(This is the first installment of a two-part series updating the status of marijuana markets one year after they were approved. To read Part II on medical markets, click here.)
The recreational marijuana industry had a big year in 2016, when voters in four states – California, Maine, Massachusetts and Nevada – approved sales of adult-use cannabis.
But one year later, what the voters approved and the reality of what’s happening look vastly different.
As has happened throughout the industry’s development, each state has written its own rules and regulations to begin rec sales.
Some states, such as Nevada, have given preference to existing medical marijuana businesses to kick off early sales.
Others, like Maine, have failed to pass an implementation bill to finalize regulations.
Here’s where the four new rec states stand today:
The clock is ticking for California’s behemoth market to go online at the start of 2018.
Earlier this year, the governor’s office signed a bill that merged the medical and recreational programs into one. Once they were combined, the state began developing rules for both programs.
Now the state’s many agencies are approaching a final consensus on the regulations. It’s important to note, however, that while the state-level rulemaking is crucial, how California’s industry will play out depends mainly on what happens at the local level.
According to Alex Traverso, chief of communications for California’s Bureau of Cannabis Control, final regulations for the state’s program should be issued sometime in mid-November.
The state’s Cannabis Advisory Committee is scheduled to meet for the first time Thursday and is expected to release regulations shortly after.
“We’re on track,” Traverso said. “The timeline’s aggressive – as it’s always been – but we’re making it work.”
The state currently is testing its on-line licensing system internally to work out any bugs and is targeting the first week of December to begin accepting applications for temporary business licenses.
The program is expected to launch Jan.1 with the issuance of licenses, including temporary permits that expire after 120 days.
First legal sales
The state has asked local governments for updates on where each municipality and county stands in the process.
The results have varied, Traverso said, but some areas say they expect to be up and running and selling adult-use cannabis around Jan. 1.
California’s 58 counties and 480 cities appear to be in different stages of the process, he added.
Traverso expects Berkeley, Oakland, Sacramento and Desert Hot Springs to be some of the first cities to legalize adult-use sales.
Meanwhile, the state’s goal is to not disrupt the medical side of the industry, Traverso said, and the operating MMJ businesses should have “a much faster route to getting licensed.”
- There will be no state limits on licenses, but it’s expected local governments will create caps.
- Licenses will be categorized as either medical or adult-use and separated in the traceability system.
- On the cultivation side, the California Department of Food and Agriculture will issue 17 different types of licenses, ranging from a specialty cottage outdoor (25 plants) to a medium mixed-light (10,001-22,000 square feet of canopy.) The largest licenses won’t be awarded until Jan. 1, 2023.
The state is back to the drawing board after Gov. Paul LePage vetoed an implementation bill that would have finalized rules for the recreational program.
Lawmakers couldn’t overturn the veto, so they’ll try to hammer out a new bill when the legislature reconvenes in January. But as long as LePage is in office, advocates aren’t hopeful the program will come to fruition without a fight.
Lawmakers passed a moratorium on adult-use sales until Feb. 1, 2018, a move intended to give officials more time to craft new regulations. When the moratorium expires, the state will be forced to begin putting into motion the legalization initiative voters passed in 2016.
However, it’s expected that lawmakers who want to further delay the launch of the recreational market will seek a second moratorium.
First legal sales
Initial sales are not expected to happen until 2019 at the earliest.
- Under the legalization initiative voters passed in 2016, there are no license limits except for cultivation, which is capped at a total of 800,000 square feet. The implementation bill that LePage vetoed would have removed the cap.
- The legalization initiative apportions 40% of the 800,000 square feet to operations with 3,000 square feet or less, and the remaining 60% to operations 3,000-30,000 square feet. No single cultivator license can exceed 30,000 square feet.
- As it stands, entrepreneurs and business owners from both Maine and outside the state can apply for licenses once the applications are made public. The vetoed implementation bill would have added a two-year residency requirement for business license owners.
The state’s recreational program looks to be on track for a July rollout and should create dozens of licensed businesses in the main cannabis sectors, including cultivation, retail and manufacturing.
Without a residency requirement, the program should offer investment and business opportunities for cannabis executives looking to make a foray into the East Coast market.
However, if the MMJ program is any indicator, it could take years for some businesses to get their licenses.
Industry watchers worry the state’s timeline and potential manpower issues could hinder the rollout. If adult-use businesses must obtain letters of support at the local level to operate, for example, the program could grind to a halt.
Medical marijuana businesses will get first crack at recreational sales, but so far only a dozen MMJ companies have licenses, so the initial industry could be small.
Some industry insiders are predicting a supply shortage similar to what we’ve seen in Nevada. But efforts by Massachusetts to fast-track MMJ license holders into the rec market could help counteract the shortage.
Fully operating MMJ dispensaries and those that received provisional medical cannabis licenses by July 1, 2017, can apply for licenses in April 2018. All other businesses can start applying July 1, 2018.
First legal sales
The state’s 12 licensed MMJ companies will be able to sell recreational cannabis starting July 2018.
Dozens more dispensaries are waiting to obtain local approvals and clear other hurdles, and many of them could open in the coming months. But regulators likely won’t be able to approve all of them for recreational licenses by July. Some observers estimate that roughly 25-30 dispensaries will be open by that date.
- An unlimited number of licenses will be available.
- After the first year, the Cannabis Control Commission could decide to impose a statewide licensing cap. Barring that, there would be no limit.
On Nov. 1, Nevada’s Tax Commission extended emergency rules that allowed early recreational marijuana sales in licensed medical marijuana dispensaries to continue another 120 days.
Rec sales weren’t supposed to start until 2018, but the emergency rules gave the industry a jump-start. And the early start has been a success.
Nevada’s adult-use market totaled over $27 million in sales in the first month – even after the state allowed alcohol wholesalers exclusive rights to distribute marijuana. That move slowed the supply chain and worried shop owners that they’d run out of cannabis.
Nevada – Las Vegas in particular – gets tens of millions of visitors each year, but casinos and their hotels are forbidden by the federal gaming commission to allow cannabis consumption.
So business owners are pushing for public consumption lounges to allow tourists a place to imbibe marijuana.
Permanent rules for the adult-use market are expected to be presented to the taxation department in the coming weeks, which should start the legislative approval process.
The rules must be approved by lawmakers and are intended to be finalized in January 2018.
First legal sales
Nevada recreational marijuana sales started strong out of the gate on July 1. The earliest someone not currently holding an MMJ license could open a retail shop will likely be two to three years.
- So far, 250 recreational marijuana businesses have been licensed – 53 are retail shops.
- Proposed legislation limits the number of licenses based on a county’s population.
- In Clark County, home of Las Vegas, up to 80 adult-use licenses for dispensaries, cultivation and production facilities will be allowed.
- Washoe County – which includes Reno and 100,000-700,000 residents – is permitted to have up to 20 recreational cannabis licenses.
- Counties with fewer than 55,000 people will be limited to two licenses.
Bart Schaneman can be reached at email@example.com