- within Immigration and Antitrust/Competition Law topic(s)
Earlier today, Massachusetts legislators agreed on a compromise bill to reform the Cannabis Control Commission ("Commission") and implement certain meaningful reforms to help businesses still standing after a few years of strong market downturns.
The compromise bill is the product of a conference committee process for competing versions of the cannabis reform bill that were passed by the House (H.4206) and Senate (S. 2749) at the end of last year. Last May, following publication of legislation proposed by the Legislature's Joint Cannabis Committee, we discussed many of the substantive proposals embodied in the competing bills.
The compromise bill is now likely to be passed by both chambers and signed by the Governor. According to a Fact Sheet released today, the bill will include the following changes:
- New Commission. Replacing the 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. To increase the accountability and responsiveness of Commission staff (a major complaint from industry), the Executive Director will report directly to the Chair.
Current commissioners and the current executive director may be out of a job, but would at minimum have to reapply for their jobs. The effect on rank-and-file staff is also up in the air. 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.
- Raises Retail License Cap to Six. Raising the limit on the number of adult-use marijuana retailer licenses an owner may possess from three (3) [to six (6)]. Licensees will be allowed to increase the number of retailer licenses to five beginning upon passage and non-social equity licensees will be allowed to obtain a sixth license within a year from passage.
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.
Whether this provision can help rescue struggling businesses—either as buyers through acquisition or realizing a meaningful exit as sellers—will depend on how efficiently the Commission can process changes of ownership and control.
- Raises Ownership Definition from 10% to 20% Equity. Raising the financial interest percentage that makes a person or entity an owner from 10% to 20%.
- Audits. 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.
- Ban on Credit for Delinquent Payors. 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. This much-needed provision, however, will not take effect until 18 months after passage of the bill.
- Elimination of Vertical Integration Requirement for Medical Operators. 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 two years.
- Raises Purchase Limit to 2 Ounces. Raising the legal flower purchase limit for an adult use consumer to the 2 ounces from one.
- Online Portal. Creating an anonymous online portal for reporting illegal practices, including testing fraud.
The compromise bill is expected to be adopted as "emergency" legislation, meaning it will take effect immediately upon passage.
Looking ahead, both the House and the Senate must now vote to approve the compromise bill before it can be delivered to Governor Healey for consideration. Neither chamber may propose amendments to the compromise bill at this stage.
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.
