Maryland’s ‘social equity’ cannabis lottery is today. Here’s how it works.

Hundreds of hopeful entrepreneurs will learn on Thursday if they’re one step closer to starting a cannabis business in Maryland, a state-regulated industry experts have estimated could take in more than $1 billion in annual sales.

Each of the more than 1,500 eligible applicants have checked all the boxes in a multistep vetting process to qualify as what’s been dubbed a “social equity” applicant for their shot at one of the 179 licenses being distributed in this first of three possible licensing rounds.

The Maryland Cannabis Administration will announce the lottery winners over a livestream scheduled to begin at 9:30 a.m. that could take between four and five hours. But to eliminate shadowy companies courting eligible people to apply for the licenses, the winners will face a second round of vetting before they’re awarded a conditional license.

Maryland Cannabis Administration Director Will Tilburg said last fall his team in the Office of Social Equity discovered straw companies attempting to apply for the licenses.

To prevent these companies from using someone else’s address and background to obtain a scarce — and potentially lucrative — cannabis business license, the Cannabis Administration will investigate the business relationships and agreements between owners and partners to ensure the social equity applicant or applicants would in fact own a 65% stake in the business.

Similar ploys have been uncovered in other states. In Missouri, a Michigan company exploited an applicant’s eligibility to win licenses in exchange for $20,000 and zero future profits from sales, according to the Missouri Independent. In Arizona, state officials are attempting to restore social equity licenses back to their original owners after large corporations preyed on license winners.

Tilburg estimated the added review will take about two months, and conditional licenses will be released on a rolling basis.

How Maryland prioritized applicants

This Maryland pool of applicants had to meet key requirements set in a law passed last year. Maryland is the first state to reserve its primary round of licenses for social equity applicants who have lived or gone to school in ZIP codes with an above-average number of cannabis possession arrests during prohibition.

Potential licensees had to prove their eligibility and fill out a series of detailed plans explaining their strategies for securing capital, staying in compliance with state regulations and showing how they will employ a diverse staff.

Last year’s cannabis law created a market for those 21 and older to purchase cannabis. Dispensaries that had been selling to medical cannabis patients were allowed to convert their licenses and began selling to adult-use customers.

The recreational market has since brought in $388.5 million in revenues for the existing dispensaries in its first seven months.

But the plan was always to expand licensing to social equity candidates soon after legalization.

The state used court data to produce a list of ZIP codes and public schools in communities with an above-average number of cannabis-related criminal charges. Nearly two-thirds of those ZIP codes were in three jurisdictions: Baltimore, Baltimore County and Prince George’s County. In addition, students who attended Maryland universities with a significant percentage of students receiving needs-based federal Pell Grants also qualified.

Applicants first confirmed their eligibility by using a portal set up by the Cannabis Administration before filling out lengthy business plans and spending anywhere from $1,000 to $5,000 on application fees, depending on the license type.

The Cannabis Administration received just over 1,700 applications by the December deadline. After weeks of reviewing the paperwork, the agency eliminated a few hundred candidates who did not meet the requirements.

The license types

There are six separate license types that allow large- and small-scale operators to make money growing, processing or selling cannabis. According to the Cannabis Administration, 873 lottery applicants applied for dispensary licenses, 449 wanted grow licenses and 192 requested processing licenses.

Lawmakers created multiple license options to ease financial barriers for mom and pop businesses:

• A business with a standard growing license, for example, can cultivate anywhere from 10,000 to 300,000 square feet of cannabis. There are 16 of these licenses that the state will distribute by region — east, west, central and southern — with four licenses to each.
• The state will give out 24 micro grow licenses across the four regions. These smaller operations can grow less than 10,000 square feet of crop.
• Processors turn cannabis plants into retail products, like edibles, cartridges, and concentrates. Standard processors can turn out more than 1,000 pounds of cannabis a year, while micro processors must stay below 1,000 pounds annually. The state will issue 32 standard processor and 24 micro processor licenses across the four regions.
• There are two types of dispensary licenses. The holder of a standard dispensary license can own and operate a bricks-and-mortar retail shop and can sell to medical and recreational customers. Of these, the state will hand out 75 by county. A micro dispensary business can sell and deliver cannabis without a physical storefront. It’s basically a delivery service, and there will be eight of these licenses across the four regions.

In a February interview, Tilburg said the success rate of over 1,500 candidates making it this far was “reflective of the work that went into setting really clear, objective standards, and to educate potential applicants on those standards.”

Tilburg said there’s “an excited, nervous energy” in his agency one day ahead of the lottery and upon reflecting on the thousands of hours of work his team and the Office of Social Equity has done to diversify the industry.

The livestream added more work for his agency, but in an industry where they are trying to build trust, he said transparency was key.

“People have waited a long time. So we wanted them to see it as it’s happening,” he said. “We recognize how much work the applicants put in and truly wish all of them the best of luck.”

Brenda Wintrode

brenda.wintrode@thebaltimorebanner.com

Brenda Wintrode covers state government, agencies and politics. Before joining The Baltimore Banner, Wintrode wrote an award winning series of long form investigations for Wisconsin Watch.

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