Maryland took an interesting, and circular, route to legalizing cannabis for adult use.
Last year, lawmakers referred a constitutional amendment to voters, despite the fact that former Republican Governor Larry Hogan refused to sign the legislation, a symbolic statement of his disapproval because the measure had enough support from lawmakers to move without his signature. In November, 67% of voters approved the measure. It went back to the General Assembly so lawmakers could craft rules for the industry and set it in motion.
Legislators did just that. Identical legislation to regulate the cannabis sector was introduced in the House (HB 556) and Senate (SB 516) at the beginning of the session. The House passed its version on March 10. The Senate version passed on March 31. With the session nearly over, lawmakers from the House and Senate came together to iron out the differences to their bills on April 8 and sent it to Governor Wes Moore’s desk.
Maryland lawmakers felt a sense of urgency to approve regulations for the new industry. The voter-passed constitutional amendment—New Jersey is the only other state to approve cannabis through a ballot measure referred to voters by legislators—stipulates that sales for adults 21 and up begin on July 1. On that date, consumers will buy from medical cannabis shops that have converted into adult-use sites. The legislation lays out conversion fees of 8% of a dispensary’s gross revenue in 2022, ranging from no less than $100,000 to no more than $2,000,000. The legislation allows for eighteen-month installment payments.
After that, the first round of licenses for businesses that are not already operating as medical dispensaries will be released, by the start of 2024, and not everyone is happy about the timeline. Kris Furnish, co-founder of Maryland Marijuana Justice, says early 2024 is not soon enough. She says some of the largest cannabis companies in the country, such as Trulieve and Curaleaf, already have a foothold in the state.
“I don’t think it represents equity when you allow these multi-state operators who’ve been existing in the medical industry since Maryland legalized for medical purposes [in 2014] to be able to get a head start on recreational sales before anyone else gets to even apply for a license,” Furnish told Cannabis Wire.
Furnish would like to see new applicants get access to the market on the July 1 start date alongside the existing medical cannabis operators. However, the state would likely face logistical hurdles to approving new licenses by then for companies not already operating in the state: while the adult use bill is considered emergency legislation, meaning it goes into effect immediately upon passage, the new division overseeing cannabis would have less than three months to establish the process for accepting and approving licenses.
Lawmakers have attempted to ensure smaller operators are part of the industry in a few ways. The original legislation limited new licensees to two shops—as well as just one grower and one processor license—but the legislation heading to Gov. Moore’s desk, thanks to the Senate, increased the shop limit to four. The total number of adult use shops in the state is limited to 300.
Meanwhile, the final legislation drastically reduced the number of micro dispensaries, which are businesses without physical storefronts and ten or fewer employees, from 200 to just 10. And, lawmakers added language that a study will be done to determine if micro dispensaries can “safely and securely dispense cannabis.” The final legislation, like the original framework, leaves the cap for other micro licenses at 100 for growers and 100 for processors.
Furnish argues that placing a limit on micro licensees could hurt their chances of competing against multi-state operators. “There should be allowed a craft cottage industry to exist within this massive cannabis industry,” Furnish said. “Some people just want to do this for supplemental income. They just want to put some food on the table for their family.”
Some Maryland lawmakers have described these micro businesses as, in essence, delivery services. Senator Brian Feldman, who is a co-sponsor of SB 516, agrees with Furnish that the goal is to allow smaller businesses to compete. “It’s about lower barriers to entry,” Feldman said while introducing the legislation during a Finance Committee hearing. “One of the biggest criticisms of the medical program is you need millions of dollars to get into the game.”
The legislation would also establish the Office of Social Equity as well as a Social Equity Partnership Grant Fund. The fund will allocate $5 million annually starting in 2025. The goal is to connect social equity applicants with the resources they need to receive licenses. At least 65% of ownership and control held by one or more applicants for a license must meet the commission’s social equity criteria: living in a disproportionately impacted area for five of the last ten years or having attended public school in such an area for at least five years.
Social equity applicants will be entered into a lottery for licenses. Lawmakers say they wanted to avoid the point system in which applications are scored because of litigation this kind of selection process has invited in other states. License and renewal fees are reduced by half for social equity applicants.
In the House version, taxes on cannabis sales would have started at six percent, increasing by one percentage point each year until they reached ten percent in 2028. But lawmakers went with the Senate version, keeping sales tax steady at nine percent.
Meanwhile, legislation passed in 2022 (that was contingent on adult use cannabis passage by voters) allows Marylanders to grow up to two plants at home.
Legislators ultimately made tweaks to who would distribute the license. Under the bills as they were originally introduced in the House and Senate, cannabis would be added to the agency overseeing alcohol and tobacco to create the Alcohol, Tobacco, and Cannabis Commission. The House kept it that way in the bill it passed. But the Senate proposed the state establish a separate agency, the Maryland Cannabis Administration. Lawmakers ultimately sided with the Senate on creating an independent agency.
The Legal Hemp Conundrum
One speed bump lawmakers did not anticipate is how the hemp industry would fit into this matrix. The 2018 Farm Bill in Congress legalized cannabis plants with .3% delta-9 THC or less—that is, hemp—leading to a cascade of hemp derivatives flooding the market. That includes cannabidiol (CBD), a runaway success in the legal hemp era, and delta-8 THC, a cousin to delta-9 that, as Cannabis Wire has reported, operates in a legal and regulatory gray area across the country.
Since the 2018 Farm Bill, hemp-derived products have created a booming economy of their own. That’s why Maryland’s hemp industry came out in force against a particular provision of the state’s adult-use legislation. Under the original framework introduced in the House and Senate, a person could not sell a product “for human consumption or inhalation” that contained more than 0.5 milligrams per serving or 2.5 mg per package unless licensed under the new program. Many from the industry testified at a nearly four-hour long Senate Finance Committee hearing that this cap is too low and would require hemp businesses to buy costly cannabis licenses to sell their products.
“Refusing to amend this language would result in the loss of hundreds of jobs and countless families will find themselves in financial ruin,” Nicholas Patrick, owner of Embrace CBD Wellness Centers, said at the March 9 hearing.
The latest legislation notes that “it is not a violation” for “a person to sell or distribute a hemp-derived tincture intended for human consumption that contains” so long as it has a ratio of CBD to THC that is at least 15 to 1, a serving limit of 2.5 mg of THC, and a packaging limit of 100 mg.
On-Site Consumption, Social Equity, and Other Provisions
Perhaps the biggest point of contention in the Senate was the inclusion of on-site consumption licenses. It would have allowed for cannabis consumption on approved premises, including where food is served, and limiting the total number of licenses to fifty.
At the March 9 Finance Committee meeting, William Tilburg, executive director of the Maryland Medical Cannabis Commission, said the on-site consumption piece was just a placeholder. Something akin to cannabis lounges wouldn’t open until May 2024 at the earliest. But Senator Clarence Lam said he was skeptical that a placeholder was necessary, noting the sites would violate the amended Indoor Clean Air Act passed last year, in which indoor cannabis smoking is specifically prohibited. They discussed the Ceylon House lounge, an unlicensed, first-in-the-state business allowing medical patients to smoke cannabis on-site that recently opened up in Burtonsville.
“It is critical for the state to do something in this space,” Tilburg said, “because absent the state clarifying the position, locals are starting to approve these businesses.”
“I’m just concerned about the slippery slope,” Lam said. “We’re already seeing institutions and facilities moving in this direction and having on-site consumption even in what seems like apparent discordance with current state statute. So this whole on-site consumption piece does give me some pause.”
The final legislation stipulates that cannabis cannot be smoked indoors at licensed sites, sending users outside on approved premises.
Maryland lawmakers have vowed to revisit some measures in the legislation in future sessions, such as how to further regulate on-site consumption. For now, they want to ensure comprehensive legislation is approved before legal sales start this summer. The Senate bill’s sponsor, Feldman, says the state has taken a slower, more deliberate approach to legalization than other states, but two-thirds of Maryland voters say they’re ready.
“Marylanders have spoken decisively and now our job is to create the regulatory framework to make it work in the best possible way,” Feldman said at the beginning of this process. “Drawing on some of the mistakes, candidly, that were made in terms of our medical cannabis program roll out and the lessons learned from other states.”