scoring process alleged that the scoring metrics were unfair because applicants were not given required notices of deficiencies in their applications, identical portions of different applications were scored differently, companies that accumulated social equity points solely through employment were excluded, and the status as a veteran created an arbitrary scoring element. The state corrected this issue by rescoring previously denied applications, with a judge dismissing attempts to halt the rescoring process by winning applicants in a November 2020 ruling. On July 29th, 55 Conditional Adult-Use licenses were awarded to the pool of applicants that received at least 85% of the total 250 application points. Though the appetite for adult-use cannabis in Illinois will continue to grow, these initial program difficulties may present challenges for investors interested in cannabis businesses as the state is still determining how to objectively evaluate license applications.
In April, North Carolina Senator Bill Rabon (R) sponsored Senate Bill 711 (“NC Compassionate Care Act”) that would allow patients with a debilitating medical condition to access cannabis through a regulated medical cannabis supply system. The North Carolina Department of Health and Human Services would oversee the program with the creation of a Medical Cannabis Production Commission. The Commission would be allowed to issue ten medical cannabis supplier licenses with each supplier allowed to operate no more than four medical cannabis centers. Each supplier would pay to the Department a monthly fee equal to 10% of the gross revenue derived from the sale of cannabis. So far the bill has cleared both the Senate Judiciary and Senate Finance committees, and is currently pending to be heard by the Senate Committee on Health and Safety. Marijuana is currently outlawed in North Carolina; however, the state does allow CBD use for patients suffering from epilepsy. Now that neighboring state Virginia currently has both a medical and adult-use program, state officials in North Carolina may change their stance on marijuana prohibition.
In 2014, the Department of Justice released a policy statement regarding marijuana issues in indigenous nations throughout the United States. In the policy, the DOJ confirms that federal law such as the Cole Memorandum is enforceable over the laws set forth in Indian Country. The statement further details that enforcement efforts should be based on district-specific assessments among United States Attorneys and tribal attorneys on a government-to-government cooperative basis. Today, several tribal nations have their own marijuana programs that are often separate from that of the state(s) in which they’re located. In South Dakota, the Native Nations Cannabis Dispensary was opened by members of the Flandreau Santee Sioux Tribe on July 1st, four months before the state planned to open its first medical dispensary. Attorney General Jason Ravnsborg issued an official statement to provide context for non-Flandreau Santee members who were issued tribal medical cards to purchase marijuana. His statement confirmed that a tribe’s medical cannabis card issued to a South Dakota resident who is not an enrolled tribal member is not a substitute for a written physician’s certification that a patient must produce under the guidelines set forth in Initiated Measure 26.
With respect to states that recently implemented adult-use programs, the St. Regis Mohawk Tribe of New York plans to open the state’s first adult-use dispensary, well ahead of New York’s legalized adult-use program that is still in the process of developing its licensing regulations. Though tribal banks are required to follow federal guidance set forth by FinCEN,
Senate Bill 421 was filed by Senate President Jose Dalmau Santiago and Senator Ramon Ruiz Nieves after a proposal from the Cannabis and Hemp Committee of the Puerto Rico Chamber of Commerce was presented to the Senate of Puerto Rico to address the lack of banking services for the cannabis industry on the island. The bill proposes expanding services offered by the Economic Development Bank for Puerto Rico to emerging industries, including cannabis businesses. Puerto Rico currently has a thriving medical marijuana program in which average monthly sales reached $10 million in 2020.
Marijuana Record Expungement
Activists in the cannabis industry took issue with the language in the Cannabis Administration and Opportunity Act regarding record expungement for non-violent marijuana convictions. The language excludes those that have been federally charged with the kingpin statute, thus creating an arbitrary ranking among convicted individuals eligible for resentencing and expungement. Criminal justice reformers advocate that exclusionary language in the bill fails to recognize biases that persist among those incarcerated for marijuana offenses.
The Massachusetts Cannabis Control Commission, considered a model program for states with legalized marijuana programs, has had issues with connecting its social equity applicants to proper funding to launch their businesses upon completion of the Commission’s social equity program. Per this article, State urged to form equity fund to address cannabis industry access, there are 4 bills that have already been filed to address this issue – H 158/S 63 from Rep. Dan Hunt and Sen. Nick Collins, H 166 filed by Rep. Hannah Kane, H 177 from Rep. Dave Rogers and H 178 filed by Rep. Jon Santiago, however neither of the bills have progressed passed being introduced. For state funding for social equity establishments, upfront costs for social equity businesses will continue to be an issue until there are more opportunities to access lending via financial opportunities at reasonable rates. Grant programs could temporarily solve the issue but it’s unclear whether this method would be sustainable long term.