Shock veto upends Virginia adult-use cannabis retail launch

In a stunning reversal that means a new billion-dollar adult-use cannabis market may not open until 2028, Virginia Gov. Abigail Spanberger on Tuesday vetoed a bill that would have finally launched recreational sales in the South – one that she’d initially promised to sign.

Virginia legalized adult-use cannabis possession in 2021, but sales are still restricted to medical-only through one of the five licensed vertically integrated medical cannabis providers.

“I share the General Assembly’s goal of establishing a safe, legal and well-regulated cannabis retail marketplace in the Commonwealth,” the governor wrote in her veto message Tuesday.

“Virginians deserve a system that replaces the illicit cannabis market with one that prioritizes our children’s health and safety, public safety, product integrity and accountability.

“As Virginia pursues a legal retail market, it is critical that we incorporate lessons learned by other states and ensure that our regulatory framework is fully prepared to provide strong oversight from day one,” her statement continued.

“That includes clear enforcement authority and sufficient resources for compliance, testing and inspections and robust tools to crack down on bad actors who continue to profit from the illicit market.”

“I remain committed to working with members of the General Assembly, stakeholders and law enforcement to get this right.”

Why did Virginia Gov. Spanberger veto adult-use cannabis sales?

The veto is the latest act in a political drama that saw Spanberger, a Democrat, vow on the campaign trail before her election last November to sign legislation finally launching legal adult-use sales in Virginia.

That would have broken a years-long stalemate in Richmond that saw her Republican predecessor, Glenn Youngkin, repeatedly veto cannabis sales bills.

But after the state General Assembly passed a bill that would have seen sales launch Jan. 1, 2027, Spanberger sent back to state lawmakers a revised package that included a later launch date, higher taxes, fewer retail outlets allowed and – worst of all for some – new criminal penalties.

Lawmakers rejected Spanberger’s revisions, which led to a deadline of Tuesday to allow the bill to become law without her signature or veto it.

And there is not a big enough majority in the Democratic Party-controlled General Assembly to overturn a veto, observers told MJBizDaily.

“It is outrageous that five years after Virginia lawmakers first approved legalization, there still exists no regulated cannabis sales system outside of the state-licensed medical program,” JM Pedini, the executive director of the Virginia chapter of the National Organization for the Reform of Marijuana Laws (NORML), which lobbied in favor of the bill, said in a statement.

“Gov. Spanberger’s veto is a profound disappointment to the many Virginia voters who believed her when she said on the campaign trail that she supported establishing a regulated adult-use cannabis market,” Pedini added.

When can adult-use cannabis sales in Virginia begin?

Seen as part of a power struggle with the state General Assembly that saw the governor shoot down other popular measures, Tuesday’s veto is also a sop to alcohol and hemp lobbies that asked Spanberger to delay adult-use sales.

For now, hemp-derived THC products are sold in smoke shops and other venues throughout Virginia, where hemp operators said that the cannabis legislation would have meant the end of their businesses.

A coalition of hemp operators that included national alcohol retailer Total Wine & Spirits, which has embraced hemp-derived THC products, including beverages as well as edibles, formally asked Spanberger to veto the bill in a May 14 letter.

“Once again, Virginia’s efforts to establish a safe, regulated and equitable adult-use cannabis marketplace has been halted despite years of work, public input and broad recognition that status quo is failing Virginians,” state Sen. Lashresce Aird said in a statement.

“The Governor’s decision leaves the Commonwealth exactly where we have been since 2021: with an unchecked illicit market hurting our communities, harming our youth and putting adults at risk.”

There is a slim chance that a sales bill can still become law via the state budget process. The budget deadline is July 1.

What is the state of the Virginia cannabis market?

Virginia adult-use cannabis sales could reach $780 million in the first full calendar year of legal retail, with the billion-dollar milestone possible by the second year, according to an MJBiz Factbook projection.

Under the legislation the General Assembly passed earlier in the spring, sales would have begun Jan. 1, 2027.

Key provisions in the assembly’s sales bill included:

• A state tax rate of 6%, with an additional local option of up to 3.5%
• Capping retail licenses at 350

Among the changes that Spanberger countered with were:

• A launch date of July 1, 2027
• A retail cap of 200 until at least Jan. 1, 2029
• A state sales tax rate of 6% that would automatically increase to 8% in July 2029
• A cultivation cap for vertically integrated processors of no more than 70,000 square feet.
• A ban on butane extraction outside of commercial manufacturing.

Spanberger’s plan allowed the state’s five existing medical cannabis operators to enter the adult-use market after paying a $10 million conversion fee, either in full or in installments, by May 1, 2027.

Medical cannabis sales in Virginia stand at $59.3 million in 2026, according to the state Cannabis Control Authority.

Existing Virginia medical cannabis permits are held by:

• Boca Raton, Florida-based Jushi Holdings
• Chicago-based Green Thumb Industries
• Chicago-based Verano Holdings Corp.
• An affiliate of Millstreet Credit Fund, a Boston-based hedge fund, which paid The Cannabist Co. $130 million for its permit.
• A second Mill Street affiliate, operating under the legal name Aboretum, also now holds the permit formerly held by MSO Ayr Wellness, which had yet to open any dispensaries in Virginia

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.