Issue 51: A Deep Dive Into The Ocean State
As Rhode Island's Cannabis Control Commission (finally) gets to work, I look at what lies ahead for one of the country's most compact cannabis markets
This week, I take a break from reacting to the latest cannabis news to do a deep dive into Rhode Island's emerging cannabis economy.
Rhode Island: A State (Where Weed Is) For Sale
After years of debate, Rhode Island legalized in May of last year when Governor Dan McKee signed the Rhode Island Cannabis Act into law.
The industry will be governed by the three cannabis commissioners that were recently appointed. The chair (Kimberly Ahern) is a full-time state employee, while the two other commissioners (Robert Jacquard and Olayiwola Oduyingbo) will receive stipends for performing their duties.
(This is in pretty big contrast to Massachusetts, where the industry is regulated by five full-time commissioners.)
Day-to-day implementation of the laws and regulations will be handled by the Cannabis Office, a division of the state’s Department of Business Regulation.
Rhode Island’s state sales taxes for cannabis comes out to 20%, about the same as Massachusetts (when you account for the Bay State’s optional 3% local tax).
How Future Dispensary Licenses Will be Decided
The law allows for up to 33 retail licenses to be awarded. For one reason or another, Rhode Island’s legislature decided to take the zone system that was used to hand out additional medical marijuana licenses and apply it to these new recreational dispensaries as well. This means that the 24 additional retail licenses that will be awarded will be divided evenly amongst the six zones. Each of these zones will be required to have one social equity license, and one workers’ cooperatives license (more on these topics below).
Anybody who is familiar with the state’s population distribution will quickly realize that all of these zones are not created equal. While I think there are locations within every zone where a dispensary could do decent business, the vast majority of Rhode Island’s residents live in and around the Providence area.
Other than the zones and the cap on the amount of dispensaries, the law largely allows the CCC to decide how they will go about allocating these additional licenses.
Social Equity
While the state’s social equity language was clearly modeled after regulations in Massachusetts, there are some notable exceptions. One of the major differences is that the fact that Rhode Island has specifically set aside six licenses for social equity applicants.
Setting aside licenses for equity is an admirable idea, but one of the qualifying criteria for being declared a social equity applicant has some activists concerned: a provision that allows the participation of anyone who can “demonstrate past experience in or business practices that promote economic empowerment in disproportionately impacted areas.”
While many people feel that social equity programs should include provisions that include people who have been impacted by the War on Drugs beyond an arrest, this rule has the potential to open up these licenses to basically anyone who has ever run a business in whatever areas of Rhode Island end up being designated areas of disproportionate impact.
It seems that there’s some demand to adjust the social equity program’s requirements to ensure that they are not taken advantage of, but such a fix would have to come via the legislature.
In addition to the licensing carve-out, the new law also creates a social equity trust fund that can be used to fund licensing fees, workplace training, and other programs meant to reverse the negative impacts of the War on Drugs. While all the licensing fees from the cannabis program will be placed in this fund, cannabis sales tax revenue will be put into the general fund instead, limiting the equity fund’s ability to grow exponentially.
Based upon fees that have already been paid by existing dispensaries, It’s expected that the fund will start out with a balance of somewhere around $1.5 million.
Workers’ Cooperatives
Rhode Island is currently the only state in the country that has specifically set aside cannabis business licenses for cooperatively owned businesses. Each of the six cannabis zones will be required to have at least one dispensary that is employee-owned and operated.
In addition to the worker cooperative carveout, the Ocean State has another worker-friendly provision: similar to other states like New York and New Jersey, Rhode Island’s law requires license holders to sign a labor peace agreement.
The Role of the Cannabis Advisory Board
Like Massachusetts, Rhode Island has a volunteer advisory board made up of experts from a variety of different backgrounds. Comprising eight voting members and eleven non-voting members, this board is meant to advise the Commission on policy changes. Unique to Rhode Island, the law requires the chair of advisory board to be an expert in social equity.
While it’s easy to dismiss the importance of a board that doesn’t actually have any authority to change regulations, I suspect that the fact that two of the three commissioners are only part-time employees might mean that they lean pretty heavily on the advisory board to come up with regulatory proposals.
What’s still unknown
There are still some major questions regarding the rollout of legalization in Rhode Island.
Will there be further changes to the laws and regulations?
Cannabis was legalized by the state’s legislature, and they are free to further change the law however they want. This year’s session of Rhode Island’s General Assembly is set to end on June 30th, but it’s possible that they take up more cannabis legislation when they reconvene in January.
Even if the legislature doesn’t make any major changes, the Commission still has a number of things to decide:
Retail licensing process: The current assumption is that the next round of retail licenses will be handed out via a lottery, which would be the same way that the previous round of medical marijuana licenses were awarded. However, the new chair hasn’t ruled out a competitive application process, and it’s ultimately up to regulators to determine how to go about granting the final 24 dispensary licenses (beyond the geographic zone requirements).
Other license types: The Rhode Island Cannabis Act specifically empowers the Commission with the ability to request that the legislature create additional license types like delivery, social consumption, research, or special event licensing. However, with a number of urgent topics to tackle, I wouldn’t necessarily expect the Rhode Island CCC to make immediate moves in this area.
What’s the timeline for more dispensaries getting open?
It’s unknown at this point, but Chair Ahern told a local NBC affiliate that she expects for licenses to be issued sometime in 2024.
This means existing dispensaries will have at least a year of adult use sales under their belt before new retail stores come online.
I also count at least 20 Massachusetts dispensaries within a 10 minute drive of the Rhode Island border, most of which have been operating for years now.
While I like to think people will vote with their wallets and exclusively shop at social equity businesses and worker cooperatives once they open, real world examples have shown it can be very difficult to get customers who are used to shopping at one store to suddenly start shopping at another. Allowing these dispensaries to operate for months – or even years – before competitors are allowed to open is giving them a massive advantage that will be difficult for newer companies to overcome.
How many independent cultivators will survive 2023?
Believe it or not, there are over 60 independent cannabis cultivators in Rhode Island. That’s because in 2017, the state decided to start licensing standalone medical cultivation facilities. This was a departure from the previous situation, where medical marijuana license holders had to cultivate and produce virtually all of their own products, with caregivers filling the gaps.
While the addition of these independent grows allowed for more widespread participation in the state’s cannabis market, most of the established dispensaries have chosen to still produce as much product in-house as possible, giving cultivators relatively small scraps of the remaining market to fight over. The addition of recreational sales has created more demand from products from independent growers, but it’s still not enough to support all 60+ cultivation license holders. One cultivation owner told WPRI that she has her doubts that all the existing cultivators will last until new dispensaries open.
It’s possible that we could see the new CCC make some immediate efforts to bring relief to independent cultivators, but drastic action will need to be taken if all the current growers are going to stay operational until there are more paths to market for their products.
How will the municipal game play out?
While Rhode Island (thankfully) doesn’t have community host agreements like Massachusetts, municipalities still have control of the local zoning process. This could be a potential barrier to social equity efforts, as established figures in local cities and towns are likely to have an upper hand when it comes to getting local approvals for prime locations.
My Overall Thoughts on Rhode Island
While the state has taken a number of innovative steps to support a more equitable cannabis industry, I can’t help but notice the massive advantage that the existing dispensaries already have. The long delay from the Governor in appointing commissioners to form the CCC has only increased that advantage, and I wouldn’t be surprised if the existing dispensaries do everything possible to further undermine the rollout of additional licenses.
At the same time, rushing to award licenses would mean there’s no time to fix the state’s social equity provisions, particularly the one that could potentially allow for basically any business owner or entrepreneur to claim that they are an equity applicant.
Rhode Island’s legalization plan looks pretty good on paper, but there’s a ton of work to do in the next few months if we want reality to meet expectations.
Frequent federal investigations into Rhode Island state officials (and other recent events) have reminded us that the state hasn’t really changed all that much from the days when Lincoln Steffens wrote about it back in 1905. Given Rhode Island’s reputation for backroom deals and corruption, advocates and prospective license holders are going to have to keep a very close eye on the entire rollout process to keep bad actors at bay.
Attending the RI Social Equity Policy Salon this week helped inform my writing on this subject. If you’re interested, their next meeting will be on July 17th from 6pm-7:30pm at Sweetspot Dispensary in Exeter.
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New England
NEW RHODE ISLAND LAW ALLOWS MARIJUANA RETAIL ADVERTISEMENTS (MjBizDaily)
Advertisements may run online, in broadcast media such as TV or radio, in print media such as newspapers, magazines and direct mail as well as outdoors on billboards and “street furniture.”
The ads must “clearly and conspicuously” show Rhode Island’s universal marijuana symbol in color as well as the retailer’s license number and the statement: “For Ages 21+ and medical cannabis patients.”
ANALYSIS: The new regulation only “encourages” license holders to ensure that 85% of the targeted population for an ad can be reasonably expected to be 21 or older – a suggestion that I’m sure most businesses will be happy to ignore. While the billboard angle of this story is getting all the attention, the real story is that Rhode Island now has some of the most lax marijuana advertising rules in the region, if not the entire country.
Rest of U.S / National
MARIJUANA DISPENSARIES PUSH BACK AGAINST PHILLY’S RECREATIONAL ZONING BAN (Kristen Mosbrucker-Garza | WHYY)
If new zoning rules proposed by Philadelphia City Councilmember Brian O’Neill are approved in the coming months, several medical marijuana dispensaries across Northeast Philadelphia will be cut out of the future recreational market. Councilmember O’Neill introduced a bill to amend two zoning overlay districts to prohibit the sale of recreational marijuana.
ANALYSIS: Large cannabis companies have made a habit of getting into exclusive neighborhoods by pledging to never sell recreational cannabis, only to go back on that promise the second adult use laws are passed. It’s my understanding that this “ban” can be overruled by the city’s zoning authority on a case-by-case basis, but at least this process would require dispensaries to meet with community members again.
3 MARIJUANA CONSUMPTION LOUNGES APPROVED IN NEVADA (McKenna Ross | Las Vegas Review-Journal)
Nevada regulators approved the first three cannabis consumption lounges on Tuesday, including two in the Las Vegas Valley, paving the way for some of the state’s first public spaces that allow marijuana use.
Planet 13 and Thrive Cannabis Marketplace in Clark County and The Venue at SoL Cannabis in Washoe County all unanimously received conditional licenses for their consumption lounge plans. The licensees must receive approval through their local jurisdictions and undergo a final inspection before opening.
ANALYSIS: I went to Planet 13 when I was in Vegas for MJBizCon, and noticed there really wasn’t much to do there once you made a purchase. It seems like the perfect spot for a consumption space, and if lounges can’t succeed in Vegas, I’m not sure they can succeed anywhere.
NFL IS PUTTING MORE MONEY INTO RESEARCH ON CBD AS AN OPIOID ALTERNATIVE FOR PLAYERS WITH CONCUSSIONS (Kyle Jaeger | Marijuana Moment)
The National Football League (NFL) and its players union announced on Thursday that they are jointly awarding another round of funding to support independent research on the therapeutic benefits of CBD as a pain treatment alternative to opioids for players with concussions.
A total of $526,525 is being granted for two studies, including one that will be led by the American Society of Pain and Neuroscience (ASPN) to explore cannabidiol and non-invasive vagal nerve stimulation (nVNS) as alternative treatments for post-concussion headache pain.
ANALYSIS: This is good and all, but maybe the NFL could pick up the entire tab? They are the ones who are running a business where players concuss themselves for our entertainment, after all.
International
🇲🇹 WE ASKED FOR A ‘CANNABIS LEGALISATION TIMEFRAME’, LEONID... NOT A BLOODY LECTURE! [Opinion] (Raphael Vassallo | Malta Today)
Despite having supposedly ‘legalised cannabis’ in 2021; and despite having been showered by international praise (among liberal circles, anyway), for becoming ‘the first EU country, to actually do so’... it is now abundantly evident that this supposed ‘legalisation’ process never really happened at all.
ANALYSIS: This piece is a must read if you want to know what’s really going on in Malta. Months after major news organizations have lost interest in covering the country’s cannabis policy changes, a prohibitionist regulator has single handedly stopped the roll-out of cannabis clubs.
🇹🇭 THAILAND CANNABIS INDUSTRY BRACES FOR LEGALIZATION REVERSAL (Tommy Walker | Deutsche Welle)
Some political figures have condemned the increased use of cannabis since its legalization, while there are growing concerns that imported cannabis is saturating the market and reducing profits for local Thai growers.
In response, the eight-party coalition led by Move Forward Party has included reinstating cannabis as a narcotic in their 23-point policy list.
ANALYSIS: Despite not knowing the ins-and-outs of Thai politics, I still feel confident that the new coalition government is not going to completely roll back cannabis legalization.
This Sunday marks Bourdain Day, the impromptu holiday meant to honor the legacy of the late writer and travel documentarian. If you feel like doing something to acknowledge this iconic figure, perhaps check out one of the locations on this map of his travels that was put together by fans. I’m partial to Southie Bowl, a candlepin alley that he visited during his Boston episode of No Reservations back in 2011.
This week it’s Lynx, who is available at Baypath. He tolerates both kids AND dogs, a rarity in the cat world.
