The House of Delegates on Friday passed a bill outlining Maryland’s recreational cannabis marketplace, which included key initiatives intended to boost business opportunities for communities disproportionately affected by the criminalization of marijuana.
The bill now sits before the Senate, and Democratic leaders from both houses are aligned on key provisions — dubbed “social equity” — meant to reduce barriers for low-income and minority business owners.
Speaker of the House of Delegates Adrienne A. Jones said she’s confident both chambers will continue to work together after the House voted in favor of the bill. It passed 103-32.
“I won’t take my eye off this bill until it is across the finish line, but I’m very pleased with where we are in the process right now,” Jones, a Baltimore County Democrat, said in a statement. Jones was instrumental in putting adult-use cannabis legalization on the ballot last year.
But before any cannabis shop can open its doors to recreational consumers, both chambers must agree on what to leave in and which to take out before sending the bill to the governor. And the path the bill took through the House may indicate what’s ahead.
Bill drafters prioritized getting cannabis licenses to entrepreneurs with ties to geographical areas ravaged by the aggressive enforcement of marijuana laws. They created initiatives to make it easier to get money to start a business and to send tax revenues back to affected communities.
Sen. Brian Feldman, who will usher the bill through the Senate, reminded his colleagues they must move swiftly to prop up a recreational market by July 1 if they want to crush illegal weed sales.
July 1 is the day possession and use of recreational cannabis becomes legal in Maryland for those 21 and older, after voters in November approved a constitutional amendment.
“When there are delays, the illicit market grabs demand,” said Feldman, a Democrat who represents Montgomery County. “And the legal market has difficulty getting fully back into the game.”
Feldman said that after setting up a program that “boxes out the illicit market” the social equity component is a “major centerpiece of the legislation.”
A few of the bill’s functions act as a breakwater, holding back a tidal wave of competition while new operators get up and running. Should the bill pass, medical cannabis growers, who have been in business for years, won’t be able to expand their crop beyond how big they were in October of 2022, until 2026. Feldman said he expects the nascent recreational businesses would have matured enough by then to compete.
If medical cannabis businesses want to sell a recreational product they have to pay a one-time conversion fee, the proceeds of which help startups that meet the social equity requirements. And established cannabis businesses can get some of those fees back if they offer to mentor a newcomer.
The path through the House
The House bill’s Democratic cosponsors Howard County Del. Vanessa Atterbeary and Del. C.T. Wilson, of Charles County, both Democrats, ushered the bill through their chamber with the provisions intact.
“We set it up in a very race neutral fashion, as required by the courts,” Wilson said. “But we did so being very mindful of those communities that were not only disenfranchised, but utterly destroyed by drugs and the war on drugs.”
Wilson would like to see 30% of cannabis licenses go to minority-owned businesses, he said. The state will hold two license application rounds, allowing only applicants who meet social equity requirements to apply during the first. A disparity study will determine any adjustments needed for a second round.
Wilson said he hopes his counterparts in the Senate keep the number of licenses limited.
“The reason we limited the number of licenses is so no one business can dominate this industry,” Wilson said. “The individuals from the state mom and pop stores can survive and thrive.”
The license scheme piggybacks on lessons learned during the state’s medical cannabis market rollout.
And it makes some amends to medical cannabis license holders who were never able to get off the ground. After the first round of licenses went to mostly white entrepreneurs, some minority business owners sued. The state responded by issuing another batch.
The state gave those minority business owners discounts on recreational license conversion fees. But some say the fees should be waived for this group, and they should be made eligible for the programs in the new bill.
Wilson said he spent the better part of a year drafting the legislation in anticipation of voters passing the constitutional amendment and was initially “not a fan” of legalizing cannabis.
“But I am a fan of creating equity. I am a fan of making sure that Marylanders have an opportunity to participate fairly and equally in this process,” he said.
An office tasked with recruiting eligible licensees will act as a small business consultant and oversee a $40 million loan and grant program, just to name a few of many responsibilities.
The state will also offer default protections on bank loans up to $1 million for eligible growers and processors and $500,000 for eligible dispensaries, according to an amendment.
Defending social equity
Democrats rejected Republican-led efforts to amend the bill, some of which suggested adding language back in that had been taken out.
Allegany County Del. Jason Buckel called the bill that lays out licensing, testing, oversight, taxes, minority-owned businesses and creating jobs “radical” because the state would be legalizing a federally illegal drug. Maryland is one of more than twenty states to do so in recent years.
“It’s radical in the sense that it’s something that is such a deviation from the way things have normally been conducted, that we have to be very careful about how we do it that we don’t produce unintended consequences,” the Republican said.
Then, Buckel proposed a revision that protects employers from lawsuits should they terminate an employee or contract because of an individual’s cannabis use.
“We must stress that Maryland businesses simply want access to the tools and protocols they’re already using to keep themselves, their employees and their customers safe,” he said.
Wilson said employers have not lost their rights to enforce company drug policy or keep themselves and customers safe. The language was removed, he said, because “this is a licensing bill.”
As Republicans wagged fingers during a House debate at state-sponsored business grants and the loan loss reserve funds meant to undergird social equity entrants, Wilson defended the financial assistance.
Wilson explained that bolstering legal businesses deters the illicit market.
“Whether you like marijuana or not, it’s not the marijuana that kills people. It’s the people trying to get marijuana ... robbing people, getting arrested,” he said. “We’re trying to do away with that, but we cannot do that if these businesses fail.”
The floor leader reminded his colleagues that the intention of the bill is to create financial opportunity for communities that may not have ready access to capital.
“They shouldn’t have to be millionaires before they can get involved, should they?” Wilson said, during an impassioned response. “And just because they came from poverty doesn’t mean that they have to stay there.”