Cannabis and the 2020 elections
Next month, five states will vote on seven election measures to legalize cannabis. A variety of proposals, including constitutional amendments, legislative initiatives, and alternative measures, could create new markets for medicinal cannabis in two states and extend legalization to legalize adult use in four states. Three of these proposals would enshrine cannabis possession and use in state constitutions.
This article examines the proposals themselves, as well as the short-term effects of legalization on existing licensees and the industry.
State to state verification
Arizona voters have another opportunity to legalize cannabis next month after narrowly disregarding adult use legislation four years ago. In recent years, the copper state medical cannabis market has seen a significant expansion of MSOs, and new mandatory testing requirements were introduced in early November.
There are currently around 150 medical cannabis licenses in the state, all of which would have priority in the application process for licensing for adult use. In addition, diversity applicants and applicants in areas where there is currently no access to retail cannabis would quickly become temporary applicants.
Prop. 207 includes local scrutiny and opt-out provisions, and a new 16% tax would divert revenue to a variety of funds while retailers could launch delivery services as early as 2023.
Mississippi could become the 34th state to legalize cannabis for medical purposes, but two competing measures create complications in the vote. A community-based campaign resulted in the placement of Initiative 65, while legislators responded with the alternative Initiative 65A.
Initiative 65 establishes a medical cannabis program that is similar to the program structure of many other countries; with clearly defined qualification requirements, ownership restrictions, taxes, registration fees and a supervisory authority – the state health department. The alternative contains no definitions and only allows smokable cannabis products for terminally ill patients, creating a highly restrictive market that requires legislation.
Earlier bills were proposed but never put to the vote – making some skeptical that anything could come from Initiative 65A at all.
Montana’s existing medical cannabis program is based on a system of caregivers who grow cannabis and manufacture manufactured products, including foods and concentrates. In addition, there are a limited number of licensed pharmacies across the state. Legalization would be a major development for Montana, which has seen multiple electoral initiatives and legislative interventions in the past few years.
Two measures have been taken: a constitutional amendment to set the age of 21 as the minimum shopping age and a measure to create a commercial market for adult use. While there is no early sales requirement, Montana companies would be the only companies able to start selling in the first year after legalization.
New Jersey voters could make history, legalize adult cannabis use, and spark a race among mid-Atlantic states to make sales first. While all of New Jersey’s neighbors have medical cannabis programs in place, none have taken steps to keep expanding. In the last few years, numerous regional legislators have tried to legalize, and Public Question 1 could make the difference for an entire region of over 50 million people.
The text of the amendment is short but gives a definition of “cannabis” and allows adults aged 21 and over to own, use and operate the industry. The existing Cannabis Regulatory Commission would have the job of regulating the industry, but state lawmakers must first reach an agreement and pass the relevant laws.
Currently, the New Jersey medical market includes approximately fifteen licenses, including cultivation and manufacturing, and a limited number of pharmacies. The next phase for cannabis in New Jersey is uncharted territory for the time being: It is unclear whether existing licenses will get the first opportunity to serve the public.
Given delays in licensing and a slow roll-out in Illinois, litigation and delays could be in the future of New Jersey. Some analysts suggest a period of four years from change to full implementation. This can be good news for MSOs, including Columbia Care, Verano, and Acreage Holdings.
South Dakota has long been unfriendly to cannabis in all forms and has some of the toughest penalties for marijuana possession in the nation. While other non-medical states have at least approved low-THC medical hemp programs, the Mount Rushmore state hadn’t instituted a hemp or cannabis program at all until lawmakers passed industrial hemp legalization last spring.
Now the state could be the first to make history for legalizing cannabis for both medical and adult use at the same time. Two proposals are on the ballot: a move in motion to introduce a medical cannabis program and a constitutional amendment to fully legalize cannabis with provisions such as adult use, a medical program and expanded legalization of hemp.
Medical use is enshrined in both proposals, while the constitutional amendment would prevent lawmakers from engaging in legal manipulation to restrict a retail market. The constitutional amendment would create a commercial market for both adult and medical purposes. Medicinal uses would include home growing. Since there is currently no cannabis market in the state, no companies would be able to benefit from the “early sales” regulations as they do in other states.
Previously, medical cannabis programs and commercial licensing programs predated the legalization of adult use, and most of these proposals were launched through the vote. Most of the earliest states to be fully legalized did: Colorado, Washington, Alaska, Oregon, California, Massachusetts, and Nevada all first had some form of voter-approved medical cannabis laws.
However, the implementation of adult legalization has varied from state to state. In these proposals, Arizona, Montana, and New Jersey all have medical cannabis infrastructures in place, but implementing adult use will likely result in program changes.
Some legalization efforts have allowed existing medical pharmacies to start sales to adults during a late-ruling period. These companies worked according to changed compliance rules, with track-and-trace requirements and different tax rates until the legalization rules were finalized.
After Oregon voters approved legalization in 2014, the state’s medical market expanded rapidly and sales were pending. At one point, the state had more medical dispensaries than Starbucks or McDonald’s. That number later declined when companies switched their licenses.
For some states legalized this year, the transition from medicine will create challenges: product shortages, long customer lines, new tax rates, uncertainty about product offerings and testing requirements in addition to an already difficult pandemic business environment.
Overall, legalization efforts hold the promise of a significant impact on consumers and patients in Arizona, Mississippi, Montana, New Jersey, and South Dakota. It is difficult to quantify the short-term improvements for consumers and industrial companies as the adoption of these initiatives over the holidays and spring will spark a flurry of legislative and regulatory debate. Existing licensees and hopeful applicants should be on the lookout for new opportunities: public comment deadlines, application deadlines, and new sales opportunities on the horizon.