Massachusetts’ recreational marijuana market can expect an influx of business license applications now that lawmakers have agreed on an adult-use bill that will serve as the framework for the new industry.
The market will be strong, observers predict, but the stakes will be high for a coveted license.
Four insiders in the Massachusetts cannabis industry helped Marijuana Business Daily identify some of the most frequently asked questions that potential business owners are likely to have about the bill and the state’s future adult-use market:
- Democratic state Sen. Patricia Jehlen, a member of the panel that negotiated the compromise bill
- Attorney Adam Fine, managing partner of Vicente Sederberg’s Boston law office
- Tim Keogh, CEO of AmeriCann, a multifaceted marijuana company in Denver; and board member of Coastal Compassion dispensary in New Bedford, Massachusetts
- Kris Krane, managing partner of 4Front Ventures, a Boston-based cannabis-focused consulting firm
What happens next?
The Massachusetts House and Senate will vote on the bill Wednesday, Jehlen said.
If it passes as expected, the measure will go to the governor, who is expected to sign it next week.
Here are key dates for the industry, though it’s unclear when sales may begin:
- Aug. 1: Cannabis Advisory Board – composed of 25 unpaid members appointed by various government entities – must be in place.
- Sept. 1: Cannabis Control Commission – made up of five paid government appointees – must be in place.
- April 1, 2018: Regulators can begin accepting license applications.
- June 1, 2018: Regulators can begin awarding licenses.
What tax rate did lawmakers decide on?
The state will impose a retail tax of 17% on rec marijuana, while communities will have the option to tack on a 3% local tax.
Lawmakers pointed out that Massachusetts’ adult-use taxes will be among the lowest among the eight states that have legalized recreational marijuana and the same as Oregon’s.
“Anything higher than 20% would have made me uncomfortable and made it really hard to undercut the illicit market,” Fine said.
Added Keogh: “I think it’s going to work.”
How will the process work for an adult-use business license?
Massachusetts’ 12 licensed medical marijuana dispensaries will be allowed to apply for recreational licenses without having to fulfill any new conditions. There are also roughly 180 active medical cannabis applicants that have completed various stages of the required 12 MMJ application steps.
Those candidates won’t have to reapply from scratch for a recreational license. Rather, they will receive credit for portions of the MMJ licensing process they have completed and must only fulfill licensing requirements they haven’t yet finalized.
“For the businesses that are already fully or provisionally licensed, it should be a much shorter runway for them to get an adult-use license and get up and running,” Krane said. “That should really speed up the process of getting these stores up and running by next July” – the new target date for businesses to open.
The bill eliminates a one-year waiting period for new producers and retailers who don’t already have MMJ licenses and also removes a two-year wait for first-time cultivators.
How will local communities decide whether to ban marijuana businesses?
In communities that supported recreational marijuana in last November’s election, any ban or restriction on the number of marijuana establishments can be done only by referendum.
In communities that opposed legalization, elected officials hold the power to ban or severely limit production and sale of rec cannabis.
Most Massachusetts communities supported recreational legalization, but nearly a third have already voted in referendums to ban marijuana businesses.
The bill also has safeguards that prevent zoning and other regulations from blocking marijuana businesses from being sited in a town.
What about Massachusetts’ unique ‘community host agreements’?
Local communities that accepted medical marijuana businesses have often enacted so-called “community host agreements.”
The agreements require businesses to pay a portion of their revenue – sometimes 5% or more – to cover costs that towns incur relating to marijuana businesses, such as extra police officers. The agreements are often perceived as a way for towns to unfairly gouge MMJ businesses.
The bill caps how much towns can demand of businesses at 3% of revenue, and the agreements can’t be longer than five years. Furthermore, towns must justify their revenue demands by showing how much money will be needed to cover costs related to marijuana businesses.
“It might be hard to justify 3%,” Krane said. “That’s a high standard to meet.”
What’s the status of edibles?
Infused products are permitted.
The bill specifies ways to prevent edibles products from appealing to underage people, such as:
- Prohibiting goods that resemble branded consumer products.
- Forbidding media advertising unless more than 15% of the target audience is expected to be over 21.
- Listing serving sizes on packaging.
Are there provisions about hemp?
Yes.
The bill legalizes the production of hemp, which “can be a valuable crop for farmers.”
What about farmers and small businesses?
The Cannabis Control Commission is mandated to develop ways for small producers to form co-ops and to establish license fees commensurate to a cultivator’s size.
Furthermore, no entity may own more than three marijuana business licenses.
Are people with marijuana convictions permitted to participate in the industry?
Yes.
The bill permits people with marijuana convictions to have “a second chance” in Massachusetts’ rec market, allows them to have their records sealed and mandates a “public campaign” to inform those with such offenses on their records about their opportunity to enter the rec sector.
The bill also gives priority to license applicants who have established businesses in communities that’ve been “impacted by high rates of arrest and incarceration due to previous marijuana laws.”
Will there be a surge in recreational marijuana business applications?
Some groups have been waiting to see what happens with this legislation before deciding to start a new MMJ application.
And groups that are seeking adult-use licenses or want to open MMJ dispensaries before potentially entering the rec market may feel more emboldened to do so.
“I don’t think it’ll open the floodgates,” Krane said, “but it might increase the number of applicants.”
How competitive will the adult-use market be?
“It’s already a really challenging process,” Krane said. “It’s expensive, it requires really good local connections.
“It’s a massive process, (and) there’s still quite a barrier to entry.”
All that aside, Krane believes “it’s going to be a terrific market.”
“I like the fact that the state seems to be acknowledging that it took way too long to get medical up and running,” he continued, “and that they’ve taken steps to try and get the rec program up and running quickly.”
Omar Sacirbey can be reached at omars@mjbizdaily.com
