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Changing Times – Recent Developments Give Cannabis Businesses New Optimism (Part 2)

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Part 2 of a Two-Part Series

In last week’s article we discussed some of the recent developments at the state, federal, and international levels that have given cannabis businesses new reasons to be optimistic in 2021.  In this second of a two-part series, we will briefly discuss some of the key findings of the recent Joint Legislative Audit and Review Commission (JLARC)  study on the legalization of marijuana and the report issued by Governor Northam’s Virginia Marijuana Legalization Work Group which discusses the impact of legalization in Virginia. While neither document recommends the legalization of marijuana, both consider wide-ranging issues surrounding legalization such as taxation, banking, criminal justice reform, licensing, regulations, legislative changes, and consumer safety, and make recommendations on how to address those issues.  

The JLARC Study

SJ67 and HJ130 from the 2020 General Assembly legislative session directed JLARC to review how Virginia could legalize marijuana.  The study focused on ways in which legalization of marijuana could redress the harm to disproportionately affected individuals and communities caused by current marijuana laws. Some of its key findings are:

  1. Legalizing marijuana would require several legislative decisions such as:
  • Determining the amount of marijuana an individual would be allowed to possess
  • Determining where marijuana could be legally smoked or consumed
  • Setting the legal age for marijuana use
  • Whether to allow individuals to grow their own marijuana
  • Whether to adjust existing penalties for unlawful sale, distribution, and possession above the legally allowed amount
  • Addressing penalties for driving under the influence of marijuana and underage use and possession
  1. Creating a commercial market would entail issuing licenses for the following operations:
  • Cultivation
  • Processing
  • Distribution
  • Retail Sales
  • Testing

The study discussed potential prohibition of “vertically integrated” businesses that are allowed in other jurisdictions. Vertically integrated businesses are those in which a single business is licensed to perform multiple operations such as cultivation, processing, distribution, and retail sales.  The study suggested that the prohibition of these types of businesses could provide greater opportunities for small businesses to participate in the commercial marijuana market. The study recommended; however, that testing labs should be independent of any other marijuana operations.

  1. Allowing localities to “opt out” of the commercial market and allowing current medical marijuana businesses to participate in the market.

The study identified a JLARC survey suggesting that a majority of localities in Northern Virginia and Tidewater would be likely to participate in the commercial market while localities in Southwest and Southern Virginia may be less interested. The study supported allowing localities to determine the number of retail establishments to be licensed in their jurisdictions and to apply zoning restrictions and other local requirements to those businesses. It also supported the participation of existing medical marijuana businesses as long as they are required to meet the same requirements of other businesses in the commercial market.

Other findings included:

  • The use of legalization to address prior disproportionality in marijuana enforcement
  • The necessity of measures to mitigate the unintended negative public health consequences of legalization
  • The need to grant regulatory authority to VABC or to create a new agency to regulate the market
  • The revenue generation from taxation of commercial marijuana sales and offset of operational costs to the state through licensing fees
  • The number of jobs created by the commercial market
  • Th recognition that authorizing and implementing the commercial market may take two or more years, with revenues anticipated to far exceed operation costs to the state after implementation

The study also issued forty-six recommendations and twenty-nine policy options for consideration by the General Assembly all which may be found here.

The Marijuana Legalization Workgroup Report

Chapters 1285 and 1286 of the 2020 Acts of Assembly mandated the creation of a work group comprised of relevant stakeholders to study legalizing the sale and personal use of marijuana in Virginia and to issue a report of its findings by November 30, 2020.  Areas discussed by the report include:

  • The legal and regulatory frameworks in other states that have legalized marijuana
  • The Virginia industrial hemp and pharmaceutical processor programs
  • Marijuana decriminalization
  • Feasibility of legalizing the sale and personal use of marijuana
  • Potential revenue impacts of legalization
  • The necessary regulatory framework
  • Potential health effects and mitigation

Additionally, the report provides a set of policy recommendations in the following areas:

  • Regulatory, industry, and licensing structure
  • Taxation
  • Banking
  • Social equity
  • Local control
  • Product regulation
  • Personal cultivation
  • Impaired driving
  • Impairment and employment
  • Health impacts
  • Consumer education/product safety
  • Allowable THC levels
  • Cannabis use disorder
  • Youth impacts
  • Prevention and education
  • Health equity
  • Clean Indoor Air Act

Both the JLARC study and the Working Group report will likely be the starting point for any proposed marijuana legalization legislation in the 2021 legislative session. Review of these documents should provide important insights to any businesses seeking to get involved in the commercial marijuana market in Virginia – should marijuana legalization become a reality in the Commonwealth.

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