Cannabis industry is waiting - state guidelines are still in flux

Business owners, employers, and communities worrying about how to tackle the Connecticut cannabis retail market legalized next year are still faced with government guidance that, in some cases, is incomplete, confusing, or simply non-existent.

According to Andrew Glassman, attorney at Pullman & Comley, this is indeed "not for the faint of heart".

Glassman, co-chair of the Pullman Business Organization and Finance Practice, was one of the speakers at the Bridgeport law firm's "Cannabis in Connecticut" webinar on October 6th.

Part of the problem, according to Glassman and other Pullman lawyers, is the slow adoption of regulations by the Social Equity Council, which is designed to ensure that the adult cannabis program is grown fairly and that funds from the program get into the communities flow back, those hardest hit by the war on drugs.

"We are sitting here and waiting and wondering what the SEC is going to do," said Glassman. "It has not established guidelines for the management and control of eligible capital structures.

Additionally, while some of the firm's clients have considered convertible bonds to capitalize on their businesses, it is unclear whether this would meet the criteria of the SEA (Social Equity Application).

As explained by Glassman's co-chair, Nancy Hancock, the SEC is expected to recommend additional qualifications and expedited or priority licenses for SEAs by January 1. Its task is to establish minimum criteria for all cannabis operations licensed as of this date that do not hold an SEA in order to fulfill a personnel development plan for reinvestment or for the provision of employment and training opportunities for people in disproportionately badly affected areas (DIAs).

"I've heard that maybe 22% to 23% of Connecticut residents are eligible DIA residents," Hancock added.

It is also currently uncertain how the state consumer protection agency will run its lotteries - at least two - to choose who will be allowed to operate under the new law, which, as the name suggests, depends at least in part on luck. The DCP will announce the total number of applications to be selected and award 50% of them to a third lottery operator.

Hancock pointed out that 50% of the licenses will go to the SUP applicants, so the general lottery will not take place until a sufficient number of SUPs have been selected for that license group.

After what appears to be a rather cumbersome process, applicants selected in the lottery must complete a preliminary application and pay the appropriate fee; the interim licensee has 14 months to obtain a fully functional license.

Glassman pointed out that there are alternatives for those who don't want to rely on the luck of getting a license. Converting an existing medical marijuana license appears to be one of the easiest, with growers being able to switch from July 1st and dispensaries from September 1st.

A problem? There is currently no application for a changeover.

A second problem is the cost of the switch; Glassman said he heard growers want to spend up to $ 300 per square meter on the conversion, while pharmacy conversion efforts will be "significantly less expensive".

Instructions on how interested parties can skip the lottery are also still in progress; a number of joint venture opportunities including those with an SEA. Glassman said Pullman's best guess is to start its retail cannabis business in Connecticut in mid to late 2022.

Gary O'Connor, co-chair of Pullman's Real Estate, Energy, Environment and Land use division gave an overview of the various rights communities have over adult cannabis, including control over production, retail sales and public consumption , number and location of cannabis operations, and consumption of the product on communal or controlled property.

According to the statutes, municipalities can choose one of four ways of zoning, including the option of not taking any action. O'Connor warned, however, that an enterprising retailer could apply for a permit in the same area and in the same way as a liquor store.

Other options include allowing or denying adult retail stores - Greenwich has done the latter - or introducing a moratorium, as has been done in places like Danbury and Trumbull.

However, attorney Steve Stafstrom, who is also a state MP, warned that there are limits to local authority. For example, a pharmacy in Stamford could offer a delivery service to Greenwich; Stamford would then receive 3% local sales tax as the product is "sold" there, unless Greenwich specifically prohibits such transfers.

Megan Carannante, co-chair of Pullman's labor law department. Megan Carannante, co-chair of Pullman's labor law and benefits division, said employers can still set up drug-free workplaces and prohibit their employees from being under the influence of cannabis while at work - despite pointing out that Jan. Next July, employment protection comes into effect for those who choose to use cannabis outside of work and / or before hiring.