Connecticut’s Social Equity Council wants a legislative fix to prevent market saturation from cannabis cultivation applicants that can buy their way past the state’s licensing lottery, but there may not be enough time for it to take effect.
“The issue is that currently there is no limit on the number of social equity applicants that can apply for disproportionately impacted area (DIA) cultivator licenses if they pay three million dollars to forgo the lottery process,” said Council Chairman Ed Shirley. “This could open the way for market saturation. We know the DCP (Department of Consumer Protection) wants to limit cultivation in the state to 1.2 million square feet of total space.”
The SEC held a special meeting on Feb. 17 to discuss and approve a collection of recommendations for the state legislature, one week out from the deadline for new bills.
Connecticut recently began accepting applications for its adult-use cannabis market earlier this month. Each week, one of the eight different license types start their 90-day window for applications. Most recently, the state began accepting applications for cannabis delivery businesses on Feb. 17.
At the same time, prospective cultivators from disproportionately impacted areas can skip the lottery process with a $3 million fee. Similarly, larger companies can partner with individuals that qualify as social equity applicants for a $1.5 million fee.
The Council recommended that at the very least, the legislature re-examine the rules for DIA cultivators and Equity Joint Ventures to ensure that the market isn’t crowded. They also recommended setting a cap on the number of EJVs a single operator can start.
“The ones who most need a leg up could be left out of the market, which could be saturated by unlimited equity joint ventures,” said Shirley.
Although the Council could still get their recommendations to the legislature in time for a bill to be introduced, any actual change to the law would likely come after the 90-day window expired for DIA cultivators.
The 90-day window for lottery applicants will be repeated with subsequent rounds of open application periods. The second is expected by the end of 2022.
Council member Christine Shaw wondered if there were any estimates for what the expected market share might be for social equity license holders.
“When this program is up and running, has anyone estimated the number of social equity applicants who will likely be participating in the market. It’s got to be what? three or four dozen?” she asked. “Has anyone estimated the universe of potential social equity applicants in the cannabis market?”
Unlike other states with adult-use cannabis markets, Connecticut defines social equity status based on income and geographic location. The applicant must hail from one of over 200 census tracts among the state’s 833 that represent communities disproportionately impacted by the War on Drugs.
The Council voted to approve the recommendations.