Massachusetts was expected to be the first state in the Northeast to tax and regulate recreational use cannabis sales on July 1. But the state’s Cannabis Control Commission only approved its first retail license Monday, and no sales will happen for at least a few weeks.
This is due to the state’s cautious approach to recreational use cannabis, which is reflected throughout the region: It’s been legal in Washington, D.C. since 2014, followed by Maine in 2016 and Vermont this year, but no state has fully embraced cannabis.
The District doesn’t allow sales, and neither does Vermont, where the adult use cannabis law took effect July 1. So far, Vermont Gov. Phil Scott doesn’t want to move on regulating sales until the state’s cannabis commission releases a public safety report at the end of the year. Maine Gov. Paul LePage introduced a bill to repeal the legalization of recreational use cannabis, which voters approved in 2016. And Massachusetts Gov. Charlie Baker and Boston Mayor Marty Walsh have long opposed legalization. The general attitude toward legalization in the region to-date could provide some insight into how states like New Jersey and New York will approach it, if and when they do. These state governments have been more reluctant to welcome legal cannabis sales than those in western states, despite support from voters and, in New Jersey’s case, the governor himself.
Massachusetts voters approved the sales in 2016, but since then, the state legislature has delayed the regulatory process and allowed municipalities that opposed the 2016 vote to ban recreational cannabis businesses. Other municipalities were allowed temporary moratoria to craft appropriate zoning bylaws. In June, Attorney General Maura Healey allowed some municipalities to extend those temporary bans until 2019, frustrating potential consumers and entrepreneurs who feel they’ve waited long enough for regulation.
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Zoning bylaws let residents weigh in on where recreational use cannabis businesses can be located. Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, says this is important because a town may not want to “have a cannabis shop in the middle of their downtown, as the anchor of their community.”
This zoning process has become a hurdle for Massachusetts’ legal cannabis industry, which the Department of Public Health estimated would increase state tax revenue by $215.8 million in the first two years of sales.
Beckwith, a Massachusetts native who’s worked in local and state politics most of his life, believes in New England’s centuries-old style of direct democracy, and he doesn’t think the cannabis industry should be able to bypass it, no matter how many millions it could be worth in the state.
“We can’t just flip a switch and have an overnight transformation,” he told Cannabis Wire. “If we just enacted laws without having them go through the local process, that would strip citizens of their fundamental right in the Massachusetts democratic process.”
Kris Krane, president of cannabis consulting firm 4Front Ventures, told Cannabis Wire that the way this local process has unfolded “just causes more and more delays, and there’s fewer and fewer opportunities for business.” He said, “We didn’t have to do it this way in Massachusetts.”
Zoning could be a problem for New Jersey’s newly elected Gov. Phil Murphy, who supported legalization during his campaign and earlier this year introduced a 2019 budget proposal estimating $80 million in tax revenue from cannabis sales. Already about twenty municipalities, such as Point Pleasant Beach, are issuing bans on cannabis businesses.
Despite some local opposition, New Jersey Sen. Nicholas Scutari introduced a legalization bill last month, which he hopes will pass this summer. This movement in New Jersey, along with legalization in Massachusetts and Vermont, appears to be pushing New York Gov. Andrew Cuomo toward legalization in his state.
Cuomo has long opposed legalizing recreational use cannabis, but Chris Alexander, a policy coordinator with the Drug Policy Alliance, says the governor knows “this is a reality now that we can no longer ignore.”
Alexander worked with the governor’s office to reduce the number of marijuana arrests in New York City. He says cannabis legalization in neighboring states could be a law enforcement nightmare for New York, and that legalization makes sense from a revenue standpoint. Alexander compares it to gambling laws, which Cuomo expanded in 2013 to keep that money from crossing into New Jersey or Connecticut.
“We didn’t have casinos, and it was a big issue for [Gov. Cuomo] to watch all this revenue leave the state,” Alexander told Cannabis Wire. “It’s more so the likelihood that a state like New Jersey could benefit [from the cannabis industry] and we could not.”
The New York City Comptroller’s office estimated the state could earn $438 million in tax revenues from $3.1 billion in sales of recreational cannabis, which Alexander calls a conservative estimate.
The Vermont Marijuana Commission estimates up to $20 million in tax revenue, should the state choose to allow recreational use cannabis sales, and the Maine legislature projects $10 million in tax revenue by 2021. Combined with estimates from New York, New Jersey and Massachusetts, recreational use cannabis sales could create nearly $800 million in tax revenue for the region in a few short years.
It might be a while, however, before these states cash in on recreational use cannabis. Massachusetts granted its first retail license to Cultivate Holdings in Worcester on July 2, but to make a sale, the business will have to wait until an independent testing lab is approved.
Currently, the Cannabis Control Commission doesn’t have any complete applications from labs. But Commissioner Shaleen Title tweeted that more licenses are coming up. She was optimistic about regulatory progress in a series of Monday afternoon tweets, praising the Commission for moving quickly, “even by non-gov standards.”