House Bill 1, introduced by Delegate Luke Clippinger, the chair of the House Judiciary Committee, proposes a referendum on the Maryland November 2022 state-wide ballot to approve the adult use of cannabis in the State of Maryland. Although sometimes referred to as “legalization” or “recreational use,” both terms are somewhat misnomers. Maryland cannot “legalize” cannabis so long as it is a controlled substance under federal law. The referendum in its current format only would allow “use and possession” of cannabis, not cultivating, processing, or selling cannabis. “Recreational use” is also overly broad because the referendum would allow adults over the age of 21 to use and possess cannabis.
Delegate Clippinger is the chair of the Judiciary Committee, which will hear the bill in the House of Delegates, and was also the chair of the House Cannabis Referendum and Legalization Workgroup, an interim committee that spent countless hours off-session developing a strategy to approve adult use in Maryland.
Recent efforts towards approval
Bills have been introduced in both the House of Delegates and Senate over the last several years but were unsuccessful. The Maryland Speaker of the House publicly supports placing legalization on the 2022 state-wide ballot as a referendum initiative. Several high-ranking senators have suggested that either a bill that would establish a legal market on its own, or be a companion to a referendum should be the goal. A legalization work group was established in 2019 and has been working during 2021 to develop strategies for a legal adult-use market.
2022 Policy Initiatives
With House Bill 1 being one of the first bills, and introduced by a legislator who chairs the committee that will consider the bill, HB1 should receive serious consideration and traction this session. Beyond HB1, more needs to be done to bring adult use to Maryland. A referendum will not provide the statutory framework and regulatory delegation necessary to implement adult use in the State. During prior sessions, several top-ranking Maryland Senators and Delegates introduced legislation that would implement a statutory and regulatory framework with varying strategies for regulating this new industry. To streamline implementation of adult-use after the likely approval of a referendum by Maryland voters, a bill that would implement the adult-use market could be passed this session pending a positive referendum result. Otherwise, even after a referendum in November, Marylanders would need to wait until the 2023 legislative session for legislation implementing the adult-use market, delaying its adoption.
The 2022 Issues Paper was divided into two separate sections regarding adult-use legalization: (1) health care concerns; and (2) policy/regulatory initiatives.
Policy & Regulatory Framework
The issues paper cited four main policies that adult-use legislation should include: (1) regulatory structure for taxation and the production, sale, and possession of legal cannabis; (2) expungement of prior convictions and related crimes; (3) a structure for equitable ownership in cannabis-related businesses; and (4) social equity programs to compensate communities adversely impacted by prior marijuana-related crimes.
For taxation, the issues paper reported that a 10% tax rate for retail and wholesale cannabis sales would generate tax revenues of approximately $97 million and business tax revenues of approximately $33 million for the state. A 15% tax would generate $117 million and $29 million respectively. Either tax would be less than the 21% recently approved by Virginia’s adult-use legislation, but represents a significant increase above the current medical market.
Concerning the regulatory structure, prior legislation suggested establishing a separate regulatory body from the Maryland Medical Cannabis Commission (“MMCC”) that regulates the medical market. Other legislation proposed dissolving the MMCC and regulating both adult-use and medical markets under a single regulatory body. In a presentation to the House workgroup in November, MMCC Director Will Tilburg informed the legislature that 17 out of 18 states with adult-use markets regulate medical and adult-use cannabis under one entity. For current Maryland operators, the prospect of having two regulatory bodies to answer to, depending on the customer’s status as a medical or recreational customer, could be daunting.
However, a constitutional and legislative roadblock may prohibit the MMCC in its current format from supervising both medical and adult use. The MMCC is a separate regulatory agency under the Department of Health. The adult use market would need to be regulated as a health-oriented industry to fall under the purview of the MMCC. The legislature could always expand on the MMCC’s authority to remain a single regulatory agency and the continuity and history of the MMCC’s development of the cannabis industry may be beneficial to current operators.
Health Care Concerns
The 2022 Issues Paper recognized that there are limited studies regarding the health effects of cannabis, but did cite certain known potential health effects (use during pregnancy, cannabis use disorder, traffic accidents and driving under the influence). However, the Issues Paper also noted that while use among adults grew in states that authorized adult use, youth cannabis consumption remained stagnant or actually decreased in those states. There is also a distinct health benefit to cannabis users who purchase on the black market if they can now purchase cannabis that has been tested, comes with certificates of analysis, and comes from dispensaries and processors that have strict chain of custody and quality assurance obligations.
The 2022 legislative session promises to be momentous for the cannabis industry in Maryland. As the regulatory and legal framework changes, and as more licenses potentially come online, the Cannabis Law practice group at Goodell DeVries will be actively monitoring legislation. The attorneys in the Goodell DeVries Cannabis Law group serve as outside regulatory advisors, outside general counsel, and have assisted clients with preparing and submitting applications to regulators for cannabis licenses. For questions regarding this article or the cannabis industry in Maryland, please contact Justin Tepe, co-founder of Goodell DeVries’s Cannabis Law group at email@example.com or (410) 783-4012.