Massachusetts Cannabis Control Commission Chairman Steve Hoffman Encourages Lawmakers to Thwart Targeted Predatory Lending Practices by Passing a Social Equity Loan/Grant Fund, Agency Also Asks Lawmakers to Take Action on Impaired Driving and Social Consumption at Monthly Public Meeting

In a sprawling, and at times contentious, eight-hour hearing on Thursday the Massachusetts Cannabis Control Commission (CCC) reinforced its commitment to preventing predatory lending in the industry directed at equity companies, encouraged lawmakers (again) to pass a social equity loan-fund in order to assist in those efforts, voted in support of a sweeping policy proposal related to encouraging legislative action on impaired driving (but only if that action is commensurate with protecting racial justice and in-line with necessary advances in science needed to identify active impairment from THC) and moved forward with language asking lawmakers to allow local cities and towns to opt-in to a social consumption pilot program that already exists under current regulations.

To begin the meeting, CCC Chairman Steve Hoffman read aloud a statement regarding predatory lending practices targeting equity companies (those companies owned by individuals impacted by the drug war), raising concerns about specific contractual arrangements he said were not in line with agency regulations regarding ownership and control over individual licenses;

"The proposed terms that I have seen include forced sales once the [equity] exclusivity period has ended, control over decision making and the hiring of key personnel, and cash distributions significantly disproportionate to stated equity ownership..." said Hoffman.

To address those issues, the Chairman noted the agency would be willing to "use all of the resources available" to prevent such abuse, including investigations during the licensing process (the agency also provides an extensive list of "red-flags" it encourages equity companies to keep on the lookout for during the investment process).

However, noted the Chairman, there was also a recognition that some applicants felt they had no where else to turn (even if the terms being offered by predatory lenders are in violation of the law);

"In that context", said Hoffman, "I respectfully again implore the legislature to take action to create a public source of funding for these deserving entrepreneurs."

A bill (S.63) under consideration on Beacon Hill, due to be reported out of the Joint Committee on Cannabis Policy before February 2nd of this year, would do just that; a portion of existing tax revenue collected under the adult use program would be set aside for the purpose of creating no-interest loans (including forgiveness provisions) for equity companies seeking to operate in the market sector.

Multiple other states, including New York and Illinois, are already using their adult use tax resources to help equity companies obtain crucial funding during the application process in the absence of more traditional lines of financing.

Screenshot of a CCC memo to equity companies indicating predatory investment practices of which to be aware

"I constantly get emails with details of terms that are being proposed to equity applicants," Hoffman told reporters after Thursday's meeting. "The parties are not referenced, but the terms of the contact are referenced...and it continues to be egregious in my opinion."

By passing an equity loan fund, many advocates contend, such predatory contracts would be rendered obsolete.

Time, however, is of the essence; with a limited window (36 months, at minimum) of equity priority for a new class of adult use delivery licenses, the longer lawmakers wait to provide that funding the more companies will fall victim to deals which fundamentally undermine ownership and control limits designed to keep the playing field level and open to smaller operators state-wide.

A CCC overview of the history of social consumption, including the timeline which resulted in the need for a change in the law to allow local cities and towns to opt-in to the already existing social consumption pilot program under 935CMR500.141.

Telehealth for initial medical card appointments and curbside pickup (for medical retailers only) extended until June of 2022;

In a pair of 4-1 votes (with only Chairman Hoffman voting against) the CCC extended the ability of certifying healthcare providers to seek waivers from Executive Director Sean Collins in order to certify first time patients via telehealth and extended the ability of medical retailers (but not adult use retailers) to continue curbside pickup operations, both until June of 2022.

Chairman Hoffman, for his part, noted his objection to the changes taking place via a delegation of waiver authority to the Executive Director, stating he, instead, felt the changes should have taken place via a change to the agencies regulations themselves.

Regulatory revision;

In the latest installment of a long-simmering back and forth between Chairman Steve Hoffman and, well, basically all of his colleagues the Chairman once again raised the issue of a potential regulatory revision to begin over the course of the coming months.

This issue of another round of regulatory changes, initially brought up by the Chairman in the fall of 2021, has resulted in push-back from fellow Commissioners (including Commissioner Camargo and Commissioner Conception), who have long expressed concerns over the internal process governing such a regulatory revision and the impact that multiple rounds of regulatory changes could have on smaller operators in the market sector (who do not have the resources, per se, to be able to respond to a rapidly changing set of regulatory standards every few years).

From the Chairman's perspective, another targeted round of regulatory revisions is needed to address gaps in the agencies rule making authority that are currently being addressed via sub-regulatory guidance documents and waivers (such as recent changes to guidance regarding the sale of finished hemp product and hemp extract into the CCC supply chain). The Chairman also argued that any regulatory review process that begins now would also not conclude until, at the earliest, the end of 2022 or the beginning of 2023 (also of note, the Chairman's term, barring a reappointment, ends in September of 2022).

Other Commissioners, including Ava Conception, do not share the Chairman's perspective;

"What I don't want to happen, for one, is that we're changing this so frequently...that people are unable, or have some problems, complying and I think that [frequent changes to the regulations] are going to be incredibly detrimental to the mom and pops or the smaller establishments, or our equity participants, so that is a major concern," said Conception after Thursday's hearing.

Commissioner Conception went on, "...there are also so many things that happen within our agency daily and every month the staff here is trying to sift through all of the different applications and trying to ensure they are responding and corresponding with different people who need those services...so how do we create a process [for a regulatory revision] that doesn't completely dismantle the ongoing work and functionality of the agency while also addressing some of the needs that might need to be changed?"

At the conclusion of their discussion regarding a potential regulatory revision, Commissioners agreed to revisit the process portion of the deliberations at either the February or March meeting of the agency -- a special meeting, specifically for the purposes of discussing the processes in place related to regulatory revisions, is also on the table for consideration according to remarks during Thursday's meeting from the Chairman after a suggestion from Commissioner Roy.

Record number of renewal applications approved:

In a moment for someone's records books (although perhaps only my own) today the CCC broke its own previous record for the most license renewal approvals during a single meeting with 117.

Kudos to agency staff for processing what, I am certain, amounts to metric tons worth of paperwork in the preparation for each monthly meeting.