New Cannabis Markets Bring Evolved Business Licensing Process: Q&A With Attorney Brian Vicente
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New Cannabis Markets Bring Evolved Business Licensing Process: Q&A With Attorney Brian Vicente

As U.S. cannabis markets have matured at a rapid clip since 2014, so too has the sophistication of the industry’s gatekeepers.

January 22, 2019

As U.S. cannabis markets have matured at a rapid clip since 2014, so too has the sophistication of the industry’s gatekeepers. Cannabis business license applications look different than they did at the outset of Colorado and Washington’s marketplaces. More investment dollars have flowed into the cannabis space, and the barriers to entry have grown more substantial (while in other cases those barriers are being chipped away by state legislators and vocal business owners).

Brian Vicente, partner and founding member of Vicente Sederberg LLC in Denver, Colo., was one of the primary authors of Colorado’s Amendment 64. For years, he’s been watching the industry closely.

With more state markets almost certain to come online within the next year or so in the U.S., we caught up with Vicente to get a sense of how those cannabis business applications—and the applicants themselves—are changing.

Cannabis Business Times: How have things changed, in terms of what regulators want to see on applications and how businesses have responded over the years?

Brian Vicente: Different states and different municipalities approach licensing differently. And that certainly has evolved over the years. A lot of your early states—Colorado, Washington, Alaska—really had an open system that was more of a check-the-box system. [These] applications, you need to make sure that your zoning is correct, and you don't have certain felonies, and you have the check to pay the fees, and then you can you can get a license to operate. A lot of newer states, whether that’s New Jersey Florida, [Arkansas] or what have you, have adopted more of a merit-based application system. That [application] asked for a combination of: explain your property, explain your team and how you're going to be so great at servicing folks and explain your capital and how you're going to get this done. We’ve seen that evolve in certain ways where there will be a fourth or fifth criterion added in: tell us about the diversity of your team, tell us about the economic impacts you are going to have.

CBT: A lot of newer markets have placed caps on these licenses. Has that sort of relative scarcity changed the applicant pool and changed who's eligible in the first place to toss an application into the ring?

BV: When they're giving away a really small number of licenses, those licenses are inherently going to be very valuable to the people who win them. If I’m one of 10 people in Florida that can sell marijuana, that's a valuable license to hold. As such, you see some pretty deep-pocketed MSOs, those multistate operators that apply for those [licenses] and often win. They [have] an application writing team and they have access to tens if not hundreds of thousands of dollars and it makes it a little harder for your local guys or your economically disadvantaged groups to apply.

CBT: Whether it's social equity programs or the way this new New York program is being proposed, barring vertical integration, there seems to be some pushback there. State legislators are trying to walk that balance between small business development and allowing MSOs to come into a marketplace—have you seen that balance being navigated?

BV: I think there's a robust discussion. It’s such an exciting moment in time, where you have states and municipalities that are deciding how to regulate marijuana [and] medical marijuana for the first time ever. So, they’re looking at: how have other states, how have other cities done this? There certainly are things like lawsuits to be concerned about; a lot of these big state merit-based processes, there's inevitably flurry of lawsuits by the applicants who didn't win. So, municipalities and states are thinking about how to avoid that.

And then I think there's a real feeling, and I believe this is based in fact, that there's more and more essentially white, well-heeled males, typically, that are winning these licenses. Is that really appropriate in the world we live in, especially when a lot of people that worked to change marijuana laws like myself did so because we wanted to help people that were disproportionately impacted by the racist War on Drugs?

[As] they were giving out awards to people to get rich, it seems like some of those economically impacted groups and disproportionately impacted groups should have certainly equal access or perhaps some sort of preference. As such, we're seeing Maryland is about to award some licenses to minority ethnic groups. Florida is looking at doing something similar. Massachusetts, certain parts of California. These kinds of equity licensing programs are being discussed and formulated a bit.

CBT: How does market consolidation fit into the licensing regime and the various makeups of state markets?

BV: We’re seeing some of the largest acquisitions in marijuana history, right? And yes, those folks that are engaging in that acquisition did not go through the merit-based licensing process like their peers. There are a couple factors there. It’s certainly allowing folks with a large bankroll to enter markets and gobble up the licenses without necessarily having to prove their merit to the regulators, although they certainly do go through background checks and things of that nature.

The fun thing about being a lawyer in the space is that every state is different; residency rules and acquisition rules, it’s different in every state. So, it’s a bit difficult to navigate [this landscape for] these multistate operators, but often they can find a way to get it done. We certainly get a feel for what these licenses are selling for, and, yeah, a license is a lot less valuable in a place like Oklahoma, where [the state is] giving away thousands of licenses versus a New York.

But there’s so much enthusiasm from people that are really cannabis-curious that want to get in and invest in this space. And at this point they're often bidding against these multistate operators to see if they can get one of those licenses. Another factor … [is] certain states don't allow public companies to own marijuana licenses. Colorado is one. That's going to change this year, I predict. But some states do [allow public companies to own cannabis licenses].