This practice note provides background on adult-use cannabis in Massachusetts and offers detailed, step-by-step information on the process for seeking one or more adult-use licenses from the state cannabis agency.
The Start of Adult-Use Cannabis in Massachusetts
Massachusetts took its first steps to develop a legal cannabis industry in 2012 by becoming one of the first states in the Eastern United States to enact legislation enabling state-legal medical-use cannabis for qualifying patients, personal caregivers, and registered medical dispensaries (RMD). See The Act for the Humanitarian Medical Use of Marijuana (effective on January 1, 2013), later codified into statute as Mass. Ann. Laws ch. 94I.
Massachusetts state leaders expressed hesitation or opposition about legislatively authorizing a state-legal adult-use cannabis scheme, similar to those enacted in pioneering cannabis states such as Colorado and Oregon. Massachusetts voters responded in November 2016 by passing Ballot Question No. 4 (the ballot question act). The ballot question act legalized personal use and retail sales of adult-use cannabis. Political and legislative activities followed to modify the ballot question act's provisions, ultimately resulting in a July 2017 passage of an Act to Ensure Safe Access to Marijuana, later codified as Mass. Ann. Laws ch. 94G (the act). The act established the principles and processes that would regulate the Massachusetts adult-use cannabis marketplace while retaining ballot question act personal-use provisions, namely rules:
- Permitting recreational use by those 21 and older
- Enabling and limiting possession –and–
- Establishing and limiting home growing
Key Legislative Provisions Affecting Development of Adult-Use Licensing
Key elements of the act's licensing provisions include:
- Creating a five-member independent Cannabis Control Commission (CCC), with a broad mandate to regulate all aspects of the nascent adult-use market and, after a phase-in period, medical-use marijuana market
- Conferring on the CCC's broad discretion to adopt regulations in 30-plus specific subject areas, including:
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- Setting fees
- Creating rules and regulations in line with minimum standards within the act
- Establishing policies to license, register, investigate, revoke, or suspend any marijuana establishment
- Adopting diversity licensing goals –and–
- Establishing energy and environmental standards
- Establishing a March 2018 deadline for promulgating regulations for the new adult-use licensing process, with additional deadlines to accept applications and issue licenses
- Establishing processes for allowing cities and towns to ban or limit adult-use cannabis establishments within municipal borders –and–
- Authorizing state and local tax and fee provisions intended to balance revenue needs without creating excessive market prices that would drive consumers to illegal, black-market options, namely:
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- 10.75% state excise tax to be paid to the commonwealth
- 6.25% state sales tax to be paid to the commonwealth
- Up to 3% option local sales tax to be paid to the commonwealth and then refunded to the host municipality –and–
- Up to 3% options municipal host community agreement assessments on the cannabis establishment's gross revenue to be paid to the host municipality
Moving quickly, state officials appointed the CCC chair and commissioners in early September 2017. The CCC began planning meetings immediately, obtaining budgeted operational funds through June 30, 2018, finding temporary office space in Boston, and hiring an executive director, general counsel, and other professional and administrative staff. By year-end 2017, the CCC drafted and circulated for public comment 100-plus pages of detailed adult-use regulations that drew heavily from provisions enacted in pre-existing adult-use states. In Spring 2018, the CCC promulgated final adult regulations in 935 Code of Massachusetts Regulations 500.001 et seq. (hereinafter 935 CMR 500 or the rules).
Three significant strategic decisions by the CCC, the legislature or both dictated major elements of the rules.
First, the rules departed from the vertically integrated Massachusetts medical-use licensing approach, which required each medical dispensary to cultivate and process all cannabis, make edibles and other manufactured products and retail them to medical patients. Applicants were allowed to pursue licensure in one or more individual specialties, including, but not limited to:
- Retail stores
- Small to large cultivation/grow facilities
- Manufacturing facilities
- Transportation companies
- Testing laboratories
- Research facilities –and–
- Smaller niche specialties, including microbusinesses and craft cooperatives
With some exceptions, applicants and their principals were limited to three licenses in each category to minimize opportunities for accumulation of market power by cannabis companies and their owners.
Second, the CCC elected not to place caps on the total number of state cannabis licenses it could lawfully issue. In other words, once an applicant meets the CCC's license requirements, the applicant will receive the license whether it is the 10th, 50th, 500th, or 1,000th licensee in the commonwealth. The applicant's acumen and the applicable cannabis marketplace would dictate the venture's success rather than having a state-determined cutoff point.
Third, the CCC prioritized application processing for specific license applications or applicant categories. One favored category is existing medical-use licensees seeking to enter the adult-use market. The CCC also prioritized applicants qualifying for several diversity categories, notably, economic empowerment program applicants, social equity program applicants and applicants majority-owned by diverse groups qualifying as minority-, women-, LGBTQ-, veteran, and disabled-owned businesses. The CCC also established three-plus-year licensing exclusivity periods for both types of cannabis delivery licenses and the social consumption (i.e., so-called cannabis café) establishment licenses (that have been inactive due to a need for legislative enabling language but that should now move forward due to passage in of enabling language in new cannabis reform legislation, Senate Bill S3096, signed by Governor Baker on August 11, 2022), limiting access to applicants that are majority owned by diverse candidates.
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Originally published by LexisNexis.
Originally published September 13, 2022
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