Unless you’ve lived there or you pass through regularly, Maryland can be an easy place to forget. Small, wedged in between more consequential places like Washington, DC, Pennsylvania, and New Jersey, you’re invited to think of it as a place on the way to somewhere else.
But when it comes to cannabis, that would be a mistake. Maryland’s medical program had over $42 million in sales last June, between 103 licensed dispensaries and 18 growers. And all of that is expected to hit the rocket boosters, since voters are expected to approve Question 4, a straight up or down question, by a wide margin in the November general election. A March 2022 poll from Goucher College shows 62% of Maryland voters support legalization while only 34% oppose it.
But because “yes” or “no” is all the referendum answers, once it presumably passes, the details will then get tossed back to the state legislature, which local operators tell me, will likely take its time to write the rules.
New licensees, especially, will need lots of time before they can start selling, says Mackie Barch, co-founder of grower and dispensary, Culta.
“The average time to stand up those businesses will be three years. One year for applications. Build, one year. Another six to nine months to get the cannabis out the door,” he warned.
And exactly what those rules would be are up for grabs: As Barch hinted, should existing medical licensees be granted automatic adult use licenses that can operate right away, like New Jersey did? How many more licenses should be created? Should Maryland even be a limited license state? And should the legislature directly control the process, like in Illinois, or should it empower a commission to make decisions like in New York and New Jersey? And what should the tax rate be?
Existing operators, not surprisingly, want to see the state continue to limit licenses. Not only so they can maintain the value of their own licenses, but also because rapid cannabis price drops in unlimited license states like Michigan and Massachusetts have spooked them. How do you stay in business if you don’t have a margin?
“I don’t see [that] legislators are going to approve unlimited licenses in Maryland,” said Tracy Lancaster Miller, a dispensary owner and president of the Maryland Medical Dispensary Association (MDMDA). “We’ve seen that in other states, and that doesn’t work with the price drops. We’re asking them to pay attention to how to create a more limited license market to create opportunities for social equity applicants, and so small businesses are able to flourish.”
Meanwhile existing operators also plan to push the legislature to allow them to immediately convert to adult use sales, soon after the referendum passage.
“Voters are going to want a program that coincides with their vote. A big reason to create the industry sooner rather than later is to prevent the illicit market from taking hold in the time between passing the referendum and the beginning of sales,” said Justin Garcia, director of compliance for SunMed, a grower based on the state’s Eastern Shore.
Partly in anticipation of the coming adult use laws, Garcia says SunMed recently expanded its 60,000 square feet of greenhouses to include 150,000 square feet of outdoor grow.
“We knew a referendum was on the table,” said Garcia, “and we solved the demand of where the medical market was. It’s a $650 million market for medical. Recreational will put it at $2 billion.”
But many social equity operators have had trouble standing up, says Brandon Wyatt, compliance director for MAS Alliance, a Black and family-owned grow operation based in Eastern Shore that is still in the capital raise stage. The big plans existing operators have are just fine, but in order to stay alive, social equity operators will need some sort of special dispensation, like ensuring they get adult use licenses to match their medical licenses, and some sort of capital assistance, like state-backed loans.
“It would be unfair for us to have to recompete for recreational licenses. We’d hope the legislature would allow us to pay a fee and grandfather us in,” said Wyatt. “Social equity applicants, due to the difficulties of raising capital in Maryland, have had trouble getting capitalized. If they can’t be grandfathered in, it could truly ruin their chances…It would be borderline criminal to be honest.”
On the other side of things: Three large multi-state operators, PharmaCann, Curaleaf, and Green Thumb Industries, are already doing business in the state. But Maryland-based operators think the big guys are likely to have the same problems as everyone else.
“They’re capital constrained too. If you look at what’s happening, their stocks have been decimated. I think there’s going to be a rationing of these MSOs,” said Culta’s Mackie Barch. “They’re going to have to get profitable, and a lot of them aren’t. They don’t have unlimited capital to spend in each market. They have to be choosy too.”
Exactly how fast state government can respond to changing market needs is another major issue for Maryland operators. New Jersey’s Cannabis Regulatory Commission has made a big impression, as the CRC so far has been able to pivot quickly and make big changes to license requirements and processes without running them past a lethargic legislature first. In contrast, the Maryland Medical Cannabis Commission has proven a disappointment, as it turned out to not have enough authority to make as many license and regulatory changes as many operators would like.
“The current commission, when medical launched, I believe it was given authority without the ability to enforce, it wasn’t able to really do some of the things it was set out to be able to do,” said MDMDA’s Lancaster Miller.
For instance, Maryland’s has a two-step process for approving medical cannabis patient status that can take up to a month, in some cases, says Miller. Just over the border, in Pennsylvania, their system takes 2-3 days. And because Pennsylvania is so much bigger, large enough to have “it’s own ecosystem” she calls it, Maryland has to pay close attention to its neighbors.
“We’re all just so connected because there are people who live in Maryland but work in Pennsylvania. We’re used to crossing those state lines in our daily lives, so we have to be aware of what all of those states are doing,” she said.
Meanwhile, operators are concerned that a rush to adopt other states’ systems may take away the very things that made Maryland’s system work in the first place.
“What makes Maryland a great market is the rigorous testing,” says SunMed’s Garcia. “We created something good in Maryland. We want to make sure the medicine we do have is safe. And if we can keep that same pathway for how medicine should flow…[Then] we think there’s enough pie out there for everyone to be happy.”