🔒Race to Market: Now that a 300-page cannabis bill has passed, regulators, others face monumental task getting industry off ground by 2022

Before Gov. Ned Lamont signed into law the bill that legalized recreational cannabis in Connecticut, legislators and advocates spent months painstakingly laying out nearly 300 pages of legislation that detailed how the new industry will work.

And that was the easy part.

Now that legalized adult-use cannabis is the law of the land, much of the onus for standing up and regulating the industry falls to the Department of Consumer Protection, newly-created Social Equity Council (SEC) and Department of Economic and Community Development (DECD).

DCP Commissioner Michelle Seagull, who is largely responsible for building out the legal cannabis industry's regulatory regime, said she expects retail sales will probably start by the end of next year. In the intervening time, DCP and other groups have a lot of work to do, from setting specific security standards for dispensaries to creating a state-run workforce development plan for the cannabis industry.

"It's very important that we do it correctly, but I think it will happen quickly," Seagull said. "We want a program that reflects the values and priorities of Connecticut."

The speed at which Connecticut's adult-use market can get off the ground partly depends on how quickly the SEC is formed and creates licensing criteria for cannabis businesses.

Much of the SEC's responsibilities will deal with social equity applicants, such as identifying geographic areas in the state that have been disproportionately affected by the 50-year war on drugs. But the law gives SEC approval power over non-equity applicants as well.

For example, the council must approve an applicant's social equity and workforce development plans before any license is granted.

The council will operate as an independent body, but is administratively under the auspices of DECD, which will also hire the SEC's executive director, said Department of Economic and Community Development Commissioner David Lehman. Lehman said council members will make decisions and the director will implement them. DECD is currently interviewing candidates for the executive director position, Lehman said.

Once formed, SEC members have to identify and publish a list of U.S. Census tracts that qualify as "Areas of Disproportionate Impact" by Aug. 1. Five days later, the SEC is supposed to begin looking for a third-party to conduct a study on racial disparities and consequences of the war on drugs, among other things.

SEC members must finalize and publicly post final social equity applicant qualifications by Sept. 1. Those applicants can begin submitting forms 30 days later, and non-equity businesses can start applying 30 days after that, the law says. Medical dispensaries may begin applying to convert their licenses to serve the adult-use market on Sept. 1.

It's a tight timeline, Lehman admits.

"I do think there's a chance of meeting these dates," Lehman said. "We're working as fast as we can."

DECD is also tasked with helping develop a cannabis business accelerator program for prospective social equity businesses, and an industry workforce training program. The law dedicates $50 million to put these programs into action.

A large part of the SEC’s and DECD's mandates are to make sure large multistate operators don't completely dominate market share in Connecticut's adult-use cannabis industry, Lehman said.

"It is clear established players that have access to capital have a real advantage," Lehman said. "We already know larger, established players are going to be aggressive."

Licensing requirements

Outside of equity concerns, the Department of Consumer Protection will serve as the cannabis industry's primary regulator. Once the SEC is formed and lays out its standards for equity measures, DCP will accept cannabis business license applications, decide how many licenses the state will allow for each of the nine license categories and oversee a lottery process that decides which applicants it will consider, Commissioner Seagull said.

Licensing will likely be a complicated process, but the statute covers what it will look like in broad strokes.

After DCP sets the maximum number of licenses, the state will hold two lotteries for each license category: one for social equity applicants, and the other for general applicants. DCP, at first, will issue a provisional license to qualified business operators, which will then have 14 months to get everything in order for final approval.

Prospective cannabis businesses should keep an eye on the standards DCP develops for provisional licensure and have certain ducks in a row, including a business plan and a location amenable to cannabis businesses, said Daniel Glissman, an attorney with Hartford law firm MacDermid, Reynolds & Glissman PC.

"There's just a laundry list of policies and procedures [applicants] might want to review," Glissman said. "[DCP] could do a lot or they could do a little" in requirements for provisional licenses.

DCP will also approve or deny current medical cannabis businesses trying to convert their licenses to recreational-use, or hybrid medical/recreational-use, Seagull said.

The department will also provide oversight for packaging and safety standards, and set up an electronic tracking system for all marijuana sold in Connecticut, among other responsibilities.

Seagull said DCP's health and safety standards for the medical cannabis industry — which DCP also oversees — will serve as a guidepost to how it approaches the adult-use market.

"We're certainly using [medical cannabis standards] as a starting point," Seagull said. "But we recognize that a medical product is different from a product that's intended for more recreational use."

Bay State comparisons

In addition to representing cannabis industry players in Connecticut, Glissman has taken on marijuana business clients in Massachusetts for years. The lottery process definitely sets Connecticut apart from its northern neighbor, which operates on a rolling first-come, first-serve basis, Glissman said. The social equity components in Connecticut's law are also far more extensive than in Massachusetts.

It took the Bay State about two years from the time voters passed cannabis legalization via ballot referendum to when the state's first adult-use cannabis stores opened to the public. However, Glissman pointed out, Massachusetts lawmakers spent months following the vote writing specific legislation to set up a retail market and form the Cannabis Control Commission, which regulates the state’s marijuana industry. Glissman predicts adult-use sales will likely begin in Connecticut by late 2022, or early 2023.

"I could definitely see that timeline here in Connecticut," Glissman said. "I could also see it happening quicker."

That falls in line with Seagull's expectation that the market will likely open by the end of 2022.

Andrew Glassman, an attorney for law firm Pullman & Comley who represented some of Connecticut's first medical cannabis business license applicants, said the state's success in setting up the medical marijuana market bodes well for the recreational industry. While there are still plenty of details for regulators to fill in, Glassman said the nearly 300-page law indicates the state will take very seriously its role in overseeing the market.

"It's the beginning of a brand new industry in Connecticut," Glassman said. "My hope is that people who get into it understand that it's a serious business."