By now, you’ve probably heard the results of the 2020 election. And regardless of your political stance, it’s become clear that the real winner this year was weed.
Five states had cannabis legalization measures on the ballot - and all five of them passed them on November 3. This clean sweep further demonstrates the size and power of the marijuana industry.
But, for most new markets, the ballot is just the first step in a long process. So, we asked Vicente Sederberg partners Josh Kappel and Charles Alovisetti about what’s next for each of the new markets.
What was passed: Adult-use
What’s next: Legislature must create and pass legislation
Key take-aways: There are still a lot of unknowns as the legislature must pass language. Local control will be a key piece and issues of social equity are yet to be determined but will play a large role in the process.
New Jersey has been talking about full legalization for quite some time but finally passed it in 2020. However, this is just the beginning of what will likely be a complicated and contentious process.
First, New Jersey’s ballot measure was non-binding, so we still have to wait for the legislature to create and pass language on legalization. Fortunately, the momentum is there; S21 or the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act already exists and has made it out of committee.
Because of this, there are a few things we already know. The bill allows for the 9 existing businesses to be the only new applicants for the first 18 months and defines 6 classes of licenses: Grower, Processor, Wholesaler, Distributor, Retailer and Delivery. It also allows for significant local say in whether licenses will be allowed.
Despite this, there is also plenty we don’t know. Caps on licenses will be kicked to the commission to determine. As well, social equity and where tax revenues will go is highly contentious and will play a critical role as rules are created.
And while licenses seem to be set up on a merit-based system, existing language implies a significant amount of local control. This means any business interested in entering the NJ market will have to play local politics to be sure it will be allowed.
What was passed: Adult-use via statutory language
What’s next: Draft rules released for comment
Key take-away: Arizona’s program is very friendly to the existing industry. Any parties interested in entering the market will have to buy an existing license, qualify as a social equity license or rationalize a rural license.
Arizona has had a medical program since 2010 and this year was not the first attempt by the state to pass adult-use legalization.
Arizona’s measure was statutory, meaning it is binding and has already gone into the state’s statutes. Due to this, the state has set a quick timeline with applications opening on January 20, 2021. The rules also state that the governing bodies must issue licenses no later than April 15, 2021. If they fail to do so, all existing medical license holders can begin selling adult-use.
This is not to say everything is certain as the state has yet to release specific rules. Once draft rules are released all interested parties have the ability to comment on them.
Another important thing to note is that the existing industry very much drove this effort - the passed measure prioritizes existing medical license holders, giving them a period of time to bite at adult-use licenses before making them generally available. This will inevitably mean that businesses interested in entering the market will have to buy their way in.
That being said, there are two other ways businesses can enter. The measure specifies 26 social equity licenses to be granted and also has some provisions for rural areas where existing access is limited.
What passed: Adult-use
What’s next: Rules & regulations to come
Key take-away: Montana’s market will be kept insular on purpose with residency requirements for licenses.
Montana isn’t a huge market with a population of just 1 million. In 2004, the state voted on and passed a medical program.
While other states’ licensing is often “apply” or “buy”, Montana is different in that they require 1 year of residency in the state. In this way, the state is attempting to keep the industry insulated and focused on Montana.
However, it remains unclear how strict this requirement will be for the adult-use market as regulations and rules have yet to be released. These residency restrictions are not new as we’ve seen them play out in other markets - Alaska, Colorado, etc. - however, they don’t seem to be as common in the more recent legalization efforts.
Experts say that, outside of this key requirement, the language seems to insinuate a rather open market for Montana.
What passed: Medical and adult-use
What’s next: Rules for medical; legislation for adult-use
Key take-away: South Dakota’s surprising outcome highlights the need for more ballot measures and on-going advocacy as legislation is created.
South Dakota’s passage of both Measure 26 (medical) and Amendment A (adult-use) was the most surprising of the outcomes from the 2020 election. The state is known for being conservative, further demonstrating the power of ballot initiatives over legalization through the legislature.
For Measure 26, South Dakota’s Department of Health has until October 29, 2021 to make rules. Amendment A adds an additional 6 months, requiring rules by the end of March 2022.
Amendment A also requires implementing legislation and, as we’ve seen in other markets with more conservative governments, this can be a slow process that sometimes steps on the will of the people. So, if you’re interested in South Dakota’s market, continuing advocacy will be critical.
What passed: Medical
What’s next: Pending legal issues from non cannabis-friendly local leaders
Key take-away: Mississippi’s program will be relatively open, similar to Oklahoma.
Passage of Initiative 65 means medical cannabis will be coming to the state, though it won’t be the first. All cannabis allowed for US-government sanctioned research is grown at the University of Mississippi - though critics point out the sub-par quality.
And while a medical program in Mississippi won’t change this, it is an interesting piece of the puzzle.
The medical program in Mississippi is also shaping up to be a strong market. With 3 million people and a small government, experts see Mississippi’s market similar to Oklahoma - open and business friendly.
The measure has no caps on licenses and specifies that rules must be completed by the end of July 2021. It also allows for no local control.
Mississippi’s passage of Initiative 65 shows the power of the industry. The initiative passed with 73% approval, a high number in the scheme of things - even higher when you consider it’s place in the deep south.
However, not everyone is happy. The state currently has a pending case from local leaders who would like the ability to ban cannabis from their locality. It is unclear what the outcome will be or how it will impact the industry so stay tuned.