For the past several years, Colorado, Washington and Oregon have served as the testbeds for policies governing state-legal cannabis markets. But now it’s Massachusetts’ turn.
Massachusetts, whose residents voted in 2016 to legalize cannabis for adult use, is on the cusp of implementing experimental, never-before-seen rules that will be closely watched by both the cannabis industry and regulators around the country.
Last month, the state’s Cannabis Control Commission, the regulatory agency tasked with overseeing the rollout and implementation of Massachusetts’ new adult-use cannabis industry, released the final rules that will govern the market.
Massachusetts will be the first state east of the Mississippi to implement a market for legal cannabis. With Vermont, Rhode Island, Connecticut, New Jersey and others on the east coast all seriously considering legislation to fully legalize marijuana in their states, elected officials from across the region will be keeping a close eye on the Bay State and how its program compares with others in the so called “wild west.”
Many of the rules have been seen before (child-resistant packaging requirements; separate licenses for cultivators, producers, and retailers; etc.) and are in effect in existing adult-use states. What’s noteworthy about Massachusetts’ new rules, though, are the ones that have never been tried before and could serve as a blueprint for other states that are seriously considering the full legalization of cannabis.
Perhaps most noteworthy is that Massachusetts is seeking to be the first state to make an attempt at rectifying some of the social injustices that have been a result of marijuana prohibition. It is a fact that the enforcement of cannabis laws has disproportionately affected people of color and people who live in economically disadvantaged communities. Nearly 80% of people in federal prison for drug offences and almost 60% in state prison are black or latino, despite the fact these groups use and sell drugs at similar rates to whites, according to the Drug Policy Alliance. And yet, for the most part, people of color and people who have convictions for non-violent cannabis offenses have so far been largely excluded from meaningful participation in the new cannabis economy.
Massachusetts’ Cannabis Control Commission is trying to change that through a series of experimental policies that many observers hope will become new standards for states across the country as they implement new legal cannabis markets. First off, the state has eliminated the vertical-integration requirement of the medical program, which mandated that all businesses must produce the products sold in their dispensaries. Mandated vertical integration requires businesses to spend large amounts of capital to build out large-scale cultivation and production facilities. Coupled with the lack of access to banks and institutional lending, this kind of requirement makes it virtually impossible for anyone without access to wealthy investors to open a cannabis business.
The commission decided to not only split these into separate cultivation, production, and dispensary licenses, but also to create sub-licenses for cultivation facilities of different sizes. Under these rules, an entrepreneur wanting to open a smaller cultivation/production facility will have to pay some of the lowest registration fees in the country, and will not be required to spend mass sums of capital building out large-scale facilities.
The commission will also allow these small “craft” cultivators to cultivate collectively, meaning that they can pool resources to achieve economies of scale and give them an opportunity to compete against much better funded large-scale operators who typically drive down wholesale prices as cannabis markets mature. Without this ability to cultivate collectively, smaller-scale producers would have a difficult time competing on price on the wholesale market, likely driving these mom-and-pop entrepreneurs out of business.
The commission has also created a new class of applicants, referred to as “equity applicants,” who will be given advantages in the application process not enjoyed by other prospective cannabis entrepreneurs. Equity applicants include people of color, residents from neighborhoods that have been disproportionately impacted by marijuana law enforcement, and those who have previously been convicted of a marijuana felony offense. Anyone who qualifies as an equity applicant will be allowed to submit their business applications to the commission in April, while all other applicants, aside from existing medical operators, will need to wait until July. Even after this initial grace period, any applications from those who qualify as equity applicants will automatically be moved to the front of the line, a significant advantage in what is expected to be a flood of new business applications.
It is important to note that these provisions to prioritize and provide a path to business ownership for those traditionally targeted by enforcement and excluded from the cannabis economy did not happen in a vacuum. Commissioner Shaleen Title, one of the five commissioners tasked with developing the rules and overseeing implementation of the new adult-use industry, is a veteran drug policy reformer. Shaleen founded a chapter of NORML/Students for Sensible Drug Policy as an undergrad in college in the early 2000s, worked for Law Enforcement Against Prohibition (now Law Enforcement Action Partners), and worked in the industry for pioneering law firm Vicente Sederberg and my company, 4Front. She went on to form a staffing company, THC Staffing, that focused on providing access to the cannabis industry for people of color and became a nationally recognized voice on the importance of equity and inclusion in the cannabis industry. There is no doubt that without her voice on the commission, these kinds of forward-thinking policies would likely never have been debated, let along adopted as official rules. It goes to show how important it is that people who have spent their careers advocating for sensible marijuana policies have a seat at the table as regulators, and not have these positions left solely to lifelong bureaucrats, attorneys, and businesspeople. That’s what I meant when, in my previous Forbes column, I wrote that having cannabis-reform veterans involved in the industry gives us the opportunity “to not only build a new industry, but a new kind of industry.”
Massachusetts will also be studied as a pioneer in other areas of marijuana industry regulation. The state has adopted some of the more stringent environmental regulations in the industry. Indoor cannabis cultivation, the method most commonly used to grow marijuana around the country, is notoriously carbon intensive. It has been estimated that indoor cannabis cultivation releases 4,600 kilograms of carbon dioxide into the atmosphere for every kilogram of marijuana produced, according to a highly cited study released in 2012. Massachusetts has adopted a Climate Change bill that mandates all agencies must take carbon emissions into account when drafting new regulations, and the Cannabis Control Commission has attempted to push the industry in the state to be among the least polluting in the country.
In particular, the commission has mandated that cultivators not exceed 36 watts per square foot of cultivation space. This requirement will force cultivators to use far more efficient LED lights in indoor cultivation facilities, or to move most cultivation to more energy efficient greenhouses. Many, myself included, have been skeptical of whether LED lighting technology is sufficient to grow high-quality cannabis, and would have preferred to see different standards, such as a total energy usage per square foot, which factors in energy used by HVAC and other equipment rather than focusing exclusively on lighting. But this does not take away from the fact that the commission is taking steps to mitigate very real environmental concerns around the cultivation of cannabis.
The state will also be closely watched as one of the first in the country to roll out “social consumption” licenses for businesses to allow customers to consume marijuana on-site. These will eventually be made available for dispensaries to include consumption lounges as part of their customer experience, and will also be available to third-party businesses for whom marijuana sales make up less than half of their business. Within a few years cannabis consumers will not only be able to indulge at their favorite dispensary, but could be able to enjoy cannabis at a cafe, movie theater, or yoga studio. Allowing this kind of social consumption will further breakdown the stigma that cannabis consumers face compared to their alcohol guzzling compatriots, particularly since all legal states currently only allow the purchase of marijuana, but don’t provide places where people can consume legally outside of their homes. Due to pressure from Gov. Charlie Baker and other elected officials in the state, these licenses will not be issued immediately, but the commission has stated that they plan to revisit them as soon as possible. As a concession for delaying the issuance of social consumption and delivery licenses, Commissioner Title secured a compromise that these licenses will initially only be available to the aforementioned equity applicants.
Legalization’s new poster child
These kinds of innovative reforms will put Massachusetts squarely in the spotlight as new states throughout the country consider adopting their own versions of legalization in the coming years.
They will also be on full display to a large number of out-of-state residents when compared to other legal marijuana markets around the country. Colorado has famously seen an increase in tourism since legal marijuana sales began in 2013, but Denver is a difficult city for most people to get to, with no major population centers within a five-hour drive. California, the largest marijuana market in the country, is a huge state surrounded by other states with their own versions of legal cannabis. Same goes for Oregon and Washington. In contrast, around 60 million people live within driving distance of Massachusetts, including the major metropolitan areas of New York and Philadelphia.
Outside of arguably Las Vegas, no marijuana market in the United States will have the opportunity to directly demonstrate the benefits of cannabis legalization to those visiting from places still living under the oppression of marijuana prohibition.
For the next few years, all eyes will be on the Bay State and its innovative approach to implementing a legal cannabis market.