The following article, written by Omar Sacirbey, originally appeared on the website of Marijuana Business Daily on March 22, 2018.
Massachusetts’ looming recreational marijuana market has the potential to be one of the most prosperous in the nation.
Under rules finalized this month, cannabis entrepreneurs face no license caps for an assortment of business categories, edibles and myriad other goods are permitted, and there are opportunities to build a brand.
But applicants seeking to set up shop when the Bay State’s adult-use industry opens this summer will face a gauntlet of requirements that have already derailed scores of aspiring medical marijuana businesses.
Of the roughly 275 businesses that have applied for MMJ licenses since Massachusetts voters approved medical cannabis in 2012, only 22 have opened. At least 50 applications have expired.
Recreational license applicants can expect more of the same, observers said, though these same hurdles could benefit entrepreneurs who can cross the finish line.
“If you’re able to get open here, you’re going to see a more protected environment,” said Scott Moskol, an attorney who heads the cannabis practice at Boston law firm Burns & Levinson.
“We’re not going to see the downward pricing pressures as … Keep reading
A 92-year-old landlord who leased a storefront to a marijuana dispensary will receive a new hearing after a court dismissed her bankruptcy case on the grounds that acceptance of rent payments from the dispensary disqualified her from bankruptcy relief. Last month, a Bankruptcy Appellate Panel for the 9th Circuit remanded the Chapter 13 case after finding that the Court did not adequately detail a bad faith finding and, therefore, did not support its conclusion that the debtor violated federal law (namely, the Controlled Substances Act).
The landlord, Patricia Olson, owned a shopping center in Lake Tahoe, California, and, in 2013, began leasing space to Tahoe Wellness Cooperative, a state-licensed dispensary. However, the CSA makes it illegal to knowingly lease a property for the purpose of distributing marijuana. At the initial hearing to authorize the sale of the shopping center, the Bankruptcy Court for the District of Nevada took issue with the fact that Ms. Olson had continued to accept rent payments from the dispensary during her bankruptcy proceedings. The Court went so far as to say that Ms. Olson committed a crime by leasing to a business operation deemed illegal under the CSA. Accordingly, the Court concluded that … Keep reading
When it comes to the cannabis industry, banks and other financial institutions can find themselves in particularly murky legal waters (see Banking & Cannabis: Where Do Things Stand?). Federal rules dictate that banks and financial institutions that accept deposits from cannabis-related businesses may be liable for penalties, which has led to cannabis-related business in many states being conducted almost entirely in cash. Not only does this result in operational hurdles, particularly when it comes to paying taxes and compensating employees, it can also result in large amounts of cash being stored onsite, which, in turn, can lead to increased crime and an unsafe work environment. As California Senator Robert Hertzberg pointed out, “these business handle significant economic activity, yet they are forced to operate under the table and with little government oversight, as if they’re a black-market operation.”
Historically, under the Cole Memo, the consensus seems to have been that financial institutions would not be penalized in states that have legalized cannabis, unless those financial institutions were willfully ignorant to customer activities that could lend themselves to criminal financial transactions (e.g., the concealment of funds derived from other illegal activity, or the use of marijuana proceeds to support … Keep reading
Massachusetts’ Cannabis Control Commission landed firmly in the middle of the road when it voted on February 26, 2018, to postpone granting licenses to marijuana home-delivery services and “social consumption” operations. In justifying the delay, the CCC claimed that it needs additional time to craft rules that address public health and safety concerns, such as impaired driving and underage sales. Despite the postponement, it’s important to note that these limitations in no way impact retail marijuana dispensaries and their suppliers, which remain scheduled to open for business in July 2018.
While the decision is a setback for those in favor of an immediate roll-out, the CCC did agree to initially grant delivery and social consumption licenses to individuals affected by the War on Drugs, meaning that they will not be boxed out of the market when those licenses become available in 2019. This policy is meant to preserve a place in the market for lower-cost marijuana businesses, like delivery services.
While Governor Baker applauded the CCC’s action as part of establishing a “safe and responsible retail” market, others may view it as an opportunity that will appeal to entrepreneurs lacking investment capital, as the types of businesses affected will … Keep reading
I recently attended the New England Real Estate Journal’s “Cannabis: The Next Phase in Commercial Real Estate” summit, which brought together a number of local players for networking and a high-level discussion of where the industry stands in Massachusetts. In addition to being fantastic networking opportunities, events such as this allow attendees to get a sense of where the conversation on cannabis is heading, and for us, can be invaluable in terms of helping to anticipate concerns that clients will have and issues they’ll face.
Some of my takeaways:
- Despite the Attorney General’s stance on marijuana, nothing has really changed. For now, the federal government seems content leaving it to state and local authorities to ensure that cannabis industry players adhere to state laws when establishing and operating their businesses.
- When it comes to launching a cannabis business of any kind, it’s critically important to educate people about what your operation will entail, and what it won’t. You need to meet with municipal boards, with community groups, with public safety officials, to really drive home the message that: “Yes, we’re in the cannabis business, but we’re not the big, bad wolf. We’re just a dispensary, or a
… Keep reading
On December 21, 2017, the Massachusetts Cannabis Control Commission filed a first draft of regulations for the purpose of implementing the legality of adult-use marijuana. The draft—935 CMR 500.000—reflects more than 80 policies discussed and voted upon the prior week.
It details, among other things, the approval of products and requirements for labeling, packaging, advertising, and serving sizes, as well as the enforcement of regulations, security, and municipal protections.
Following is a summary of some of the regulations pertaining to business establishments.
- No licensee shall be granted more than three licenses in a particular class, except as otherwise specified. An independent testing laboratory or standards laboratory may not have a license in any other class. No individual or entity shall be a controlling person over more than three licenses in a particular class of license.
License classes are as follows:
- Marijuana Cultivator:
Tier 1: Up to 1,000 square feet of canopy
Tier 2: 1,001 to 5,000 square feet of canopy
Tier 3: 5,001 to 10,000 square feet of canopy
Tier 4: 10,001+ square feet of canopy
- Craft Marijuana Cooperative
- Marijuana Product Manufacturer
- Marijuana Retailer (Storefront, Delivery-Only, Marijuana Social Consumption Establishment, Primary Use, Mixed Use)
… Keep reading
As we’ve blogged before, we don’t believe that Attorney General Sessions’ revocation of the Cole Memorandum will have much impact on the regulated, licensed marijuana industry. As of this post, we’ve neither heard nor read of any U.S. Attorney seeking to prosecute a licensed, compliant marijuana operation. Beyond statements by key political players, certain data points can give the industry comfort. Below are some that we believe illustrate that the attorney general’s actions and statements will not meaningfully reverse the progress that the industry has realized over the past few years.
- Per an October 2017 Gallup poll, 64% of Americans support marijuana legalization, including 51% of polled Republicans. Per a July 2017 Quinnipiac University poll, 75% of Americans, including 59% of Republicans, oppose the enforcement of federal marijuana laws in states that have legalized cannabis.
- The legal cannabis industry (not including cannabis-adjacent businesses) employs an estimated 165,000 to 230,000 workers. This is two to three times more workers employed by the coal-mining industry.
- Although estimates of actual revenues from legal cannabis enterprises vary, The Arcview Group states that, in 2016, the industry generated at least $6.7 billion—that figure is projected to increase to $21 billion by 2021.
- The cannabis
… Keep reading
Last week, the Vermont House and Senate passed H.511, which seeks to permit recreational- and adult-use marijuana in the state. The law would remove civil penalties by allowing individuals to possess one ounce or less of marijuana, as well as up to two mature and four immature marijuana plants to grow at home. Expected to be signed into law by Governor Phil Scott, the bill would go into effect on July 1, 2018.
Although H.511 does not provide or allow for licensure of adult-use cannabis cultivation, processing, or dispensary operations, supporters nonetheless see it as an important first step to full implementation of an adult-use marijuana program in Vermont.
As other commentators have noted, the passage of H.511 is important for two other reasons:
- This is the first time a state legislature has legalized recreational marijuana. The eight states that presently permit adult use got there via citizen ballot initiatives.
- The legislation was passed (and the governor has pledged to sign the bill into law) after Attorney General Sessions’ revocation of the Cole Memorandum, giving hope to many in the industry that Sessions’ actions will not chill the industry.
Here at the Blog, we congratulate Vermont’s legislature … Keep reading
As most are by now likely aware, last Thursday, Attorney General Jeff Sessions issued a memorandum to all U.S. Attorneys entitled “Marijuana Enforcement,” which noted that decisions to prosecute even legal marijuana have been, and shall continue to be, guided by prosecutorial discretion, in light of the government’s “finite resources.” It went on to state that previous guidance with respect to marijuana enforcement, including the Cole Memorandum, was “unnecessary” and, therefore, rescinded.
The Massachusetts U.S. Attorney, Andrew Lelling, who was confirmed just last month (December 2017), said the following soon after the release of Attorney General Sessions’ memo:
This office will pursue federal marijuana crimes as part of its overall approach to reducing violent crime, stemming the tide of the drug crisis, and dismantling criminal gangs and in particular the threat posed by bulk trafficking of marijuana, which has had a devastating impact on local communities … As with all of our decisions, we will continue to use our prosecutorial discretion and work with our law enforcement partners to determine resource availability, weigh the seriousness of the crime and determine the impact on the community.
In a further statement, he went on to say:
… Keep reading
Earlier today, Attorney General Jeff Sessions issued a memorandum rescinding several Obama-era policies (notably outlined in the Cole Memo) regarding the possession, distribution, and cultivation of marijuana. Whereas the government has largely allowed states to decide how best to define and enforce their positions on cannabis, the Attorney General has now essentially green-lit prosecutors across the country to determine how to enforce federal drug laws regarding the substance, particularly alarming those in states that have moved to legalize.
We believe that further information is necessary to truly assess what impact, if any, this development may have on the industry. For now, our message is: Let’s not overreact.
Sessions saying that it is now up to individual AGs to determine how to handle cannabis, is not much different from the way things are being done now. The Cole Memo was simply a list of prosecutorial priorities. It never prevented the Justice Department from going after cannabis entities—it just stated that, unless certain things were happening (e.g., money laundering or sales to minors), the feds wouldn’t waste resources. Now that Justice is short-staffed and underfunded, it’s doubtful that there will be much movement on this front, except in, perhaps, … Keep reading