Today is April 28, and Texas and Florida both accepted the expected dozens of applications for a limited number of medical cannabis licenses in those respective states. In the background, Kentucky recently legalized medical cannabis, while Delaware will soon welcome adult use sales. It looks increasingly likely both states will follow the example of other capped license jurisdictions and hold merit-based application sweepstakes to award a set number of licenses. While they won’t attract the attention of the population behemoths, Texas and Florida, these new laws ensure another new-state expansion opportunity through competitive licensing is on the horizon. We summarize the two new state laws below. Welcome Kentucky and Delaware!
On March 31st Gov. Andy Beshear signed a law, making Kentucky the 38th state to legalize medical cannabis. Senate Bill 47 passed the Kentucky House by a bipartisan 66-33 vote. The Kentucky House had been able to pass medical cannabis bills two out of the last three years, but it would continually die in the Senate due to lack of support. This year the Kentucky Senate was able to draft and later pass SB 47 on a 26-11 margin.
Under SB 47, The Cabinet for Health and Family Services (The Cabinet) would be responsible for the implementation, operation, oversight, and regulation of the medical cannabis program. This includes setting licensing requirements for cultivators, producers, processers, and dispensaries. SB 47 states that the Cabinet for Health and Family Services shall create licenses that fall under the following categories:
- Tier I Cannabis Cultivator: indoor growth area maximum of 2,500 square feet.
- Tier II Cannabis Cultivator: indoor growth area maximum of 10,000 square feet.
- Tier III Cannabis Cultivator: indoor growth area maximum of 25,000 square feet.
- Tier IV Cannabis Cultivator: indoor growth area maximum of 50,000 square feet.
- Cannabis dispensary.
- Cannabis processor.
- Cannabis producer.
- Cannabis safety compliance facility.
The law provides that The Cabinet is tasked to provide a yearly assessment of “the effectiveness of the cultivators, processors, and producers licensed under this chapter, individually and collectively, in serving the needs of processors, dispensaries, and cardholders… and the sufficiency of the number operating to serve processors, dispensaries, and cardholders in the Commonwealth.” This leads us to surmise there will be a limited number of licenses, but we’ll see the particulars.
A medical cannabis business is required to have a separate license for each location it intends to operate. One exception is a producer is allowed to have cultivation and processing activities occur at separate locations but can only operate one cultivation and one processing facility per license. Licenses are only valid for a year and The Cabinet will notify licenses to renew 90 days prior to the expiration date of the license. The Cabinet is required to acknowledge that an application was received within 15 days of receiving the application and must approve or deny an application within 45 days of receiving a completed application.
The Cabinet will create the application for a license. However, SB 47 states that the following must be included, the proposed business legal name and address, the name, address, and date of birth for each principal officer and prospective board member, and any instances in which the business or not-for-profit entity that any of the prospective board members managed or served on the board of was convicted, fined, censured, or had a registration or license suspended or revoked in any administrative or judicial proceeding. A medical cannabis practitioner cannot serve as a principal officer or board member of a proposed cannabis business. The proposed cannabis business can also not be within 1000 feet of a school or daycare center. The Cabinet can require additional information and has been given power to promulgate administrative regulations to implement and run the medical cannabis program.
To be eligible for medical cannabis patients must have one of the six listed medical conditions, which are:
- Any type or form of cancer regardless of stage.
- Chronic, severe, intractable, or debilitating pain.
- Epilepsy or any other problematic seizure disorder.
- Multiple sclerosis, muscle spasms, or spasticity.
- Chronic nausea that has proven resistant to other treatments.
- Post-traumatic stress disorder.
Patients could also be considered eligible if diagnosed with a medical condition or disease for which The Kentucky Center for Cannabis at the University of Kentucky determines cannabis use could be beneficial.
Cardholders would be required to be at least 18 years old. For anyone who is eligible but younger, there must be a designated caregiver. The medical cannabis will only be available for consumption through vaporizing, or edible and topical products. There will be a 35% THC cap on flower cannabis products and there will be a 70% cap for concentrates. Additionally, edible products are capped at 10 milligrams per serving. Patients will be permitted to possess a 10-day supply of cannabis on their person and a 30-day supply at home. Under the bill, Kentucky’s medical cannabis program is slated to launch by January 2025.
The Delaware legislature recently passed companion bills that would legalize adult use of marijuana in the state and authorize the establishment of a state licensed and regulated marijuana industry. The adult use bill (House Bill 1) passed the Delaware Senate by a 16-4 margin. This would allow for personal possession by individuals 21 and older for up to one ounce of marijuana flower or an equivalent amount in other forms. The industry creating bill, known as the Delaware Marijuana Control Act, passed the Delaware Senate by a 15-5 vote. It would create a regulatory framework to establish a legal recreational marijuana industry. A Marijuana Commissioner position would be established, and this person would license, regulate, and inspect marijuana businesses. Some relevant provisions include:
- A 15% tax on sales.
- 30 retailer licenses: 15 for social equity applicants and 15 open licenses.
- 60 cultivator licenses: 20 for microbusinesses, 10 for social equity applicants with grow area less than or equal to 2500 square feet, 10 for social equity applicant with grow areas more than 2500 square feet, and 20 open licenses.
- 5 testing licenses: 2 for social equity applicants and 3 open licenses.
- 30 manufacturer licenses: 10 for microbusinesses, 10 for social equity applicants, and 10 open licenses.
Applications for licenses would open 13 months after the Act’s effective date. Licenses would be issued in phases starting with 15 months after the Act’s effective date for cultivation licenses, 16 months for manufacturing licenses, and 19 months for retail licenses and testing. All licenses would last for 2 years.
The Commissioner is given the power to adopt regulations for the issuance, renewal, suspension, transfer, and revocation of marijuana licenses. The Commissioner will also create a competitive scoring process that will ensure that all applicants will follow best practices for community engagement, consumer protection, food safety, workers safety, family support jobs, diversity, public safety, and environmental stewardship. The criteria will also include applicants having:
- A comprehensive business plan.
- Experience training and expertise of applicant and managing officers.
- Plans for operations, training, and staffing.
- Plans for safety, security, and prevention of diversion.
- Procedures for how to track marijuana from seed to sale.
- Requirements for storage and transportation of marijuana.
- Employment and training requirements for licensees, employees, and agents.
Open licenses must include a submission of an attestation signed by a bona fide labor organization stating that the applicant has entered into a labor peace agreement with the labor organization.
For cultivation and manufacturing licenses, the applications will need an environmental and sustainability plan, including efforts to minimize environmental impact and resource needs of the facility.
Previously, Gov. John Carney has vetoed measures of legalizing adult use marijuana citing concerns for young people and highway safety. However, he has allowed the measures to become law this time around.