The General Assembly’s legislative oversight commission, JLARC, recommended several major changes to Virginia’s law legalizing the use of cannabis and the development of a commercial cannabis market.
The recommendations, which include eliminating preferences for vertical integration, narrowing the pool of social equity applicants, and moving up the timeline for the regulatory process, will likely be given heavy weight by the General Assembly as it continues its work on the cannabis legalization law in the 2022 session.
Background on JLARC Study
When the General Assembly passed legislation legalizing the possession and commercial sale of cannabis, a provision was included in the bill asking the Joint Legislative Audit and Review Commission (JLARC) to review the legislation and recommend changes before final adoption of the law in 2022.
JLARC is a widely respected nonpartisan commission of full-time professional staff that conduct dozens of studies and reviews to make policy recommendations to the General Assembly. JLARC’s previous study and recommendations were the basis for many provisions in the current iteration of the legislation.
Major Recommendations
JLARC recommended several major changes to the law that will substantially affect eligibility for applicants looking to enter Virginia’s commercial cannabis market.
JLARC recommended eliminating vertical integration preferences for registered hemp processors.
Allowing vertical integration for certain applicants is a key provision in the law that established a considerable preference for those currently operating in Virginia’s existing hemp market. JLARC noted that because industrial hemp processors are registered but not licensed, the requirements for registration are very low compared to the proposed guidelines for cannabis licensure.
If the General Assembly were to adopt this recommendation, only registered pharmaceutical permit processors would be allowed to vertically integrate their businesses. Pharmaceutical permit processors interested in vertical integration are still required to pay the $1 million fee to the Cannabis Control Authority and submit and implement a diversity, equity, and inclusion plan to the Board.
JLARC recommended narrowing the qualifications for “social equity applicants.”
JLARC suggested narrowing the qualifications for social equity applicants by eliminating the criterion that gives preferential status to applicants whose close family member(s) have been convicted of a marijuana crime.
JLARC noted that the reason for eliminating this provision is that it creates a pool of applicants substantially larger than those created by other criteria. Making the criteria more exclusive will open the space for a more diverse group of applicants, including candidates from more economically distressed areas of Virginia and graduates of HBCUs.
In order to qualify as a social equity applicant however, the applicant must still apply on behalf of a business where at least two-thirds of ownership fit at least one criterion.
JLARC recommended moving up the timeline to begin accepting applications January 1, 2023.
Moving up the date for implementing regulations and accepting applications to January 1, 2023 will allow an additional year for the market to develop before legalized sale officially begins on January 1, 2024. This will speed up the regulatory process and allow for more time for the VCCA to craft thoughtful and sound regulations.
Other Recommendations
The Commission suggested additional provisions relating to possession, zoning and permitting, license sub-categories, and others, including:
- Add a misdemeanor offense for possession between the $25 civil penalty and subsequent felony offense.
- Clarify limits on the amount of marijuana that can be possessed at a residence or privately-owned property.
- Establish emergency regulations for possession equivalencies for non-flower marijuana products.
- Clarify legality and legitimacy of commercial transactions with license marijuana operations (i.e. banking, finance, insurance, and other ancillary services).
- Direct the Department of Criminal Justice Services to develop model marijuana law enforcement policy and training.
- Reduce the number of locations for medial licensees from 6 to 3 per health service area.
- Clarify restrictions on the sale of tobacco and alcohol at retail marijuana locations.
- Establish size-based cultivation classifications and set a maximum size limit on the largest classification of cultivators.
- Expand vertical integration options for the smallest tier of cultivators to sell at retail.
- Exempt smallest classification of cultivators from license caps.
- Create different classifications of manufacturing and wholesale licenses.
- Authorize wholesalers to package and label products.
- Clarify local authority on zoning and permitting.
- Clarify restrictions on the sale of tobacco and alcohol at retail marijuana locations.
Next Steps
JLARC’s recommendations pose major questions on the readiness, purpose, and structure of the proposed cannabis market that the General Assembly will be forced to debate. With the Virginia Cannabis Control Authority set to be created in less than a month, it will be more important than ever to prepare for significant and potentially austere changes that could change the course of your business.
The deadline for applications could be here sooner than expected. Gentry Locke Consulting offers regulatory and licensure guidance to get you and your business ready to enter Virginia’s new cannabis market.
Visit www.gentrylocke.consulting/cannabis for more information about our services.