🔒As recreational marijuana sales prep for debut, regulators reflect on launching new industry

Following the passage of Connecticut’s cannabis legalization law in 2021, the state Department of Consumer Protection and newly-created Social Equity Council had a tall task in 2022: prepare the launch of a tightly regulated new industry.

After a year of crafting application language and qualifications and overseeing license lotteries, Social Equity Council (SEC) Chair Andrea Comer and Department of Consumer Protection Commissioner (DCP) Michelle Seagull said they have successfully laid the groundwork for the state’s adult-use marijuana market to begin Jan. 10, even if there were some growing pains along the way.

“Obviously nothing that you build from the ground is without its stumbles or challenges, but I think we’re at a net equal or net positive in what we’ve been able to get done,” said Comer, who is also deputy DCP commissioner.

However, Comer won't be in her DCP role for much longer, She is leaving the agency at the end of the year to become chief of staff for incoming State Treasurer Erick Russell, WTNH reported Sunday.

2022 recap

While the state initially eyed the end of this year for recreational sales to begin, that won’t happen. Instead the adult-use market will debut on Jan. 10, at 10 a.m.

As of Dec. 9, nine medical marijuana dispensaries were approved to serve the recreational market. They will be the first retailers to offer product to adult-use customers.

DCP set the industry’s launch date after all four existing medical marijuana producers — Advanced Grow Labs, Connecticut Pharmaceutical Solutions, Curaleaf and Theraplant — met the requirements for a hybrid license that allows them to supply both the adult-use and medical marijuana markets.

The law required at least 250,000 square feet of growing and manufacturing space to be approved for adult-use production before retail sales could begin. After all four existing producers successfully converted to a hybrid license, that threshold was met.

More dispensaries will come online in 2023, along with other cannabis business types. As of Dec. 9, the state doled out 42 provisional licenses for everything from retail stores to micro-cultivators. There are currently 100 businesses moving through the licensing pipeline, Seagull said.

“Even if there’s a smaller number (of growers and retailers) on day one, there is a pipeline of companies that are moving towards final approval, so more will be added on an ongoing basis,” Seagull said.

The lottery and licensing processes haven’t been without hiccups and learning experiences. For example, several social equity cultivator applicants sued the state this past summer after their initial license bids were rejected for not providing enough information about ownership structures. Companies eventually dropped their appeals after the Social Equity Council voted to allow them to resubmit certain parts of their applications for another review.

Looking back at the past year, Comer said navigating the licensing process and regulations was a challenge but something she’s proud the SEC worked through.

“The legislation itself was a bit of a stone suit, so there were lots of bits and pieces and not everything connected along the way,” Comer said. “One of the challenges was trying to figure out, ‘how do we take this legislation, make it as equitable as possible in terms of implementation, and where are the places we can course-correct?’”

Looking ahead

Comer said the Social Equity Council’s recent approval of a $50-million loan program will be crucial for some businesses in 2023. Interest rates for the loans geared toward social equity businesses will range between 6% and 9%.

“I think it is going to be tremendously helpful for social equity applicants,” Comer said. “We keep hearing about the astronomical interest rates they’re being offered, because where you can go and get your funding from is limited, so this is going to be a program that will have a much lower interest rate.”

Businesses applying for a social equity loan will be able to qualify for an additional 1.5% interest-rate discount if they enroll and complete the council’s business accelerator program, which is being run by Oaksterdam University, America’s first cannabis college, in partnership with Hartford business accelerator reSET.

Seagull said the DCP will keep a close eye on the adult-use market’s launch early next year to make sure things operate smoothly. The industry must work for both new recreational customers, while also preserving the state’s existing medical program, she said.

“If we can succeed in laying that foundation, a lot of next year is going to be expanding things out and getting final licenses to businesses,” Seagull said. “Over time, we want to build this out so we have a really robust industry in the state.”

Comer said identifying ways to reinvest in communities impacted by the war on drugs, another component of last year’s law, will be a large part of what the Social Equity Council focuses on in 2023.

DCP will also be looking at the existing supply chain and industry infrastructure when deciding how many more licenses will be doled out in a second lottery, which is likely to take place in the year ahead, Comer added.

A “balanced approach” to licensing is key, she said.

“You don’t want to have too many retailers and not enough product, or vice-versa,” Comer said. “We have examples from other states where they have under-calculated or over-calculated what that number should be.”