By: Tom Howard
With New York causing a ruckus nearby, Maryland has moved at cannabis speed toward its first adult use licensing round that may actually be the most equitable program in terms of social equity protections written into the law. It may take a bit longer than anticipated before any new Maryland dispensary licenses get awarded because the big dreams and goals face short and tight deadlines moving ever closer with each passing day.
Maryland social equity requires its own definition, much like all the other states. Here, the focus is on people that have gone to school in the state, or where over 40% of the students receive Pell Grants (basically all the HBCUs), or long term residency in areas disproportionately impacted by marijuana arrests according to census data.
The social equity requirements for Maryland cannabis licenses go beyond the 51% ownership and control some states, and sets a 65% ownership threshold that must be maintained for five years by law. A social equity applicant must win a license in a lottery after gaining entry with a shortened cannabis license application based on a pass-fail basis comprising a Business Plan, detailed Diversity Plan and an Operations Plan.
The Maryland Cannabis Administration (MCA) has telegraphed an ambitious plan to award new licenses by January 2024, but that requires publishing rules that we have not gotten yet, then the public comment period, and finally a 30 day window after publishing the application to begin accepting them for another 30 day period. The final rules were to be published in August, which may not happen.
Taking a few months to get all the rules and framework ironed out is not that big of a deal as this industry takes longer to roll out than most people realize. However, underneath the surface the rules that have already been published looks like the chilling impact of lending to these new licenses may result in the same failure launch that plagued its last round of dispensary and grower applications in 2020. The Maryland legislature has established an $80 million dollar fund to help the social equity applicants capitalize their business, but half of it is going to the 12 medical licenses awarded to social equity applicants back in 2020 – none of which are operational.
Only banks are allowed to lend secured debt to social equity applicants, which really does not exist anywhere in cannabis because of the federal laws. The state is going to have a lottery, with a narrative application – for rules that have not come out yet – to randomly award licenses to social equity applicants that can only get loans from banks and cannot sell more than 35% of their business for five years. While Maryland’s cannabis license market is limited and social equity programs may appear ambitious, the only winners in them for the foreseeable future are the current players in the market.