Cannabis on the Ballot: 2022 Edition

The national midterm elections are just a few weeks away, with a host of important races on the map. Control of Congress, nearly all state legislatures, and numerous governorships sit above a host of other hotly contested races on the ballot. Voters in some states will see voting questions — an opportunity to decide the fate of proposed initiatives or constitutional amendments, five of which could impact the cannabis industry statewide. This week’s blog will examine five voting proposals and their impact on the industry and licensing.

Some of these voting actions will impact the future of the cannabis industry. Unlike previous years (including 2016, 2018, and 2020), this year’s cannabis legalization referendum is for adult use only. These proposals would all expand existing medicinal cannabis markets.

In recent election years, the cannabis industry has faced opportunities for both adult use and the establishment of the medicinal market. Instead, numerous states could follow the same path of regulatory and licensing expansion and more opportunities for already operating companies. Let’s take a look at the approved nominations for Arkansas, Maryland, Missouri, North Dakotaand South Dakota.

Arkansas

Responsible Growth Arkansas launched a campaign now known on the ballot as Issue 4. This constitutional amendment would amend and repeal portions of the state’s Medical Cannabis Amendment ’98. Specifically, the change, if approved, would alter the number of cultivation and manufacturing licenses available – increasing the cap from eight to 20.

The first eight medicinal breeders licensed under Amendment 98 would be prioritized to receive dual licenses for medicinal and adult use. On the sales side, the state’s 40 licensed stores would be converted to medical and adult use, and each would be allowed to open a second location.

Also, another lottery would be held to award 40 more licenses, which would triple retail presence nationwide. Senior medical business owners would be licensed to operate by adults through March 7, 2023.

Additional non-medical licenses (12 cultivation/manufacturing and 40 retail licenses) will be distributed in two lotteries with a deadline of July 5, 2023.

Support for Issue 4 includes significant support from the state’s existing medical cannabis industry. According to the Arkansas Ethics Commission, at least three cannabis growers have made significant donations to Responsible Growth Arkansas, including two donations of over $1 million. Opposition groups vary, including the state’s NORML chapter, various cannabis advocates and advocates, and conservative politicians and candidates.

Maryland

Unlike the other cannabis proposals across the country, question 4 was proposed and put on the ballot by the Maryland Legislature. Echoing New Jersey’s 2020 Question 1, voters have the option to direct the legislature to do the heavy lifting and enact more legalization legislation.

Lawmakers need to think about a regulatory framework: including sales for early adult use in medical pharmacies, a licensing timeline, social justice, tax rates, and more. Once approved, medical cannabis licensees are expected to be the first participants in the state’s expanding industry.

The state legislature has already laid the groundwork for legalization with the passage of House Bill 837. The effectiveness of the bill is dependent on the passage of Question 4, which provides for further decriminalization during a period from January 1 to June 30 before Question 4 becomes effective on the July 1 date.

Supporters of the Yes on 4 campaign have submitted campaign funding reports showing limited spending, and the opposition has not submitted such a report. License holder donors include SunMed, Trulieve and Green Thumb Industries, according to the Maryland State Board of Elections.

A recent Washington Post-University of Maryland poll shows over 70% support, suggesting passage of the amendment is imminent, but the General Assembly winter session will be the real battle, as a variety of interests have input on the details deliver.

Missouri

Missouri’s Amendment 3 would impact the state’s cannabis industry by revising the previously approved medicinal cannabis voting measure, Amendment 2 of 2018. The number of licenses available nationwide would essentially double – by making the same number of licenses available for adult use – medical licensees would be “extensive” or dual-licensed.

This would happen by early February 2023, and non-medical businesses would be closed by the end of 2024 – with one exception. As a social justice provision, the authors of the amendment included language establishing a micro-enterprise licensing program. In addition to expanding medical cannabis licensing to include adult use, 144 additional micro-business licenses would be established, distributed among the state’s congressional districts. These are distributed by lottery, and some licenses would include wholesale while others would be licensed for retail.

The proposal’s top five donors include numerous Multi-State Operators (MSOs) and other license holders in the state, and their combined donations have exceeded $1.5 million.

(As an aside, on a recent episode of the Cannacurio podcast, I spoke to Cannabiz Media’s Ed Keating about microbusiness. We touched on the future of microbusiness licensing and the relationship between ancient medical programs and social justice. Keep an eye out for suggestions , corresponding to those of Missouri in future elections.)

North Dakota

Legislative Measure 2 was submitted by New Approach North Dakota (aka “Yes on 2”), whose supporters include both state cultivation and manufacturing licensees and at least one registered dispensary. There are currently only two production licenses and eight dispensaries nationwide.

If approved, legalizing adult use would increase the number of production licenses (consolidated cultivation and manufacture) from two to seven and the number of dispensing sites from eight to 18. If approved, a mandatory rulemaking phase would put licensing and sales on track for a late 2023 (Q3) rollout.

South Dakota

The group South Dakotans for Better Marijuana Laws is back for another try after a successful 2020 initiative (Constitutional Amendment A) was gutted by the state Supreme Court. The state is currently running a medicinal cannabis program, which was also approved by voters in 2020.

Initiated Measure 27 is broad in scope, including ownership and home-growing provisions, but intentionally lacks any sort of regulatory framework to withstand future constitutional challenges. Under this proposal, home growing will only be allowed in jurisdictions that do not have a retail outlet.

If approved, lawmakers are expected to introduce a bill to create a regulatory framework — possibly modeled on the state’s medicinal cannabis licensing structure. If legislators pursue this option, license caps and/or opt-outs for adult use will likely be features of a future recreational framework.

Markets in transition

The two tables below tell a story of the various license extensions. If any voting measure is approved, some states will see production licenses surge. In Arkansas and North Dakota, the number of production licenses would more than double, while those in Missouri would remain the same, allowing only existing license holders to convert to medical and adult use.

On the retail side, Arkansas would triple from 40 stores to 120, though 80 of the locations would essentially be issued in pairs due to ownership rules. The change in market size may not be enough to justify a significant increase in testing labs. Finally, the Maryland and South Dakota markets will require regulatory action prior to licensing.

Social justice is an aspect that has gained importance and weight in legislative and regulatory discussions in recent years. While most of these proposals do not include social justice provisions, the Missouri amendment leaves social justice as the only way to license new businesses, while Maryland’s enabling legislation will almost certainly include it. These developments may result in lawsuits in some states, while others have a strict launch schedule.

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looking ahead

While some of these proposals are likely to be approved in a few weeks, conflicting political polls suggest some of these electoral measures could face close races on the home stretch. Once approved and certified by voters, some of these states will require a legislative phase that will force legislatures to agree on market mechanisms.

In 2020, New Jersey residents voted to legalize it, but it took lawmakers nearly a year to introduce compromise legislation. This compares to Arizona, where residents could start buying cannabis about two months after their legalization vote was passed.

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Implementation deadlines vary. Most of the proposals will not take effect immediately, although some may take effect in December after election certification is complete. Personal ownership and home cultivation, if any, is expected to begin on the Effective Date for each state.

Sales starts vary. Two states, Arkansas and Missouri, could open first sales in existing dispensaries in the first quarter of 2023, while North Dakota would come later in the year. All of these markets, coupled with other recently legalized East Coast states, will make for a busy 2023 for the cannabis industry.