Ownership equity threshold stirs debate at CCC
Photo | State House News Service
Cannabis Control Commission Chairman Steven Hoffman at a meeting prior to the coronavirus pandemic
Before wrapping up its third major round of rule-making since its inception three years ago, the Cannabis Control Commission on Monday solicited feedback from members of the Cannabis Advisory Board and heard plenty about its proposed regulations dealing with economic empowerment applicants and the new delivery license model.
Since June, the CCC has been busy tweaking existing marijuana regulations and setting new policies for the fledgling industry. Included in the latest draft of the CCC's regulations is a requirement that retailers display in-store and disclose on packaging that vape products have been tested for Vitamin E acetate but may still be harmful to health regardless, an allowance for delivery licensees to have an interest in another license type (and vice versa), greater flexibility for the CCC to add new groups to its social equity program, the ability for a medical marijuana caregiver to provide care to up to 10 patients, and a new process for the CCC to be notified of and have oversight over licensees placed under the control of a receiver by a Massachusetts court.
During a virtual meeting with the CAB on Monday, the commission asked for input on its proposals related to a handful of specific topic areas. The first one up was the issue of an ownership threshold for licensees that are eligible for a number of benefits because they meet the criteria to be deemed an economic empowerment applicant.
Entrepreneurs who qualify as economic empowerment applicants get priority when the CCC reviews business applications and the CCC runs a social equity program to provide technical and financial assistance to prospective business owners from communities disproportionately harmed by past drug laws.
"The primary debate that we had here was whether to require economic empowerment applicants to maintain at least 51 percent ownership of the equity in their establishment to retain their economic empowerment status," CCC Chairman Steven Hoffman said. "The draft regulations that we voted on and approved make it a requirement that you need to stay above 51 percent to retain your economic empowerment status. What that means is priority in the application process, reduced application and licensing fees, the ability to apply for either delivery license or social consumption license, and in another part of our draft regulations, the ability to participate in the social equity program."
Hoffman said the issue of an equity threshold attracted a lot of feedback from the public and prospective licensees during the commission's public comment period, though the feedback was split into two camps.
"One saying it's important for people to stay above 51 percent so that they are not taken advantage of by investors that want to use them as essentially front people to get into the program," he said. "But we've also heard from economic empowerment applicants who say they want the flexibility to structure their investors the way they want to and if that means going below 51 percent then that should be their option."
Members of the CAB -- a 25-person group formed by the 2017 legalization law to make occasional recommendations to the CCC -- said Monday they would like to see the CCC keep the requirement that economic empowerment applicants maintain at least 51 percent ownership.
"I can appreciate that there are folks that would like to reduce that in order to maintain their economic empowerment priority status and get funding. ... I think you can still obtain the funding, but I don't think that that should allow you to maintain your economic empowerment priority status as far as the expedited licensing is concerned," Kim Napoli, who served as director of outreach for the 2016 ballot question campaign that legalized marijuana, said. "Ownership is essential. Bringing wealth to these communities, to these individuals, that have been subject to high rates of arrest and incarceration is what we're trying to do. We're not trying to bring money to folks who have not had that same experience and I don't think that lowering that threshold below 51 percent and effectively giving control and ownership of the company to an outside party that is well-capitalized and not within that class of priority serves that purpose."
CAB members Michael Latulippe, who serves as development director for the Massachusetts Patient Advocacy Alliance, and Shanel Lindsay, a cannabis entrepreneur and industry consultant, also told the CCC that they support keeping the 51 percent threshold.
As was the case when the CCC held a public hearing to collect input on its regulations, the proposed model for marijuana delivery service was one area of the CCC's draft regulations that attracted significant feedback during Monday's meeting. The commission approved a delivery license structure in the fall and made applications available in May, but has not yet licensed a delivery-only business. Several prospective cannabis delivery operators told commissioners during the public hearing that the framework for delivery will not work as currently written.
"If you listened to our public hearing a while back, we got a lot of pushback about allowing for wholesaling and storage rather than the original delivery proposal, which is in the regulations right now, which essentially says that as a delivery licensee you can only deliver on behalf of the retailer, that you don't take possession or ownership of the product. Essentially, the business looks like a courier business," Hoffman said. "We got a lot of pushback saying that people found that to be less than a viable economic model. The trade-off, of course, in our minds is a very strong desire to try to keep the capital requirements as low as possible in this business and, of course, adding warehousing and wholesaling would significantly increase the capital requirements."
Napoli said she understands the concern that the cost of entry to the industry could be higher for delivery companies that want to wholesale, but said she thinks delivery licensees should have the option to purchase marijuana and marijuana products wholesale from cultivators and manufacturers.
"I feel very strongly that delivery should be able to wholesale and I understand the comments that that could raise the cost of entry to the market. However, I think that that should be an option that folks are able to make, a decision that folks are able to make for themselves," she said. Napoli added, "We're looking for people to invest in these companies, we're looking for folks to partner with these companies. There may be a cost associated with securing delivery or securing wholesale and securing space to have that storage, but that's what allows you to make the money, having those things and not having the business be an onerous one that is practically not able to function properly."
Home delivery of marijuana has long been allowed under the state's medical marijuana program, and advocates pushed for a delivery-only license in the recreational market arguing that it will help level the playing field between large corporations and small businesses because the barriers to entry for delivery are typically far less burdensome than those for retail licenses.
Delivery licenses are available exclusively to participants in the CCC's social equity program and certified economic empowerment applicants for a minimum of two years.
The CCC accepted public input on its latest draft regulations through last Friday and the commission expects to vote on a final set of regulations at a meeting scheduled for Sept. 24.
WBJ Web Partners
Most Recent
Most Recent
0 Comments