Co-Authored by Jessica Tang
Researcher/Summer Associate 2021
There is growing excitement among Connecticut's business community about the prospects for a legal adult-use marijuana market. Entrepreneurs, growers, and investors are beginning to develop business plans and looking for more information on how to obtain a license. Though specific licensing criteria and application deadlines have not been established yet, the law provides some guidance to allow the business community to start planning now.
LICENSE TYPES, REQUIREMENTS & FEES
The law creates two groups of applicants, Social Equity Applicants and general applicants. A "Social Equity Applicant" is at least 65% owned and controlled by an individual or individuals, or is an individual, who:
- Had an average household income of less than 300% of the state median household income over the three tax years immediately preceding the application; and
(a) was a resident of a disproportionately impacted area for not less than five of the ten years immediately preceding the application; or
(b) was a resident of a disproportionately impacted area for not less than nine years prior to turning 18.
For all applicants, there are 7 types of licenses available with set fee schedules as outlined in the table below.
Any person qualifying as a Social Equity Applicant will receive a 50% discount on all fees for its first three renewal cycles. Consequently, those who qualify will receive substantial financial savings to begin their operations. However, whether classified as a Social Equity Applicant or a general applicant, medical marijuana dispensary operators who wish to convert their existing license into a hybrid retailer license -- which would allow the dispensary to sell for both medical and recreational use -- must pay a fee of $1,000,000. Similarly, an existing medical marijuana producer wishing to convert their license to include recreational marijuana must pay a fee of $3,000,000. These established marijuana businesses will not receive an automatic 50% discount on license fees even if they qualify as Social Equity Applicants, but may be eligible for discounted fees if they commit to creating equity joint ventures.
The Connecticut Department of Consumer Protection (the "Department") will not award a license to any lottery applicant who has two or more licenses of a given license type at the time of the lottery, until June 30, 2025. As of now, the legislature has not set limits on the number of applications an applicant may submit.
LOTTERY SYSTEM
Licenses will be awarded by lottery with Social Equity Applicants drawn from a separate lottery than general applicants. Social Equity Applicants will receive 50% of all licenses awarded for each license type, while general applicants be awarded the remaining 50% of licenses.
Award of a Provisional License and Application for Final License
Once an applicant has been selected from the lottery, licenses are provided in a two-step process. First, the applicant will receive a provisional license, provided the applicant completes its application within 60 days and pays the necessary fees. The provisional license will expire 14 months later at which time an applicant must apply for a final license by paying the required fee and providing evidence that it has met certain criteria.
Priority for Existing Dispensaries
It is important to note that, though Social Equity Applicants will receive priority over general applicants, existing medical marijuana dispensaries still may be first in line. A dispensary may convert its license to a hybrid retailer license on or after September 1, 2021, without going through the lottery process. Dispensary facilities that have been approved by the Department and that have converted to hybrid retailers may open to the general public and commence adult use cannabis sales at a date to be published on the Department's website. State regulators currently anticipate retail sales of adult-use marijuana will begin by the end of 2022.
TIMELINE: LOOKING AHEAD TO LICENSURE
Prospective applicants should keep in mind the following important dates:
- July 31, 2021: All appointments to The Social Equity Council (the "Council") should be made by this date. The Council is established to create ownership, residency and income requirements for Social Equity Applicants and to review applications of social equity applicants. As of July 22, 2021, several members had been appointed.
- September 1, 2021: The Council will post the necessary documentation requirements on its website to inform applicants of such requirements prior to the start of the application period.
- 30 days after the Council identifies the licensing criteria for Social Equity Applicants, the Department will begin accepting applications for all license types. Prior to this date, the Department will set the maximum number of applications to be considered for each license type; 50% of which will be solely dedicated to Social Equity Applicants.
Of course, dates are subject to delays, which have occurred in other states that recently passed adult-use marijuana laws. The big questions left unanswered by the law include when the Department will start accepting applications, and the projected timeline for license approval.
In sum, there is much uncertainty associated with the license requirements and timeframe for the launch of recreational marijuana sales in Connecticut. Nevertheless, prospective applicants can identify the type of license they want, start budgeting for the license fees, determine whether they qualify for priority as existing dispensaries or Social Equity Applicants, and determine the structure of their business. We will continue to analyze this law and publish updates as more information becomes available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
