A new Controversy Sparks over Maryland’s new Cannabis Policy.

The new cannabis licensing law is a hot topic in Maryland, as some individuals do not find it appropriate for their businesses. A broader section of cannabis business professionals has filed a lawsuit against the Maryland Cannabis Department, seeking to withdraw the new cannabis laws due to their perceived negative impact on their business.

They blamed the state for creating a monopoly by limiting licensed businesses, capping limits on THC concentrates in products containing CBD, and restricting licensing.

But, the officials of the Maryland Alcohol and Tobacco Commission have said the new law aims to protect consumers from unregulated cannabis products.

• Introduction
• Why Does the Maryland Hemp Industry Have a Problem with the New Cannabis Licensing Law?
• How Will The New Licensing Procedure Work?
• The New Fees For Converting Existing Medical Cannabis Businesses To Adult-Selling Cannabis Licenses.
• Now Onwards, Cannabis Businesses Must Create Dedicated Lines!
• Is New Cannabis Maryland Law Will Create A Monopoly In The Market?

Why Does the Maryland Hemp Industry Have a Problem with the New Cannabis Licensing Law?

The state recently introduced House Bill 556 (cross-filed with Maryland Senate Bill 516), which contains essential provisions for entities or persons interested in getting business licensed in Maryland.
Before July 1, 2023, or the new law, all current cannabis businesses could convert their licenses for medical and adult use. They could sell CBD products with 2.5 mg of THC without any permit, but now they require a license to sell these products.

Moreover, the U.S. Drug Enforcement Administration has classified delta-8 THC as a Schedule I drug under the CSA (Controlled Substances Act).

Obtaining a license requires a significant amount of effort. The state divides the licensing procedure into two different rounds. The first licensing round will start on January 1, 2024, and will be limited to social equity applicants. The second licensing round is scheduled to begin on or before May 1, 2024, and has the potential to include all applicants.

How Will The New Licensing Procedure Work?

During the first round, each social equity applicant who meets the minimum qualifications established by the division will enter into a lottery. After evaluating their infrastructure and operational capacity, the division will use a pass/fail basis to determine whether applicants meet the minimum qualifications for the lottery.

Based on a market-demand study, the division will give licenses as needed in Second-round licensing. They will develop the factors to determine qualifications for the lottery. Moreover, the division may limit some or all of the licenses issued to social equity applicants, as determined necessary by the diversity study.

The department is limited to issuing Maryland license distribution based on market and population demand within a given county and jurisdiction. This limitation includes all the licenses converted from medical to medical and adult use. Still, if you get your cannabis license, you have a pay huge application free to operate in Maryland.

These critics argue that the policy might inadvertently create a barrier for smaller players and new entrants, favoring more giant corporations or established entities that can more easily fit within the designated applicant categories.

The New Fees For Converting Existing Medical Cannabis Businesses To Adult-Selling Cannabis Licenses.

The existing cannabis seller must covert their Maryland license to serve adult consumers by paying a conversion or licensing fee.

• Conversion fees for existing growers and processors are 10% of their gross revenue in 2022.
• Conversion fees for dispensaries are 8% of their gross revenue.
• Conversion fees can be at least $100,000 or higher than $2 million.
• If the business is not operational but has a pre-approved grower or process Maryland license, there is a fee of $50,000 and $25,000 for dispensaries.

However, to address these conversion fees, the marijuana department also permits payment in installments. Existing marijuana businesses can pay their conversion fees in installments until January 1, 2025.

Now Onwards, Cannabis Businesses Must Create Dedicated Lines!

Existing medical cannabis businesses must reserve a specified amount of cannabis for social equity licensees. Moreover, they must set aside operating hours or dedicated service lines to serve only medical patients. Business owners believe creating a dedicated line will cost them more, affecting our business operations.

Is New Cannabis Maryland Law Will Create A Monopoly In The Market?

A new cannabis policy will restrict many hemp operators from obtaining marijuana licenses. Many critics believe the new policy violates Maryland’s anti-monopoly laws and the Equal Protection Act. This policy is poised to establish specific applicant categories for the initial round of licenses.

Furthermore, the Equal Protection Act has been invoked to challenge the policy’s potential bias towards certain groups, potentially denying equal opportunities to those outside the specified categories. Various parties have filed lawsuits, claiming the policy unfairly discriminates against hemp operators who have already contributed to the state’s cannabis-related industries.

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