Maine’s adult use cannabis program is having a bumpy takeoff.
First, the launch of adult use sales, expected this spring after years of delays, was delayed, again, this time due to coronavirus. Now, amid this uncertainty, a lawsuit has led to the elimination of the residency requirements for business licenses, which, just as the state began to issue such licenses, opens up the state’s cannabis industry to out-of-state dollars and operators.
The move comes on the heels of a lawsuit filed in United States District Court for the District of Maine in late March, which named the parent department of the Office of Marijuana Policy (OMP), which oversees and regulates the state’s adult use cannabis program.
The lawsuit, NPG LLC et al v. Maine Department of Administrative and Financial Services et al, in a nutshell, alleged that the cannabis program’s residency rules violated a dormant Commerce Clause of the United States Constitution by “explicitly and purposefully favoring Maine residents over nonresidents.” (NPG is Northeast Patients Group, also known as Wellness Connection of Maine.)
Maine’s top cannabis regulator acknowledged in a letter to stakeholders on Monday, after receiving advice from the attorney general’s office, that “the State of Maine was unlikely to prevail in a legal challenge to the adult use residency requirement.”
Maine has always had some kind of residency rule, starting with the adult use initiative that voters passed in 2016, which included a “preference” for members of the state’s medical cannabis industry, which were required to live in Maine. Lawmakers later amended that rule, replacing it “in favor of the four-year resident income taxpayer requirement that exists today.”
The attorney general’s office and counsel for Northeast Patients Group issued a joint statement on Monday as part of their stipulation of dismissal that outlined why Maine regulators were dropping the residency rules: they are “subject to significant constitutional challenges and is not likely to withstand such challenges. The Attorney General thus does not intend to defend the Residency Requirement, given the constitutional issues raised in this lawsuit. Accordingly, defendants will not be enforcing the Residency Requirement or any agency rules, regulations or guidance which enforce or implement the Residency Requirement.”
Legislation is expected to be introduced to align language in the state’s adult use cannabis law with the decision to drop the residency requirements.
In a letter to stakeholders on Monday, OMP director Erik Gunderson stressed that the timeline for the launch of the adult use program wouldn’t be affected by this “unforeseeable” move.
“OMP has already begun working to ensure this decision will have no effect on the timeline for the rollout of the adult use marijuana program,” Gunderson wrote in the letter, in bold-faced font.
Still, the date for the launch of the adult use program, delayed because of the coronavirus pandemic, has not been set.
“We continue to monitor the latest developments related to the COVID-19 pandemic and, as communicated previously, will identify a retail sales launch date when guidance from public health experts deems such an action appropriate,” Gunderson wrote to stakeholders.
In addition to the public health concerns related to the coronavirus outbreak, the state’s program launch is dependent on another significant factor: the supply chain. And getting that up and running, in coordination with localities, has been tough amid the pandemic.
“There is the issue of ensuring we have cultivators and product manufacturers that will be able to grow and process marijuana into the products that will stock retail stores and ensuring that sufficient product exists on shelves to satisfy consumer demand,” David Heidrich, OMP spokesperson, told Cannabis Wire.
“It’s not so much about number of stores as it is getting a testing facility online, municipalities being able to complete local authorization so we can issue active licenses, those active licensees coming into possession of marijuana and stocking retail stores, and it being an appropriate time to launch the industry.”
For context, Maine took years to get its adult use program off the ground after voters passed an adult use legalization initiative in 2016.
Maine regulators announced the first conditional licenses in mid-March: a total of thirty one conditional licenses would go to sixteen cannabis stores, ten cultivation facilities, four product manufacturing facilities, and one nursery, but no date for the program’s launch was scheduled.
Gundersen told Cannabis Wire earlier this year that some of the hurdles that the program faced arose before their role in rulemaking for the adult use program even began.
“There were the two legislative rewrites, two governor’s vetoes, and we were really left with a blank slate when we were established,” Gundersen told Cannabis Wire. In addition, Maine’s geography includes some extremely rural areas, which added layers of complexity to rules surrounding the mandatory testing of cannabis samples in the adult use program.
“Maine is a huge state. So geography was a challenge, considering we have applicants in all corners of the state,” said Gundersen. “Most of the prospective testing facilities were in Southern Maine, and we can’t force anybody to go anywhere to collect samples.”
Then, weeks after the first conditional licenses were handed down, regulators announced that the launch of adult use sales would be delayed “due to the ongoing COVID-19 pandemic.”
Gunderson wrote to stakeholders on April 12, “Just one month ago, as we announced the issuance of Maine’s first conditional licenses for adult use marijuana establishments, few would have envisioned the effects the current coronavirus disease 2019 (COVID-19) would have on the daily lives of Mainers. However, it now appears as though a spring launch of Maine’s adult use industry is simply unrealistic.”