On May 26, 2023, the Maryland Cannabis Administration (“MCA”) submitted a draft of emergency regulations for the expanded adult-use cannabis market to the Joint Administrative, Executive and Legislative Review Committee (“AELR Committee”). The emergency regulations must be approved by AELR Committee and published in the Maryland Register before they are enacted.
Highlights of the draft regulations include:
- 17.02.03 – Conversion of a Medical Cannabis License – Establishes the timeline and requirements for an existing licensee to convert a medical cannabis license to a dual medical and adult-use license.
- The one-time conversion fee shall be based on the gross revenue of a licensee and calculated by the MCA using the State’s seed-to-sale tracking system for the calendar year 2022.
- On or before July 1, 2023, licensees choosing to convert their license shall pay the conversion fee as calculated in full or enter into a payment plan with the MCA (equal installments over an 18-month period).
- A licensee may not register with the State Department of Assessment and Taxation a legal name that uses the terms “cannabis,” “marijuana,” or other synonym-related controlled substances.
- 17.05.02 -Application Process and Requirements – Establishes the application requirements and process for new market entrants.
- 17.05.08 – Lottery Exemption – Certain licensees may be eligible for an additional grower or dispensary license.
- The MCA may issue up to five conditional grower licenses to recognized class members of Pigford v. Glickman, 185 32 F.R.D. 82 (D.D.C. 1999), or In Re Black Farmers Litig., 856 F. Supp. 2d 1 (D.D.C. 2011)
- A business awarded a grower license pursuant to Chapter 598 of the Acts of the General Assembly of 2018 may be awarded a standard dispensary license on the condition that (1) the minimum qualifications are satisfied and (2) any individual or entity holding an ownership interest in or control of the grower, does not own or control a cannabis dispensary.
- 17.06.04 – Change of Location – Licensees are allowed to change the location of the licensee’s operation on the condition that a licensee applies and obtains approval from the MCA.
- A dispensary may only change location within the county that the dispensary was awarded a license.
- 17.06.04 – Transfer of Ownership Interest in a License – Prohibits the transfer of a controlling interest in a converted license prior to July 1, 2028, except in the case of death, disability, incapacity, bankruptcy, or receivership in accordance with a lending agreement or court order.
- 17.06.05 – Management Agreements – The proposed emergency regulations permit the use of management agreements but requires the MCA to pre-approve said agreements prior to implementation.
- The MCA may deny a management agreement if it constitutes an invalid transfer of ownership in or control of a licensee.
- 17.06.08 – Standard Dispensary License – Limits delivery services to micro dispensary licensees after July 1, 2024, and prohibits the delivery of adult-use cannabis to consumers.
- After July 1, 2024, a standard dispensary licensee may not operate a delivery service as defined in COMAR 14.17.01 unless the standard licensee has a qualifying partnership with a micro dispensary under Alcoholic Beverages and Cannabis Article §1-323, Annotated Code of Maryland to conduct delivery services on behalf of the licensed dispensary or partners with a micro dispensary to conduct delivery services for the licensed dispensary.
- It is a violation of 14.17.06.08 § C to (1) deliver adult-use cannabis to consumers, (2) not verify the delivery recipient is a qualifying patient or registered caregiver; (3) deliver an amount that exceeds the qualifying patient or registered caregiver’s 30-day supply; (4) use a vehicle that otherwise violates COMAR 10.62.18.06.
- 17.07.08 – Conversion to a Standard License – A micro licensee in good standing may apply to convert to a standard license once it has been operational for at least 24 months.
- 17.10.02 – Cannabis Grower Premises – To make modifications or renovations to a grower facility, a licensed grower must obtain a pre-approval from the MCA.
- 17.10.05 – Grower Product Reservations and Trade Practices – A licensed grower shall make a good faith effort to allow for at least 10% of cannabis grown to be transferred to a licensed processor that has no common ownership interest or control with the grower license or transferred to be produced by a social equity business.
- 17.12.06 – Dispensary Product Reservations and Trade Practices – Licensed dispensaries shall make a good faith effort to allow for at least 25% of product available for retail sales to be products grown, extracted, or produced by a licensee that has no common ownership interest or control with the dispensary licensee or products grown, extracted or produced by a social equity business.
- 17.12.08 – Online Ordering – The proposed emergency regulations allows the use of an online order system to place pre-orders for pick-up and delivery. It is important to note that adult-use consumers are limited to pick-up only.
- The proposed emergency regulations prohibit direct-to-consumer internet sales of adult-use cannabis or cannabis products on or before July 1, 2025.
- 17.17.02 – Security Interest in a Cannabis License – A licensed grower, processor or dispensary may pledge an interest in the proceeds from a MCA-approved sale of a cannabis license as a security interest for a loan.
- The lending institution must satisfy the eligibility requirements and obtain approval from the MCA.
- A copy of the security agreement must be provided to the MCA.
- A security agreement may not contain provisions that authorize the secured credit to require the loan to become due, except if the licensee materially breaches or defaults on its obligations, convert the debt under the loan to equity, deprive the licensee the right to operate or restrict the ability of the licensee to submit a payment on the secured loan through a third party.
To access a copy of the MCA’s draft emergency regulations, visit https://mmcc.maryland.gov. If you would like to schedule a call to discuss how these developments may impact you or your business, please contact Attorney Jonathan Wachs at email@example.com or 301-575-0317.
ABOUT JON WACHS
firstname.lastname@example.org | 301.575.0302
As founder of the firm’s Cannabis Law group, Jon Wachs is a recognized resource on issues relating to the evolving relationship between cannabis law and intellectual property protection. He has worked with many operators in the cannabis industry to navigate the rules and processes relating to specific state medical cannabis programs. Mr. Wachs provided essential legal support to obtain required Maryland regulatory approval for the transfer of several licenses affected by a multi-billion dollar business combination. He also facilitated a series of business transactions involving the sale, purchase and combination of integrated cannabis cultivation, processing and dispensary businesses.