CCC Sets the Table for Vote on Proposed Regulatory Changes

On August 28, 2020, the Cannabis Control Commission held a meeting to discuss the public comments on proposed amendments to the Commission’s adult-use and medical marijuana regulations.  By way of background, the Commission posted draft regulatory amendments in late July, hosted a public hearing on the amendments on August 3rd and accepted written public comments on the amendments until August 15th.  Since the 15th, the Commissioners and staff have reviewed all of the public comments and considered whether any warranted reconsideration of, or changes to, the amendments.

Chair Steven Hoffman summarized the agenda and explained that the Commissioners would discuss 17 topics which received the most attention in the public comments.  These 17 topics included widely-followed issues such as: 1) whether the proposed new definition of Economic Empowerment Applicant (“EEA”) should continue to require that applicants meet at least one of three “majority ownership” criteria in order to qualify as an EEA; 2) whether the regulations should be clarified to expressly permit licensees to share space with other licensees; and 3) whether the Commission should promulgate new regulations to remove the vertical integration requirement for MTCs.

Introducing the Commission’s discussion on the new definition of EEA, Chair Hoffman remarked that many public comments expressed consternation over the requirement that EEAs demonstrate and continue to meet at least one majority ownership criterion.  In particular, the public comments argued that requiring EEAs to meet (and continue to meet) one of the majority ownership requirements would be a constraint on entrepreneurs seeking to raise equity financing and grow their businesses.  None of the Commissioners were persuaded by these public comments and the Commission declined to revisit the amendment to the definition.

Later, a robust discussion arose around the issue of space sharing.  In response to public comments highlighting the ambiguity within the current regulations, Commissioner Shaleen Title confirmed that the current regulations do not prohibit licensees from sharing space, provided that any applicable security regulations are complied with.  Although the remaining Commissioners agreed with Commission Title’s characterization of the current regulations, discussion then shifted to the question of whether the Commission should promulgate new regulations expressly permitting space-sharing, or whether the Commission should issue guidance clarifying that the current regulations do not prohibit space-sharing.  Executive Director Shawn Collins then commented that, at this point, the discussion of the topic was purely academic because the burden of proving that a space-sharing arrangement could comply with the regulations is squarely on applicants.  To date, no applicant has proposed such an arrangement in an application for licensure.  Ultimately, the Commission declined to take any action in response to the public comments.

Finally, the Commission discussed extensively the possibility of “disintegrating” the Commission’s existing requirement that all MTCs be vertically integrated.  Informing this conversation was a memorandum, recently made public in response to a public records request, drafted by former Commissioner Kay Doyle and a writing group of Commission staff.  The memorandum described a framework for this “disintegration” concept whereby MTC applicants could apply for endorsements for specific activities such as retail, product manufacturing and cultivation.  Although each Commissioner acknowledged urgency to reform the regulations to permit MTC disintegration, most were highly skeptical that Commission staff would be able to develop a thorough and cogent plan for inclusion in this round of regulatory changes.  Comments from Director Collins provided support for that collective concern.  He noted that, although his staff could get it done, it would be at the expense of other priority initiatives of the Commission.   Therefore, despite the Commissioners’ overwhelming support for the concept, they declined to take affirmative action at this time.

The Commission has tentatively planned to hold a vote on the proposed regulatory amendments on September 24th.  We will be sure to follow those proceedings and provide key updates.

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