BOSTON — Cannabis business owners and industry groups are raising concerns that new regulations would benefit big businesses while leaving behind social equity operators disproportionately impacted by marijuana prohibition and enforcement.
In June, the Cannabis Control Commission sped up its regulatory process by adopting emergency regulations to meet a deadline in a new state law overhauling the state’s marijuana industry. The regulations, which went into effect immediately under the emergency process, raise the cap on the number of licenses cannabis retailers can hold from three store licenses to six. Within the first 12 months the policy is in place, only social equity businesses are eligible to get six licenses and non-social equity businesses can hold up to five. Also, the amount of financial interest someone can hold before it is counted toward the license cap was raised from 10% to 20% – as long as the licensee doesn’t have direct or indirect control of the business.
Lawmakers rallied around the new law to address the industry’s evolving needs and to support businesses – particularly social equity operators.
Not everyone sees it that way.
Tremana White, an entrepreneur who said she has close ties with the cannabis community, said raising the equity cap from 10% to 20% is “exactly the kind of hidden control gap that lets consolidation happen quietly.”
“While it still looks like compliance on paper, the people of Massachusetts, I count myself among them, want the state to represent citizens, not corporations,” White said during a public hearing the CCC held on the regulations on July 30. “That’s not a slogan. That’s the standard I’m asking you to hold this policy to.”
White asked commissioners to take several steps to address her concerns with the new regulations, including: reviewing how raising the retail license cap affects equity and competition in the market; requiring more transparency about cannabis investors and financial arrangements; auditing the ownership and control of cannabis businesses in the state; opening a protected and anonymous complaint portal so social equity licensees and workers can share concerns; and investing in public data reporting so there’s a clearer picture of how equitable the state’s marijuana industry is.
Kevin Gilnack, deputy director of the cannabis advocacy group Equitable Opportunities Now, said many within the industry had expressed opposition to raising the license cap and asked commissioners to consider social equity businesses while implementing new policies.
“Chapter 65 is a significant change in the market and the CCC has an important opportunity to make sure that the additional access to capital that it may provide doesn’t lead to accelerated consolidation and control or predatory financing,” Gilnack told commissioners, referring to the chapter assigned to the new state law.
Gilnack outlined requests for commissioners including an equity and competition review for any fourth, fifth or sixth retail license issued. Gilnack also said commissioners should require more robust disclosures to shed light on how much someone is financially involved within a company that isn’t shown through their equity stake.
Gilnack said the 12-month exclusivity period for social equity licensees should be the floor. He suggested that, at minimum, social equity licensees should be the only ones allowed to get six retail licenses until both the 12-month period has passed and at least three independent social equity businesses get their sixth license. That’s to help ensure the “opportunity that was contemplated by the Legislature is actually meaningful for people seeking to take advantage of it,” he said.
Lucas Thayer, who holds a provisional social equity license, said “it’s kind of absurd to even suggest that a social equity operator would ever have enough money to open six stores” because many are struggling to get the finances to open a single store.
“There are no social equity operators now that have three stores, and there are certainly no social equity operators successful enough that have aspirations to open six stores,” Thayer told commissioners.
Ryan Dominguez, executive director the Massachusetts Cannabis Coalition, said there’s more interest in Massachusetts’ marijuana market from investors and bankers as a result of the raised caps on equity and retail licenses. Dominguez said the group advocated for those policies to be included within the legislation to help businesses that are struggling to stay afloat.
“And as you’ve heard, you know, the access to capital is probably one of the hardest things for people to either get across the finish line to open or to remain financially viable and potentially scale up. So these two things, in conjunction, were different policies that we thought would help bring new investment into Massachusetts,” Dominguez told the CCC.
Dominguez said the higher cap for retail licenses isn’t necessarily encouraging businesses to hold six licenses, but exposes them to other opportunities to stay more financially sound like mergers. Dominguez also encouraged the CCC to audit and review whether businesses are following ownership and control limitations.
The law directs the CCC to create an online anonymous portal for complaints about suspected violations of the law or commission regulations. Also, the law gives the CCC a 12-month deadline to conduct an audit on how establishments have followed the ownership and control limits. The CCC has 18 months to file a summary of the audit with the Legislature
Under the CCC’s emergency regulation process, the policies will remain in effect for three months while commissioners complete a public comment process, according to a CCC press release. Complying with the requirements for soliciting public feedback makes the regulations permanent.