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This story originally appeared on MJBizDaily
Several more states could legalize adult-use or medical marijuana before their legislative sessions adjourn in 2021, possibly generating hundreds of millions of dollars in new business opportunities in the coming years.
Now that New Jersey and New York legalized recreational marijuana programs – which together are expected to produce more than $4 billion in annual sales within a few years of launching – industry experts are keeping a close eye on the East Coast states of Connecticut, Delaware and Rhode Island. Virginia and New Mexico already legalized adult use through their legislatures this year. Together these two states are expected to generate around $2 billion in annual revenue five years after sales begin. It’s uncertain which, if any, additional state legislatures will actually pass bills this year given that political dynamics can shift rapidly.
For example, Connecticut seems a bit less likely to do so than a couple of months ago, industry experts said. Pennsylvania and Minnesota remain in play to legalize adult-use markets as well, but passage appears unlikely.
Red states in play
The new 2021 Marijuana Business Factbook counts 38 states and Washington DC as having medical marijuana programs, so MMJ legalization activity now is focused on more conservative red states. Alabama looks most likely to legalize MMJ at this point, industry experts said, noting that a measure has passed the Senate and now is going to the full House. Nebraska, Kansas and South Carolina seem unlikely. North Carolina became a maybe when the chair of the state’s powerful Senate rules committee submitted a bill.
Texas is another state to watch: It already has a limited medical marijuana program, so MJBizDaily doesn’t classify it as a full-fledged MMJ state. But it could get a significant boost from lawmakers this year. A state House committee advanced a bill that would increase the THC limit from 0.5 percent to 5 percent by weight and add qualifying conditions such as chronic pain and post-traumatic stress disorder.
This year’s legalization activity follows a clean sweep at the November ballot box when voters in Arizona, Montana, New Jersey and South Dakota approved adult use, and residents in Mississippi and South Dakota passed medical marijuana initiatives.
Karen O’Keefe, state policies director for the Marijuana Policy Project, and Carly Wolf, state policies manager for NORML, say that strong public support is the driving force for legalization via state legislatures as well. More than two-thirds of Americans support recreational legalization, according to a Quinnipiac University national poll of adults released this month.
“Now that 40 percent of Americans live in a place where marijuana is legal for all adults, the pressure is on lawmakers at every level to act on the will of the people,” Wolf wrote in an email to MJBizDaily. “The more states move on legalization, the more out-of-touch states that are left behind appear,” O’Keefe added. “Marijuana stores near state borders have parking lots full of license plates from their prohibitionist neighbors. It’s a very clear illustration of the economic growth that states are ceding to their neighbors the longer they fail to listen to voters.”
State lawmakers are attracted to the tax revenues, jobs and general economic development that legalization brings. The coronavirus pandemic, which has strained state budgets, also has put additional pressure on some state lawmakers and governors to act.
A ‘heavy lift’ in some states
But O’Keefe noted that while legalization momentum is strong, “it remains a heavy lift in state legislatures.”
For example, at the beginning of the year, prospects looked promising for adult-use legalization in Maryland and MMJ legalization in Kentucky. But efforts in Maryland stalled, as did legislation in Kentucky. It might surprise some that prospects for medical marijuana legalization appear strongest in Alabama. The Alabama Senate has passed a bill three years in a row. Last year, coronavirus derailed the possibility of a House vote, but this year two committees have advanced an amended measure to the full House.
“It’s not perfect legislation,” said Whitt Steineker, co-chair of Birmingham, Alabama-based Bradley law firm’s cannabis practice. “But if you are a supporter and advocate of medical cannabis, it’s hard not to be encouraged by the fact that there seems to be momentum behind the legislation. That’s a huge step that a lot of people wouldn’t have thought possible a year or two ago.”
Here’s a look at the bills in states most likely to pass measures this year, and some key business aspects of the bills. Much of the information is provided from bill summaries produced by the Marijuana Policy Project.
Most likely adult-use measures to pass
Connecticut (Legislature adjourns June 9.)
Senate Bill 888, proposed by Democratic Gov. Ned Lamont
- The measure provides for vertically integrated microbusiness licenses and calls for an equity commission to create a licensing program that would ensure equal access to individuals from disadvantaged communities.
- Medical marijuana dispensaries could convert to dual, MMJ-adult use stores and begin sales on May 4, 2022.
- Lamont’s bill establishes wholesale taxes in addition to the state sales tax of 6.25%. But a state House Finance Committee recently voted to back a measure that would establish a 20 percent sales tax and 3 percent local tax.
- percentMJBizDaily projected late last year that a recreational marijuana market in Connecticut alone could generate $725 million in sales by its fourth year of operation.
- A March poll from Sacred Heart University showed that 66 percent of those surveyed supported legalizing adult use.
Delaware (Legislature adjourns June 30.)
House Bill 150, advanced by one House committee and now before Appropriations, which could advance the legislation to the full House:
- The measure calls for the following number of licenses to be issued within 19 months of the law’s effective date: 30 retailers including 15 social equity applicants; 60 cultivators including 20 social equity applicants; 30 manufacturers including 10 social equity applicants and 10 microbusinesses. Half of the cultivation licenses would be smaller than 2,500 square feet of canopy.
- Five testing lab licenses also would be issued, including two to social equity applicants.
- A 15 percent tax on retail sales would be imposed. The Legislature would decide how to appropriate funds.
Rhode Island (Legislature adjourns on June 30.)
Lawmakers are considering two competing bills, Gov. Dan McKee’s legalization plan and Senate bill 568. In each, municipalities could ban adult-use establishments through a voter referendum.
- A wide range of cannabis business licenses would be made available, including “craft cultivation” permits with modest application fees.
- A cannabis control commission would establish policies to promote participation by individuals from communities that have been disproportionately harmed by the war on drugs.
- Licensing and application fees would go into a fund to provide no-interest loans to social equity businesses.
- A 10 percent excise tax would be tacked onto the normal 7 percent sales tax, and municipalities could charge an additional 3 percent local sales tax.
- Regulators would issue 25 retail licenses per year for three years and could establish a license cap in the future. Licenses would be awarded through a lottery system.
- 20 percent of the retail licenses would be awarded to minority business enterprises.
- Existing medical cannabis operators would be permitted to obtain a dual MMJ and adult-use license. Initially only existing licensed MMJ operators would be permitted to obtain an adult-use cultivation license.
- Vertical integration would be prohibited except in the case of current vertically integrated MMJ operators.
- A 10 percent excise tax would be imposed on top of normal sales taxes. There also would be a tax on marijuana sold by cultivators equal to $10 an ounce or $3 an ounce for trim.
Most promising medical marijuana measures
Alabama (Legislature adjourns May 30.)
- Rules would have to be adopted in time to allow applications to start being filed by Sept. 1, 2022. Applications would be granted or denied within 60 days.
- A Medical Cannabis Commission would license up to five vertically integrated licenses, at least four cultivation licenses, no more than four processor licenses and no more than four dispensary licenses, each of which could have up to three locations in different counties. The vertical operators could each have up to five dispensaries in different counties.
- The commission would determine the maximum daily dosage of THC that can be recommended for each qualifying condition. In most cases it would not exceed 50 milligrams.
- Pills, gelatin cubes, lozenges, oils, suppositories, nebulizers and patches would be permitted. Smokable flower, raw plant for vaping, candies and baked goods would be prohibited.
- A 9 percent tax would be levied on medical cannabis retail sales.
North Carolina (Legislature adjourns July 2.)
- A state Medical Care Commission would be required to adopt rules no later than 120 days after the effective date of the act. A Medical Cannabis Production Commission would work with the Medical Care Commission to establish licensing requirements and qualifications.
- Doctors would be able to recommend MMJ for conditions such as cancer, epilepsy, glaucoma, AIDS, Crohn’s disease, Parkinson’s disease and multiple sclerosis.