CannaBizDisputes™

Rhode Island may be the next state to legalize recreational adult-use marijuana. The 2021 budget bill introduced in January would legalize adult use of marijuana. The proposed legislation, introduced by Governor Gina Raimondo, seeks to take advantage of benefits of legalizing adult-use cannabis, including but not limited to public safety benefits and tax revenue. (See Article 13, Chapter 21-28.11 and 28.12 of the Budget Bill[1]). The bill is expected to result in over $20 million in estimated revenue to the state from recreational cannabis alone. The age limit for recreational adult use is 21.

The Governor’s proposed plan would provide for state-run retail shops and utilize private sector entities to provide products and supplies and to perform services for and on behalf of the State in connection with the State’s operation of adult use stores. Simply put, these Adult Use State “cultivators”, “processors” and “contractors” would obtain certain licenses to produce, process, and distribute, the cannabis to be sold at retail. These persons or entities would be licensed through the State’s Department of Business Regulation, which would create the Office of Cannabis Regulation. The proposed bill would prohibit licensed adult-use state store contractors from also holding multiple types of cannabis-related licenses. The number of licenses to be awarded is not set forth in the bill.

If enacted as proposed, Adult Use State licensees can engage in the following activities for state run retail shops, subject to the type of license held by each such licensee:

(i) Producing, manufacturing, packing, processing, or transporting marijuana products;

(ii) Packing, processing, possessing, or transporting marijuana that was produced by an adult use marijuana cultivator licensee;

(iii) Possessing, transporting, or producing marijuana paraphernalia;

(iv) Manufacturing, possessing, or producing marijuana products;

(v) Selling, delivering, or transferring marijuana products to the State, an adult use State store or Adult Use State contractor or any other marijuana establishment[2];

(vi) Purchasing marijuana from an Adult Use State contractor, or any other marijuana establishment;

(vii) Delivering or transferring marijuana or marijuana products to a cannabis testing laboratory;

(viii) Managing, supervising or controlling any premises or vehicle where marijuana products and marijuana paraphernalia are possessed, manufactured, sold, or deposited;

(ix) Managing, supervising or controlling any premises or vehicle where marijuana is possessed, processed, packaged, or deposited; and

(x) Any combination of the acts described within subsections (i) through (ix) above, as designated by the Office of Cannabis Regulation.

The state-owned monopoly retail model set forth in the proposed plan is not all that common when compared to other states. For example, Illinois and Massachusetts have legalized adult-use cannabis, but utilized licensing of the private sector for retail, as well as for process and cultivation. The Rhode Island model is analogous to “control” states for alcoholic beverages, where distilled spirits, and sometime wine and beer as well, are sold only through state liquor stores. Examples include Ohio, Pennsylvania and New Hampshire.

As the proposed bill proceeds through the legislative process, we anticipate that the details will be clarified, and we will provide updates on the status of this pending bill as they become available.

For more information on this topic, contact Andre R. Jaglom at jaglom@thsh.com, James Rieger at rieger@thsh.com or Alexa Zelmanowicz at zelmanowicz@thsh.com.

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[1]See full text of the proposed budget bill at: http://webserver.rilin.state.ri.us/BillText/BillText20/HouseText20/H7171.pdf

[2]“Marijuana establishment” and “marijuana establishment licensee” means any person, entity or facility that is licensed under chapters 28.12 or 28.6 of title 21, to be exempt from state penalties for engaging in or conducting the activities permitted under its respective license and includes but is not limited to an adult use marijuana cultivator licensee, an adult use marijuana processor licensee, an adult use marijuana contractor, a cannabis testing laboratory, a licensed compassion center, a licensed medical marijuana cultivator, or any other entity licensed by the office of cannabis regulation under chapter 28.12 or 28.6 or title 21.” 28-21.11-2(18) and 28-21.12-2(18).

For more information on the topic discussed, contact:

• Andre R. Jaglom  |  jaglom@thsh.com  |  212-508-6740
• James Rieger  |  rieger@thsh.com  |  212-508-6728