Cannabusiness Advisory

On Monday, Massachusetts adult-use cannabis retailers resumed sales after two months of lockdown in response to the COVID-19 outbreak. Adult-use retailers are among the first “nonessential” businesses to return to operations under strict guidelines, pursuant to the Governor’s order.

Back in March, Governor Baker deemed adult-use cannabis retailers “nonessential,” which was a departure from the adult-use industry’s classification in other states where cannabis has been legalized. However, the Governor’s order permitted medical cannabis dispensaries to remain open, with the admonishment that sales be conducted in a manner that would to limit contact between employees and patients (curbside pickup, social-distancing, etc.) The disparate treatment between medical and adult-use retailers was subsequently challenged in court. On April 16, the Massachusetts Suffolk Superior Court, denied the plaintiffs’ plea for an emergency preliminary injunction in their suit against the Governor, the aim of which was to have recreational marijuana establishments added to the list of “essential” businesses.

Nonetheless, the commencement of phase one with respect to adult-use cannabis retailers could not have come sooner. Like other consumer-facing retailers, the adult-use cannabis industry has felt the economic strain of COVID-19. Obligations to pay rent, lost sales, and other business expenses dealt a blow to industry operators.  However, unlike other businesses, cannabis operators endured the lockdown without the ability to seek federal assistance due to the continued federal prohibition. In fact, even ancillary businesses that contribute products or services to the cannabis industry have been excluded from various COVID-19 relief benefits. The Massachusetts Legislature’s bill is now considering a state-level relief bill for the cannabis industry which would provide assistance to businesses, likely in the form of a state-level Paycheck Protection Program (PPP).

The reopening of Massachusetts’ adult-use retailers is part of the first phase of a four-phase plan. Each phase is expected to last a minimum of three weeks, but may be extended depending on the Commonwealth’s public health data continues to trend negative. Like other retailers during the phase one of the state’s new reopening plan, cannabis stores, sales will be limited to curbside pickup and online reserve-ahead orders. Prior to reopening, the operator must complete a COVID-19 Control Plan and be able to present the document during an inspection. Businesses that reopen in the first phase must also:

1. Require workers to wear masks.
2. Maintain social distancing.
3. Sanitize areas that are frequently touched.
4. Create a plan for staff members who contract the virus.

Despite the harm inflicted by the COVID-19 crisis, many industry advocates remain optimistic over the cannabis industry’s long-term viability. In eight of the eleven states where adult-use cannabis is legal, those industries were deemed to be “essential businesses,” thereby allowing them to remain open during stay-at-home orders and resulting in skyrocketing sales. Success in spite of a major economic shutdown has led some to believe a healthy cannabis industry is recession-proof; a fact likely to attract further enthusiasm and investment for the industry.

There has also been some positive news at the federal level. The Secure and Fair Enforcement (SAFE) Banking Act has been included as part of the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act) passed by the U.S. House last week. While it is unclear whether the Act will be passed by the Senate, it is a positive development to see cannabis reform included in federal COVID-19 relief legislation.

For more information and key considerations for Massachusetts cannabis operators following the “Reopening Order,” click here.