February 2023

Maryland Adult Use Regulations


 

In just about one month from its release date to the public, Maryland’s proposed adult-use cannabis regulations, HBO556,  have received rumblings of discontent and concern from interested industry participants. Following the first hearing on the matter conducted by the Economic Matters Committee last Friday, February 17th, the Bill still has a long way to go before being finalized – with anticipation of several additional readings and proposals before reaching finalization. Below are some key highlights to know about the first reading of the initial proposal of the Bill and its regulation by the Cannabis Regulation and Enforcement Division (the “Division”).

  1. Application Review Process.
  • Conversion of Medical. Medical cannabis growers, processors, and dispensaries will be converted on July 1, 2023, to licenses to operate medical and adult-use cannabis businesses, subject to payment of a conversion fee. Conversion fees will range from $100,000 to $2,5000 depending on gross revenue of such operator for FY 2022.

 

  • Rounds of License Applications. By January 1, 2024, the first round of licenses will be issued, with the second round commencing as early as May 1, 2024. The program permits up to 75 marijuana cultivation licenses and 300
… Keep reading
The Constitutionality of the State Residency Requirements


More frequently over recent years, federal courts have wrestled with the constitutionality of a state’s requirement under its cannabis regulations that ownership of a cannabis company be majority owned (or some other prescribed percentage ownership) by a resident of such state, better known as a state’s “residency requirement.” The obvious repercussion of this regulatory requirement is the investor pool that cannabis companies can draw from is limited, especially as compared to cannabis businesses operating in states without a residency requirement. Not to mention the disappointment of entrepreneurs who want to invest in a new cannabis market, but don’t want to establish residency there.

Residency requirements have been challenged in federal district courts on the grounds that the regulation violates the Dormant Commerce Clause, a rather opaque bit of constitutional jurisprudence. The federal courts of Maine and Missouri have struck down residency requirements in those states, while just last week, a federal court in Washington upheld the residency requirement as constitutional and valid. Below is a summary of each court’s reasoning behind the decisions. No doubt, as new markets open up and states that have legalized adult use in November 2022 roll out their regulations, there will be additional states … Keep reading

Moving Markets: Declining Economic Conditions in Western States to Curaleaf Exit


Recent economic conditions in mature and established cannabis markets have led major players to bow out due to oversaturation in search of more opportunistic emerging markets. Curaleaf Holdings, a multistate operator, recently pivoted its business strategy by shutting down all California, Colorado, and Oregon operations. With all three of these states experiencing declining wholesale cannabis prices due to cultivation oversupply, Curaleaf has decided to exit these states and reduce its payroll by about 10% overall. Curaleaf is not the only big cannabis company to experience job cutbacks in recent months. Oregon-based Dutchie, California-based WM Technology, and Colorado-based Akerna Corp. have all scaled back their workforce as a cost-saving measure.

The California market has been troubled by several contributing factors, making it a particularly challenging market for a wholesale cultivator. After a period of wholesale cannabis price decline due to market oversupply and competition, prices have leveled off and even increased slightly. However, despite this uptick in price, some farmers still choose not to grow or renew their cultivation licenses as production costs exceed the wholesale price for outdoor bulk cannabis. Additionally, the thriving and unrestrained illicit cannabis market in California creates even more competition, with the illegal market not … Keep reading