Maryland officials have released draft regulations for the state’s adult-use marijuana market that’s set to come online in July in accordance with a legalization ballot referendum that voters approved last year.
Weeks after Gov. Wes Moore (D) signed cannabis sales legislation into law, the Marijuana Cannabis Administration (MCA) submitted a first batch of rules for the industry on Friday to the Joint Committee on Administrative, Executive, and Legislative Review (AELR).
That panel will need to review and approve the emergency regulations, which will also be published in the Maryland Register before they’re enacted.
But the relatively quick turnaround with the proposed regulations is another sign that Maryland intends to have a recreational market up and running in time for the implementation of voter-approved legalization on July 1.
The 41-page draft rule sets definitions, codifies personal possession limits, lays out responsibilities for regulators, explains licensing protocol—including for social equity applicants, clarifies enforcement authorities and penalties and outlines packaging and labeling requirements.
There’s significant focus on converting current medical marijuana businesses to dual licenses to start serving adult consumers, which they would be effectively forced to do in order to continue operating. The rules also cover the processes and fees for different license types such as microbusinesses and on-site consumption facilities.
Further, it contemplates rules for delivery services, online ordering, THC limits, advertising and cannabis research.
Jonathan Havens, an attorney at Saul Ewing LLP, told Marijuana Moment that one unique component of the Maryland draft rules is what he called its “convert or die” scheme, which requires existing medical cannabis dispensaries to either obtain a dual license to serve patients and adult consumers by July 1 or cease operations.
“This isn’t to say that MD is abandoning medical patients,” Havens said in an email. “For example, licensees must provide exclusive access to qualifying patients and registered caregivers for at least one hour per day that the dispensary is operational OR a dedicated service line to serve only qualifying patients and caregivers for the duration of the licensed premises’ operating hours.”
“Again, though, I find the ‘forced conversion’ rules a bit unique,” he said.
Havens also noted that the rules would make it so stores could only operate for up to 12 hours per day, which could complicate existing medical dispensary hours that run longer than that.
Further, while the legislation that Moore signed into law “suggested that management agreements between licensees and third parties may be prohibited,” the emergency regulations “permit them, with some notable restrictions,” he said.
MCA’s proposed rules on transfer limits and inventory controls for usable cannabis are also more restrictive than the current policy for medical cannabis operators. For example, usable marijuana that’s transferred from a grower to dispensary for the creation of usable cannabis products couldn’t exceed one pound in a single package or five pounds in a single transfer.
Licensed dispensaries couldn’t have more than 10 pounds of usable cannabis in inventory at one time “for the purposes of creating usable cannabis products.”
Marijuana products that exceed 10mg THC per serving (or 100mg THC per package) could only be sold to registered medical cannabis patients and caregivers.
Havens also pointed out that the 65 percent ownership threshold for social equity businesses is “higher than some other states,” and eligibility for the category is based on geographic factors such as living or attending school in certain areas, which the Office of Social Equity will determine.
Medical marijuana dispensary conversion licenses would be valid for five years and are generally restricted from being transferred, a policy that Havens said some observers are concerned “will make it very difficult to raise the capital necessary to keep businesses in operation.”
Meg Nash, a partner at Vicente LLP, told Marijuana Moment that the “proposed adult use regulations provide further clarity as to the implementation of the initial adult use licensing round, including clarification as to the timing for securing property post-selection in the lottery.”
Businesses that are selected for a license through a lottery system will have 18 months to find a location and receive zoning approval, which could be extended for six months if the conditional licensee shows they’re making a “good faith effort” to secure the location.
“While this may seem like a long runway to becoming operational, as a practical matter, it emphasizes the need for applicants to begin securing funding, identifying real estate, and researching municipal restrictions long before the licensing application is released to ensure their success in the market,” Nash said.
It’s not clear when the AELR committee will complete its review and when the emergency regulations will be published in the Maryland Register, but it appears that the state is working to put the basic rules into effect in time for legalization this summer.
The regulatory bill that Moore signed earlier this month covers more ground, including setting a nine percent tax rate on marijuana products, providing for specific allocations of tax revenue and imposing caps on different license types in the state.
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Under the voter-approved referendum, legalization of possession of up to 1.5 ounces of cannabis takes effect on July 1, putting pressure on regulators to put the rules in place sooner than later.
The legislation that the governor signed was partly a product of extensive work from bipartisan and bicameral lawmakers who were part of House Cannabis Referendum and Legalization Workgroup, which was formed in 2021 by Speaker Adrienne Jones (D).
Members held numerous meetings to inform future regulations following Maryland voters’ approval of a legalization referendum during last year’s election, which triggered the implementation of complementary legislation covering rules for basic policies like possession and low-level home cultivation.
In addition to legalizing the purchase and possession of up to 1.5 ounces of cannabis for adults starting this summer, the legislation will also remove criminal penalties for possession of up to 2.5 ounces. Adults 21 and older will be allowed to grow up to two plants for personal use and gift cannabis without remuneration.
Past convictions for conduct made legal under the proposed law will be automatically expunged, and people currently serving time for such offenses will be eligible for resentencing. The legislation makes it so people with convictions for possession with intent to distribute can petition the courts for expungement three years after serving out their time.
Parts of the referendum took effect at the beginning of the year. Possession of up to 1.5 ounces of cannabis became a civil offense, punishable by a $100 fine, with a $250 fine in place for more than 1.5 ounces and up to 2.5 ounces.
Adult-use legalization began to advance through Maryland’s legislature in the 2021 session, but no votes were ultimately held. The Senate Finance Committee held a hearing that year on a legalization bill, which followed a House Judiciary Committee hearing on a separate cannabis proposal.
Maryland legalized medical cannabis through an act of the legislature in 2012. Two years later, a decriminalization law took effect that replaced criminal penalties for possession of less than 10 grams of marijuana with a civil fine of $100 to $500.
Meanwhile, Moore also recently allowed a bill to become law that prevents police from using the odor or possession of cannabis alone as the basis of a search.
He additionally signed a measure last week to make it so the lawful and responsible use of marijuana by parents and guardians will not be construed by state officials as child “neglect.”
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