This week, the Virginia General Assembly’s Joint Legislative Audit and Review JLARC (JLARC) released a briefing comparing Virginia’s recently passed cannabis law to the recommendations in its study released in November 2020.  For background on the 2020 study, review our previous article. JLARC found that the General Assembly implemented 80% of its recommendations and policy options from the 2020 study.  In this latest briefing, JLARC recommends several changes to Virginia’s law that are likely to be given serious consideration by the General Assembly as it continues its work on the law in the 2022 session.

Eliminating Vertical Integration Preferences for Industrial Hemp Processors

Virginia’s law allows both licensed pharmaceutical processors (medical marijuana) and registered industrial hemp processors to operate as vertically integrated marijuana operations not subject to state license caps, provided they pay a $1 million fee and submit and implement a diversity, equity, and inclusion plan. JLARC noted that industrial hemp processors are not licensed, but are instead registered with the Virginia Department of Agriculture and Consumer Services, which is a relatively simple process.  JLARC recommended removing this preference for industrial hemp processors.  If adopted, based on the current law, only licensed pharmaceutical processors would be allowed to vertically integrate provided they pay the $1 million fee to the Virginia Cannabis Control Authority and submit and implement a diversity, equity, and inclusion plan.

Moving Up Timeline for Acceptance of Applications by the VCCA

JLARC recommended moving up the timeline for accepting license applications from July 1, 2023 to January 1, 2023 to allow one year for the market to be established before commercial sales begin. JLARC also recommended that VCCA begin initial drafting of regulations by Fall 2021, prior to the re-enactment of the commercial market provisions of the law in 2022.

Eliminating Certain Social Equity Eligibility Categories

JLARC recommended narrowing the eligibility criteria for social equity applicants to direct eligibility to individuals who have actually experienced harm and reduce the possibility that individuals who have not been harmed receive preferences intended for others. JLARC recommended eliminating the social equity category that gives preference to family members of those convicted of a marijuana related offense. The JLARC reasoned that not doing so would create a much larger group of eligible individuals (potentially 300,000 or more) which would increase competition for social equity licenses and create delays in licensing awards because of the time it would take to verify family relationships. The JLARC also recommended enacting additional statutory requirements to ensure the social equity grant program is effectively and transparently administered.

Criminal Penalties

JLARC identified that, in contrast to other states, the law’s penalty structure for illegal possession escalates from a civil penalty of $25 to a felony offense.  The JLARC recommended that the legislature make possession of 2.5 ounces (or even 5 ounces) to 1 pound of marijuana or its equivalent a misdemeanor when possessed in a public place.

Other recommendations included:

• Setting clear limits on the amount of marijuana that can be possessed at home or on privately owned property that is not a public place.
• That VCCA implement emergency regulations that establish possession equivalencies for marijuana products such as consumables, ointments, tinctures, and concentrates.
• That the Virginia Department of Criminal Justice Services develop model marijuana law enforcement policy and training.
• Reducing the allowable adult-use retail locations for pharmaceutical processors from 6 to 3 per service area.
• Authorizing VCCA to have access to expunged records for verifying an applicant’s eligibility for social equity status.
• Creating separate license caps for Class A and B cultivation licenses, directing VCCA to create sized-based cultivation classifications, setting a maximum size limit on the largest classification of cultivators, and authorizing VCCA to create different classifications of licenses within each license type.
• Allowing the smallest tier of cultivators to sell their own products at retail.
• Authorizing wholesalers to package and label products.
• Exempting the smallest classification of cultivators from license caps or increasing the number of licenses allowed and removing or increasing caps on the number of manufacturing and wholesaler licenses.
• Clarifying whether localities can use zoning special permitting authority to vet and review all proposed marijuana business locations.
• Restricting all licensed marijuana businesses from being licensed to manufacture, distribute, or sell alcohol or tobacco at their establishments
• Dividing responsibilities for testing labs between VCCA and the Division of Consolidated Laboratory Services.

What This Means

JLARC’s recommendations raise significant questions concerning Virginia’s proposed commercial cannabis market which the General Assembly will need to address in the upcoming 2022 legislative session.  With legalization of simple possession and the creation of VCCA coming next month, many questions remain unanswered and Virginia businesses will need to prepare for the rapid changes that lie ahead.  Vandeventer Black LLP’s Cannabis Law attorneys are closely monitoring the status of the cannabis market in Virginia and are ready to help your business navigate these changes.