More Work Yet To Be Done: Massachusetts Cannabis Officials Begin Regulatory Revision Process
The process, expected to begin in earnest in the coming weeks, follows on a summer 2020 regulatory revision in which the grassroots community scored multiple victories over corporate operators
Massachusetts Cannabis Control Commission (CCC) slide with timeline indicating process for current regulatory revision
As Massachusetts cannabis officials quickly come up on another round of regulatory revisions, I took some time to reflect on how we got to this point and what obstacles remain on the path to an equitable state market free from corporate oligopolies and straw-person owners.
While it is true work needs to be done on cannabis regulations in this state (that is, after all, the point of this piece), that reality should not discount for even one second the impressive victories that have been accomplished to this point because of an engaged, informed and indefatigable grassroots policy reform movement -- a movement that some corporate interests would love to see splinter into the winds, I have no doubt.
The wins that have come about over the past few years are easy to take for granted when fighting in the trenches, but taking stock of the list in text format has the propensity to shock the mind into a larger historical context;
- 10's of millions of dollars in dedicated yearly funding for the 0% interest social equity loan program;
Perhaps the biggest win of them all came about as part of the omnibus cannabis equity reform bill passed into law in recent months on Beacon Hill and then signed by Gov. Charlie Baker, as Massachusetts became the first state to capitalize a 0% interest loan/grant fund for equity applicants with a yearly dedicated levy on existing adult use taxes in perpetuity.
In turn, that fund will be seeded with between $35-$50 million per year specifically to help Social Equity (SE) and Economic Empowerment (EE) applicants obtain funding to navigate the licensing process, build out their operations and become sustainable long term without being forced to rely on predatory vulture capital firms.
The equity fund will be overseen by the Executive Office of Housing and Economic Development, which reports to the Governor, but that office will consult with a new Cannabis Equity Trust Fund Advisory Board (to be appointed in the next month) and the CCC as to the application process, qualification requirements and other aspects of the program.
The first loans/grants are expected to be distributed in Q2 of 2023.
- The creation of the Delivery Operator license type;
Despite the best efforts of existing brick and mortar retailers in the state, who wanted to force equity delivery companies to work as "Uber Eats" couriers for those retailers, the CCC created a new type of delivery license in the summer of 2020 that allows equity companies to purchase product at wholesale, store that product in a vault and then deliver their wares directly to consumers following an online sale directly to that consumer.
- The delivery/social consumption equity priority period;
Again, over the opposition of industry groups, the CCC created a 3 year period during which all delivery licenses (both Courier and Delivery Operator Licenses) will only be given to entities 51% or more owned and controlled by an SE or EE applicant. Non-equity owned retailers filed a lawsuit attempting to stop that equity priority period from moving forward, only to withdraw the suit after a mere 7 days following a sustained community boycott.
- The Cambridge equity priority period;
As mentioned above, when Cambridge created its first-in-the-nation priority period on the local level for equity companies seeking an adult use license, the response and support from the grassroots was overwhelming. Under the law at the time, only the CCC -- not local cities and towns -- was mandated to take equity status into consideration when issuing licenses, yet applicants could not even get to the CCC license queue without fist going through the local level process. As a result, said those advocates at the time, Cambridge was the first municipality to take steps to address that fundamental flaw.
One medical retailer in the city, Revolutionary Clinics, did not share in that joy however. That company, not owned by an equity applicant, filed suit against the City of Cambridge alleging that such an equity priority period was "racially discriminatory" against white-owned companies. Rev Clinics lost in court on three separate occasions in that case before eventually withdrawing the lawsuit in disgrace.
In spite of Revolutionary Clinics attempt at subversion, Cambridge's forward thinking also played a big part in a new municipal equity mandate recently passed by state lawmakers via S.3096, as now local cities and towns MUST take equity status into consideration when setting up their application processes. As those locales think about doing just that, they will come to find that the CCC highlights the Cambridge equity priority period as an exemplar as to how to go about that important task.
- The state-wide municipal equity mandate;
As mentioned above, S.3096 created a new requirement that cities and towns take equity status into consideration when issuing local level licenses (that local level license is needed before an applicant can move into the state level license queue).
Taking a "carrot and stick approach", the law both penalizes towns that do not meet the equity mandate and provides a bonus for towns who do so.
While cities and towns will be fined "in an amount equaling their HCA impact fee revenue for the last year" for failing to meet their equity mandate, they also have the opportunity to obtain a 1% bonus from existing state-level tax revenue for each EE or SE that becomes operational within their borders.
- Expanded expungement laws and changes to allow those with prior felony drug convictions to work in the regulated industry;
Also included in the recent omnibus reform law were expanded provisions for expungement of prior criminal records related to chapter 94C. While the expungement process is not yet automatic, even under the new law, it is much improved and directs judges to expunge those records by default when presented with a request.
Furthermore, again over industry opposition, the law was expanded to allow those with prior felony drug convictions to work in the regulated cannabis industry.
The CEO of MSO Patriot Care came under fire in recent weeks after it was revealed the firm had spent years fighting against those with prior drug convictions to work in the industry in terms that were widely considered offensive.
- Allowing MDAR regulated farmers/extractors to sell their biomass for use in retail stores and other aspects of the production process;
This important change, implemented after years of work by grassroots advocates and local hemp farmers, allowed MDAR regulated hemp producers/farmers to sell their products into the CCC supply chain (either as flower or as extract).
- Expanded homegrow rights for medical patients (24 plant default cap simply by having a card) and an expanded 5:1 patient ratio for caregivers;
Also in the summer of 2020, the CCC voted to approve an expanded patient per pro bono caregiver grow ratio to a baseline of 5 patients per caregiver (with an option for those caregivers to be able to apply to grow for more patients on an individual basis). Those caregivers can grow up to 500 square feet of canopy for their patients and they will be allowed to possess unlimited clones.
Furthermore, caregivers who obtain cannabis at retail price for their patients from brick and mortar medical dispensaries are banned from receiving kickbacks from those dispensaries in any form.
At the same time, the CCC also expanded the default medical patient homegrow cap to 24 plants (12 flowering and 12 vegging plants).
Both of those changes were met with staunch opposition from industry forces, and their front groups, who fought tooth and nail in a futile attempt to force patients to purchase product from brick and mortar retailers at prices far beyond the reach of most patients.
Every single time a pathway is provided for patients to pay less for their medicine than is charged by brick and mortar retail stores, those corporate interests attempt to attack/undermine the proposal solely to protect their profits. The CCC deserves credit for seeing through those attacks and moving forward with an expanded patient:caregiver ratio and an expanded medical patient homegrow limit.
- Preventing MSO's from using medical license deverticalization to undermine single-entity license caps;
Also in the summer of 2020, medical retailers attempted to subvert the regulatory revision process by silently pushing to break up the existing vertically integrated format for medical licenses. While there is near unanimous agreement that vertical integration is a product of a bygone era and should be removed, the CCC general counsel was quick to point out that attempting to change that structure via regulations would have allowed medical operators to violate existing state-level license caps designed to prevent a single entity from owning/controlling more than a specific number of licenses (which, in turn, is crucial as to warding off oligopolies/monopolies).
Because the general counsel brought up that concern, the CCC did not move forward with a regulatory change to break up vertically integrated medical licenses. Over the past two years, lawmakers also rejected a bill that would have broken up those licenses. As a result, when this issue comes up again (as discussed in depth below) there are a number of issues related to equity and those license caps which must be addressed if it is to move forward as a regulatory revision (rather than a change to existing statute).
State Senator Sonia Chang-Diaz speaks during a Senate debate on bill S.3096; Chang-Diaz, as Co-Chair of the Joint Cannabis Policy Committee, helped to steer passage of the omnibus cannabis equity reform legislation through the complex legislative process on Beacon Hill.
In that regard, when thinking about the outstanding policy issues that will come up over the next few years, it becomes quite clear why some of those large corporate operators have been deploying bought-and-paid for agents in order to sew division within grassroots organizations/movements in the hopes that victories of yore will not be repeated yet again.
Some of those changes that I think could be beneficial are as follows (sorry, no subheadings this time);
- The importance of amending existing social consumption regulations to prevent that license format from becoming another "Courier Delivery Model", wherein profits from the operation are mainly funneled to existing brick and mortar retailers. As things stand, those regulations would ban outside products from being brought in to such establishments, allow for only vaping/the service of shelf-stable edibles and would require full METRC compliance.
- Creating the policies/procedures which will effectuate the implementation of the social equity loan fund, including who will qualify for those 0% loans, how the application process will work, how loan forgiveness will work, how much each grant/loan will provide, etc.
-Ensuring that the new municipal equity mandate placed on local cities and towns as to the way they go about licensing applicants is also effectively implemented. Specifically, ensuring that existing medical operators are not allowed to partake in local equity priority periods for adult use licenses if those medical operators are not owned by an SE or EE applicant (as one such medical operator attempted in Cambridge).
- Ensuring that any attempt at breaking up vertically integrated medical licenses is done with an aim of 1) preventing existing medical operators from using deverticalization to undermine existing license limits imposed on ownership groups/investors and 2) making sure that the structures for equity that are created in the medical market go beyond those that exist for the adult use program (as equity license priority for adult use licenses applies only to delivery and social consumption, which are rendered moot in the medical context as existing retailers can already deliver medical via an endorsement).
- Ensuring that existing language in the enabling statute related to the CCC engendering the participation of local farmers in the adult and medical use industry be codified in the form of a regulatory program specifically for those individuals. A schedule f requirement for craft co-op licenses (a license type that is on the whole not viable in the Commonwealth) is not nearly enough when it comes to ensuring farmers are participating meaningfully in the adult use market and there can (and should be) an initiative akin to the social equity program specifically for farmers (including all of the license review/priority benefits that would come along with that status).
- Removing the Massachusetts Patient Advocacy Alliance (MPAA) from the CAB. There is no reason that a group taking money from large corporate operators, who has opposed equity proposals on multiple occasions in the past, should have two lifetime appointments to the CCC's advisory board. State law can, and should, be updated to remove that group from any involvement with the regulatory process due to their pattern of equating the profits of their dispensary clients with "patient access".
- Expanding oversight of the relationship between retailers and courier delivery companies, to ensure those courier companies are not signing silent "management agreements" with large operators in violation of existing ownership/control regulations. Doing so will ensure that any changes made to increase the financial viability of delivery companies (such as removing the 2 driver requirement or allowing adult use delivery in all cities/towns state-wide) will benefit equity delivery companies rather than the long-term interests of large corporate firms.
- Expanding oversight of testing laboratories and sample collection to ward off conflicts of interest and protect consumer health/safety. There is no reason that companies should be able to manipulate the testing process to sell product that is either contaminated, stripped of trichomes or subject to results-inflation and a state standards lab (that sets standards for every lab in the state but does not serve a commercial purpose) will be crucial to fixing that sordid state of affairs.
- Ensuring that Veterans are able access medical cards based on their existing VA paperwork/relationship with a VA doctor instead of having to pay upwards of hundreds of dollars per year to for-profit card mills. This proposal, which should have become law last year, was attacked by MPAA and Dr. Jordan Tishler (who makes money selling medical card recommendations) and thus will need to be taken up again during the next legislative session.
With so much work to be done, and so much momentum behind this community, I am fully convinced the possibilities for positive reform are endless so long as the grassroots in this state can continue to insulate itself from insidious corporate actors/front groups during the regulatory drafting process.
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By: Grant Smith Ellis
Wed 7 September 2022 7:30AM ET
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