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

"I am determined to put an end to predatory lending practices in the industry and commit to use all of the resources available to the Commission to do so...", said agency Chairman Steve Hoffman at Thursday's public meeting, during which a number of other topics (including social consumption, impaired driving, and potential future regulatory revisions) were also discussed.

Massachusetts Cannabis Control Commission Chairman Steve Hoffman Speaks on Thursday Evening

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.

"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.

Commissioner Kimberly Roy Sponsored a Commission Policy Statement (final version above) on impaired driving at Thursday's meeting

Other updates from Thursday's hearing;

Impaired driving:

In a somewhat contentious policy discussion surrounding impaired driving, that saw extensive back and forth between Commissioners and an exhaustive drafting process resulting in a seemingly ambiguous set of instructions to lawmakers, the CCC's newly created formal process for outreach to Beacon Hill was tested to its limits -- with potentially dangerous stakes at play on all sides.

One voice in the discussion, Commissioner Kimberly Roy (appointed to the Commission's public health seat by Governor Charlie Baker in July of 2021) has been making a push in recent months to encourage lawmakers -- and her fellow Commissioners -- to support policies that would increase penalties and enforcement against those driving impaired while under the influence of THC.

Pointing to statistics during Thursday's public meeting indicating an increase in fatal car crashes in 2021 as compared to the year 2020, along with research from local medical schools pointing to an uptick in impairment as a factor behind fatal car accidents, Commissioner Roy encouraged her colleagues to vote in support of a policy proposal that would have read as follows;

"The Commission supports legislation that aligns laws against the operation of motor vehicles while under the influence of alcohol with cannabis and other drugs. The Commission further recognizes the need to protect civil rights and for advances in technology to accurately assess cannabis impairment."

However, after feedback from fellow Commissioners Nurys Camargo and Ava Conception -- indicating their serious reservations with any enforcement mechanism related to impaired driving that did not take into consideration potential racial/gender disparities in that enforcement and that did not also take into account the current lack of technology of any kind to measure active impairment based on the presence of THC in the body -- Roy's initial proposal was amended.

As a result, the proposed policy position was updated to the following language (which passed by a vote of 5-0);

"The Commission supports legislation that strengthens laws against the operation of motor vehicles while under the influence of alcohol, cannabis and other drugs. The Commission further supports legislation that protects civil rights, racial justice, data collection on gender and race that ensures equitable enforcement of the law, and advances in-science-based technology needed to accurately assess cannabis impairment."

However, upon a closer examination of that syntax, the Commission's internal divisions on the issue become quite clear...a feeling only further exacerbated later on Thursday evening when Commissioner Ava Conception told reporters that, despite voting in favor of the policy proposal, she did not actually want lawmakers to move forward with an impaired driving bill this legislative session;

"My concerns are about getting it right, not about the if this is something that takes beyond this session to really get some actual science behind it, to make sure we're getting the data provisions that are important, then so be it..." said Conception.

"The reality is the science is not there, we do not have until we do, how can we act? How can we create a mechanism that is able to determine impairment levels without even having that available?" she asked.

Lawmakers on Beacon Hill will need to report on a number of impaired driving bills before the committee deadline of February 2nd, and this issue will be one watched closely as the legislative session progresses.

Social consumption:

Three years after the agency initially approved regulations governing social consumption lounges, the CCC on Thursday approved a policy statement encouraging lawmakers to formalize a procedural change to state law that is needed before a small group of local cities and towns may opt-in to an existing Commission pilot program governing the long-delayed cannabis cafes.

The language, approved following a 4-1 vote, is as follows;

"The commission supports the adoption of a technical amendment to MGL Chapter 94G that will allow for a process for the municipal adoption of social consumption licensing."

Commissioner Roy was the only Commissioner to vote no on the proposal, arguing that current OUI laws should be updated before the technical fix needed to implement social consumption is implemented.

For some Commissioners, however, the issue of social consumption is tied to equity; like delivery licenses, social consumption licenses may only be issued to companies 51% or more owned and controlled by an social equity or economic empowerment applicant.

As a result, a failure to move forward with the technical changes needed for towns to opt-in to existing social consumption regulations undermines market access for those equity companies.

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 with
in 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 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.

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