Nearly nine years after voters authorized the regulated sale of adult use cannabis in Massachusetts, the Joint Cannabis Committee is addressing the challenges (and that's an understatement) the industry is facing with a very meaningful reform bill. The bill faces a vote from the Joint Committee and has a long road ahead to pass both the House and Senate, but could provide a shot in the arm to a state market beleaguered by price compression, an accounts receivable crisis, frozen capital markets, failure to launch social equity goals, and well-documented dysfunction from the Cannabis Control Commission. We will explore the bill in more detail in this space, but highlights of the proposed legislation include:
- Replacing the Cannabis Control Commission with a new three-commissioner panel entirely appointed by the Governor. The new Commission will be run by a full-time chair and an executive director. Current commissioners and the current executive director may be out of a job, but would at minimum have to reapply for their jobs. The chair and executive director will oversee operation of the Commission in all respects, including hiring new employees (or re-hiring existing ones as the case may be), and organizing staff.
- Raising the limit on the number of adult-use marijuana retailer licenses an owner may possess from three (3) to six (6). This provision addresses the widespread complaint that the three-license limit makes it impossible for small and social equity businesses to capitalize on their investments since there are few, if any, remaining purchasers and that the three license limit makes it unprofitable to operate in the Commonwealth. There are currently almost 400 dispensaries in Massachusetts.
- Requiring an audit of all licensees to ensure compliance with this six-license limit (and the three license limit for all other license types) within 12 months.
- Requiring the Commission to accept applications for entities and individuals to increase their marijuana retailer ownership limits within 12 months, provided that entities and individuals may not acquire an interest in a 5th license for 24 months; and a 6th license for 36 months.
- Granting priority in approval of marijuana retailer license changes in ownership to sales involving MBEs, WBEs, and Veteran Owned Businesses.
- Raising the financial interest percentage that makes a person or entity an owner from 10% to 35%.
- Creating a new definition of "hemp," which is any part of the cannabis plant with a "concentration that does not exceed 0.3 per cent on a dry weight basis or per volume or weight of marijuana product or the combined per cent of delta–9–tetrahydrocannabinol and tetrahydrocannabinolic acid" but excludes (i) non-intoxicating topicals; (ii) industrial hemp; (iii) "consumable CBD products" and (iv) "hemp beverage products." All hemp beverage products sold in the Commonwealth shall have no more than 5 mg of total THC per container or a higher amount if established by the Commission by regulation (a container can be no more than 11 ounces). Consumable CBD products may only have "trace" amounts of THC.
- Prohibiting the manufacture of hemp beverages or consumable CBD products for sale in the Commonwealth without an endorsement or certificate from the Commission, and limiting the manufacture, wholesale, importing and distribution of hemp beverages to entities holding licenses from either the Commission or the Alcoholic Beverages Control Commission, but allowing certification of out-of-state manufacturers licensed in their home state and meeting other requirements established by the Commission.
- Restricting the sale at retail of hemp beverages to persons or entities holding all alcohol package store licenses from the Alcoholic Beverages Control Commission. Violations of this provision are subject to a $10,000 per day fine.
- Limiting hemp beverages sales to persons under age 21, and levying a $4.05 per gallon tax.
- Requiring that retailers of consumable CBD products receive a license from the Commission.
- Prohibiting the sale of any hemp products made synthetically.
- Authorizing local boards of health to take enforcement actions against unlicensed sellers of hemp, cannabis and hemp beverage products. Repeated violations are grounds to revoke licenses to sell food, alcohol, tobacco, and other products – a measure aimed at gas stations and smoke shops currently selling THC products. Boards of Health are required to notify violators within 90 days of passage of the Act.
- Requiring testing, packaging, labeling and other requirements for hemp beverage products and consumable CBD products no less stringent than those applicable to regulated cannabis products.
- Requiring the registration of all CBD products and hemp beverage products with the Commission.
- Requiring the Commission to administer an off-the-shelf testing program for consumable CBD and hemp beverage products for compliance with THC potency limits.
- Creating a public "post" system similar to that administered by the Alcoholic Beverages Control Commission that makes it unlawful for one licensee to extend credit to another licensee for more than 60 days, or to any licensee that has delinquent indebtedness to other licensees. The names of such delinquent licensees will be publicly posted by the Commission, and delinquent licensees may only purchase cannabis by cash on delivery.
- Eliminating the requirement that medical cannabis licensees must be vertically integrated, but limiting non-vertically integrated medical cannabis licenses to certain social equity businesses for three years.
- Raising the legal purchase limit for an adult use consumer to the "2 ounce equivalency of marijuana, marijuana concentrate, edible, beverage, and other ingestible products combined."
- Authorizing the Commission to limit the total number of licenses available in the Commonwealth – a provision aimed at the complaint of many businesses that there is an oversupply of product. The Commission also is required to solicit an outside economic analysis on the appropriate number of licenses and the adequacy of cannabis supply in the market.
- Directing the Commission to promulgate regulations that expressly "enable" the sale of licensees to Employee Stock Ownership Plans ("ESOPs").
- Creating an anonymous online portal for the reporting illegal practices, including testing fraud.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
