Mid-Year 2022 Cannabis Industry Updates: Northeastern United States

So far this month we’ve covered what’s happening in the U.S. cannabis industry in the western states, midwest, and southern states, as well as five states that are rolling out medical programs in the first seven months of 2022. This week we’ll be diving into updates from the Northeastern States with a future article on International Markets.

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Connecticut

With adult sales expected to begin before the end of 2022 (although many people question the feasibility of that start date), the state lottery received more than 37,000 license applications for 56 adult-use cannabis licenses in the first half of the year. The state will have eight types of licenses for the adult-use program, and the number of licenses awarded for each type will be divided equally between general applicants and social justice applicants.

The first step to obtaining a social equity license in the Connecticut adult cannabis market is to have an application approved by the Social Equity Council, which certifies that the applicant meets the requirements for obtaining social equity status.

In July, Connecticut’s Social Equity Council recommended that 16 of the 41 Social Justice applicants for cultivation licenses move to the next stage of the permitting process, and within a month multiple lawsuits were filed by 16 applicant companies that failed to obtain Social Justice permits for the cultivation. In addition, five retailer applications for Social Justice status were approved.

The state also approved four delivery service applications, two microcultivator applications, two product packager applications, and one retailer application on August 19, 2022. These applicants are screened by the Department of Consumer Protection before they are granted licenses.

Maine

The big news from Maine for the first seven months of 2022 came in August, when a federal appeals court ruled that Maine’s law requiring medical cannabis business owners to be residents of a state violated the U.S. Constitution. Barring an appeal, Maine will have to drop the residency requirement for its medical cannabis program — something it has already done for its adult-use market after a separate legal challenge.

Interestingly, both lawsuits challenging residency requirements for license holders in Maine’s medical and adult markets were served by Maine-based Wellness Connection. The current case was originally filed in 2020 when Wellness Connection (owned by Maine residents) was looking to sell its company to High Street Capital Partners, which is affiliated with Acreage Holdings, a multi-state operator based in New York .

The Federal Court’s ruling in this case sparks much discussion about cannabis and interstate commerce. The court’s decision indicated a violation of the US Constitution’s dormant commerce clause, which has long been the focus of debates over whether or not prohibiting interstate commerce in the cannabis industry is legal.

Massachusetts

Major changes were made to reform Massachusetts’ cannabis program, which previously made it difficult for small businesses to compete with big corporations and their deep pockets. Governor Charlie Baker signed a bill into law in August 2022 giving the Massachusetts Cannabis Control Commission the power to disallow or approve local impact fees, which have been a source of corruption and racketeering for years.

The new law also paves the way for consumption lounges in Massachusetts and creates a Social Justice Trust that will direct more federal money towards grants and loans to cannabis entrepreneurs harmed by the War on Drugs.

New Hampshire

Despite the fact that 74% of New Hampshire voters support adult cannabis legalization, the state Senate voted again in April against a bill that would have legalized cannabis for adults 21 and older and created state-operated cannabis stores. The Senate also voted against a bill that would have allowed home cultivation, and earlier this year a Senate committee rejected a bill that would have legalized cannabis possession.

New Jersey

Legal adult cannabis sales began on April 21, 2022 in New Jersey, and 12,438 customers purchased approximately $1.9 million worth of cannabis products that day. The state’s vertically integrated recreational cannabis market has opened with 13 retail stores statewide owned by seven existing New Jersey medical cannabis licensees. Each of the approved licensees is a Multistate Operator (MSO), including Acreage Holdings, Ascend Wellness, Columbia Care, Curaleaf Holdings, Green Thumb, TerrAscend, and Verano Holdings.

Nearly 130,000 medical cannabis patients are registered in New Jersey, and between April 21 and June 30, 2022, adult cannabis sales reached nearly $79.7 million. Throughout 2022, a widespread concern was whether permitted license holders would be able to meet supply demand for both the existing medical cannabis market and the emerging adult-use market.

new York

In 2022, New York became the first state to allow licensed cannabis growers to apply for and receive conditional cannabis cultivation licenses before anyone else. The conditional license would help avoid bottlenecks when the market for adult use launches later this year or early 2023. By mid-July, the total number of licensed cannabis growers for adult use rose to 223.

A month later, the New York City Bureau of Cannabis Management announced that applications for Social Justice retail licenses would be accepted between August 25 and September 26, 2022. These conditional retail licenses for adult use are only granted to qualified Social Justice applicants. General applicants who do not meet social justice requirements cannot apply for these retail licenses.

Both hemp farmer cultivation licenses and retail social justice licenses are issued before applications are accepted from general applicants under the state’s Seeding Opportunity Initiative.

Pennsylvania

Medical cannabis companies had a big win in June 2022 when a Pennsylvania judge ruled they could start selling vape products again after being recalled by the state Department of Health and Human Services in November 2021. The state plans to appeal, but the Department of Health can no longer prevent license holders from distributing the vape products recalled four months earlier.

Medicinal cannabis growers didn’t get similarly good news in the first seven months of 2022. In July and August, two independent growers, Hanging Gardens and Calypso Enterprises, laid off about 50% and 75% of their workers, respectively. Both companies cited the Department of Health’s ineffectiveness in enforcing rules in the state’s medical cannabis program as a cause that has allowed anti-competitive practices to flourish and monopolies and oligopolies to flourish.

Adult cannabis use has seen little movement in Pennsylvania so far in 2022. The state’s Senate Law and Justice Committee held three hearings on cannabis legalization, but that’s about it. However, it is worth noting that these were the first hearings on adult cannabis use ever held by a legislative body in the Pennsylvania General Assembly.

Rhode Island

After approval by the Rhode Island Senate and House of Representatives, Governor Dan McKee signed the Rhode Island Cannabis Act into law on May 25, 2022, legalizing cannabis in Rhode Island and authorizing a regulated, taxable cannabis program in the state.

Existing medical cannabis dispensary license holders may obtain hybrid medical/adult use licenses and begin selling cannabis for adult use on December 1, 2022. In addition to the existing medical cannabis dispensaries, 24 new retail licenses will be issued for adult use in six geographic areas.

The 60 medical grow license holders in good standing in Rhode Island are each granted a license for adult use. In addition, the state will stop issuing new cultivation licenses for two years after the rules for the adult-use program are finalized.

Vermont

The first cultivation license in the Vermont adult market was awarded in May, and seven additional cultivation licenses and two testing laboratory licenses were approved through early June. The first licenses were granted to existing medical license holders and applicants for social justice or economic self-determination.

As of August 23, 2022, Cannabiz Media is tracking 160 active licenses across the Vermont supply chain. Adult cannabis sales are expected to begin October 1, 2022 in Vermont.

The central theses

The adult cannabis market in the Northeast is set to grow exponentially over the next six to 12 months. Of the nine states discussed above, only two will not have a functioning adult cannabis market by this time next year. Some of the adult-use programs in these states are more restrictive than others, but the lack of legal recreational cannabis markets in New Hampshire and Pennsylvania directly conflicts with voter preferences. Hopefully, lawmakers in both states will catch up with their constituents in the near future.

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