Federal Updates

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.  

State Matters

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.                 

Industry

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.