Articles

January 19th, 2024

The State of Recreational Cannabis Regulation in the DMV

Posted in: Business Law    Tagged: Dustin M. Dorsino

While cannabis is still classified as a Schedule I substance under the Controlled Substances Act, making it illegal at the Federal level, many states have enacted or proposed regulatory schemes governing the use, possession, cultivation, processing, dispensing, and retail sale of cannabis. The DMV (District of Columbia, Maryland and Virginia) is no different – each has its own specific cannabis regulations, which makes it important to be aware of each of their laws if you are interested in starting a cannabis-related business or providing services to the cannabis industry.

Maryland’s cannabis regulatory landscape is significantly more developed than those of DC and Virginia. On September 8, 2023, the Maryland Cannabis Administration (MCA) announced the application window for the first round of Maryland cannabis business licenses for social equity applicants, which closed on December 12, 2023. On or before May 1, 2024, MCA is expected to announce subsequent application periods for additional social equity applicants, as well as non-social equity applicants, to apply for cannabis business licenses.

Maryland’s cannabis laws and regulations will require licensees to comply with specific rules regarding, among other things, ownership requirements, product packaging and labeling, advertising, security, and zoning and location restrictions. Licensees will also be required to obtain prior approval for certain notable business-related events, such as transferring a license or undertaking a major renovation or modification to a licensed premises. Further, the laws also set forth certain materials applicants must submit with their applications for cannabis licenses. Additionally, Maryland medical marijuana dispensaries were authorized to apply for conversion of their licenses to dual medical and recreational sales, but had to do so by July 1.

While the limited recreational possession and use of cannabis is legal in DC and Virginia (so long as no cannabis is consumed on any land owned by the Federal government), the processing, dispensing, cultivation and retail sale of recreational cannabis has not yet been officially approved. Despite this, many retail storefronts have taken to “gifting” cannabis to their customers, intending to take advantage of a “loophole” in Initiative 71 that allows for the transfer of up to one ounce of cannabis to another person. These stores, dubbed “I-71 businesses,” offer unrelated products to customers for a set price and then give the customer cannabis “for free.” However, when DC begins to regulate retail cannabis sales in the future, this could potentially pose issues for I-71 businesses who look to apply for cannabis-related licenses .

In any event, anyone that desires to hire employees and start a cannabis-related business in the DMV must obtain several licenses, a certificate of occupancy, register with state and Federal tax authorities, obtain workers compensation insurance and withhold amounts from employees’ paychecks.

In any event, anyone that desires to hire employees and start a cannabis-related business in the DMV must obtain several licenses, a certificate of occupancy, register with state and Federal tax authorities, obtain workers compensation insurance and withhold amounts from employees’ paychecks.

Any individual or entity thinking about starting a cannabis-related business or providing ancillary services to the cannabis industry in the DMV should start preparing now, proceed with caution and strongly consider engaging a team of advisors to help navigate the many legal, financial, insurance, tax, real estate, and other issues that are commonplace for an industry as heavily regulated as the cannabis industry. The attorneys at Stein Sperling have the experience necessary to guide you through the myriad of challenges that face cannabis-related businesses.

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