Montpelier, VT, PRESS RELEASE: Republican Governor Phil Scott today announced that he would permit legislation, Senate Bill 54, to become law establishing rules and regulations overseeing the commercial production and retail sale of marijuana to adults. The measure will become law absent the Governor’s signature.

Vermont lawmakers depenalized the possession and cultivation of small quantities of marijuana by adults in 2018, but that law did not legalize any commercial activities involving either cannabis production or sales. Ten states currently regulate adult-use marijuana sales.

NORML State Policies Coordinator Carly Wolf said: “Ten of the eleven states that have legalized adult-use marijuana possession have also wisely regulated the retail cannabis market; until today, Vermont had been the sole exception.

“This comprehensive legislation was debated and amended over a period of several months by members of both chambers, and it is supported by a majority of Vermont voters. Senate Bill 54 represents an opportunity to bring common-sense controls to the adult-use marijuana marketplace, which is currently unregulated, unlicensed, and untaxed. While the law, as written, is not perfect, we are confident that lawmakers will continue to further amend these proposed rules and regulations accordingly in a manner that both prioritizes public safety as well as the needs of entrepreneurs looking to enter into this space. This is a victory for those who wish to disrupt the illicit marketplace and move forward with an above-ground, regulated cannabis marketplace.”

Senate Bill 54 establishes rules and taxation rates governing the licensed commercial production and sale of cannabis and cannabis products to adults. Under the plan, retail products would be subject to a 14 percent excise tax, in addition to the state’s six percent general sales tax. The potency of herbal cannabis products will be capped at 30 percent THC while concentrates will be limited to no more than 60 percent THC. Products cannot be packaged in a manner that appears appealing to children. Prior to the operation of any licensed cannabis facility, a municipality will need to hold a vote to in favor of permitting commercial activities within their locality.

The new law takes effect on October 1, 2020. However, regulators will not begin licensing cannabis-related businesses and activities until the spring of 2022.

It has also been reported that the Governor signed separate legislation today, Senate Bill 234, which facilitates the automatic review and expungement of low-level marijuana convictions. That law takes effect on January 1, 2021. The measure is expected to result in the expungement of the criminal records of over 10,000 people convicted of possessing two ounces or less of marijuana. Separate provisions in the bill reduce the penalties for offenses involving the possession of more than one ounce but less than two ounces of marijuana and/or the cultivation of three plants to a civil fine.

For some people in the Midwest, the close of September signaled not only the changing of the leaves and an increase in pumpkin-flavored and -scented product availability, but the end of an era for cannabis. Michigan’s caregivers are no longer sourcing dispensaries with product.

“There is a massive shortage on distillate in the state of Michigan, particularly in light of the phaseout of caregivers,” said Alex Leonowicz, COO and general counsel of Redbud Roots, a vertically integrated cannabis company based in Buchanan, Mich. “There have been rumors of distillate pricing reaching as high as [$25,000 to $30,000] for a liter. Likewise, vape cartridge demand has skyrocketed.”

During the March through September phase-out of caregiver sourcing for medical dispensaries, Leonowicz said, dispensaries and customers had already been feeling the effects. (In April, the Michigan Marijuana Regulatory Agency cut off caregiver sourcing for adult-use dispensaries.)

Past experiences foreshadowed growing pains that would come with phasing the model out. Redbud, established in 2017, was one of the first several commercial growers and manufacturers to supply cannabis product into the retail market alongside caregivers, Leonowicz said.

“We couldn't even come close to supplying all the stores,” he said, explaining that the state had previously warned of a phaseout. “So, guys rise up, and they're like, ‘Wait, I can't buy it from my caregiver; you [the state] are shutting those guys down. Yet, your new model isn't ramped up enough. So, you're leaving people that utilize the plant for truly medicinal purposes without medicine.’ That's what allowed them to continue to supply into the commercial model for so long.”

Now, in a caregiver-less climate, Redbud is working to help fill the supply void.

“Being forward-thinking, we’ve ramped up both our production capacity and the cultivation,” Leonowicz said. “We added a new grow facility. We also automated all of our cartridges, edibles and prerolls.

“For us, we looked at it like, ‘Hey, there’s obviously a huge wave of shortage coming here. How can you meet that?’ Automation seems to be a huge answer to that because you can only make so many prerolls [by hand]. You're sitting there pouring it in and then packing it in, versus a machine that can do 5,000 of them in two days.”

This automation is taking place in a new 15,000-square-foot processing and packaging facility that Redbud opened in Buchanan in late September. Located “a few parcels down” from the company’s three cultivation facilities in Buchanan, Leonowicz said the facility will increase the company’s output by five times and serve as a distribution hub.

Serving the Michigan Market in Other Ways

Leonowicz recently shared some other business developments with Cannabis Business Times and Cannabis Dispensary.

Photo courtesy of Redbud Roots

On the cultivation side, Redbud has grown its SFV #4 cultivar to produce more than 32% THC. (It is not an original cut from the plant.) First grown under LED lights, the company launched its SFV #4 in its own retail locations and have since begun to wholesale it to dispensaries. Redbud is now growing the cultivar under HID lights and expects that product to have a strong THC percentage and yield.

To accommodate retail needs, Redbud opened a medical and adult-use dispensary in Muskegon, Mich., more than 100 miles north of Buchanan, in July. A 12-foot-tall red astronaut sculpture welcomes patrons and passersby; the company had it specially made by Innovative Sculpture Design to garner some attention.

That’s just the start of Muskegon customers’ retail experiences. The company hired employees from around Muskegon to provide customers and patients with a sense of familiarity.

Photo courtesy of Redbud Roots

“A lot of shops set [locations] up, and they all look and feel the same. It’s kind of like a Walgreens or CVS—you know where to go, you know how to navigate it,” Leonowicz said. “And that's fine. We’re, I guess, trying to cater to the feel and the soul of each little city.”

The Redbud Roots Muskegon Provisioning Center sees about 85% adult-use customers and 15% medical patients, Leonowicz said. In a typical week, to both markets, he said it sells 12 to 13 pounds of flower, 900 to 1,100 cartridges and 800 to 1,000 prerolls.

The storefront is one of three competing dispensaries that have opened in Muskegon so far. The city created a “marijuana overlay district” to dictate where plant-touching businesses can operate, according to ABC affiliate WZZM.

Leonowicz applauds the city’s decision to welcome new businesses to an area that has historically had vacant buildings and low traffic flow.

“You build awareness of this whole area of the city who lives over here,” he said. “I thought it was pretty smart to bunch them together. Obviously, it stinks from a competition standpoint because you’ve got a guy right down the street from you. But that’s why we brought the astronaut in.”

A group of social equity license applicants in Illinois have filed a lawsuit in Cook County Circuit Court against the Illinois Department of Financial and Professional Regulation (IDFPR) and Bret Bender, the deputy director of its Cannabis Control Section, for disqualifying their applications and not providing them the opportunity to participate in a process through which certain applicants can amend their applications and challenge their scores.

The plaintiffs are “Black, Latino, and veteran business owners,” according to a press release from the Coalition for Social Equity Justice in Cannabis. According to the complaint, various plaintiffs have served in the U.S. Army, Marines and National Guard and lived in Illinois’ “Disproportionately Impacted Areas.”

 

“We deserve to know why they failed to score our applications,” said Eva Hernandez, a veteran and social equity applicant, in a prepared statement from the release. “We put in the work, paid the fees, and responded to their requests for information. We deserve the same consideration and the same opportunity as everyone else.”

The complaint in the lawsuit was filed Oct. 5, the same day another lawsuit was filed in the Illinois Supreme Court. (That one was brought forth by finalists in Illinois’ license lottery who claimed Gov. J.B. Pritzker could not offer previously disqualified applicants a second chance.)

On Oct. 6, the plaintiffs in the circuit court lawsuit also petitioned for a “temporary restraining order, motion for preliminary injunction and motion for expedited discovery,” according to court records. They requested that the court subpoena KPMG, the Big Four accounting firm that scored the applications, to answer questions and provide insight into the scoring process. The plaintiffs asked about, among other things, the “basis of disqualification” for each of them, a description of “the process for issuing deficiency notices” (which they asserted in the complaint were “flawed and inconsistent”) and an identification of each person who knows how KPMG’s portal for applications works.

“IDFPR has acknowledged that there were problems with the review and scoring process,” Claudette Miller, an attorney for the plaintiffs, said in the press release. “These plaintiffs did respond on time to deficiency notices, so that cannot be the reason they were disqualified. The Department is committed to remedying scoring mistakes, but applicants who never even got a chance to be scored are being left behind. All we are asking for is an equal opportunity for everyone who followed the rules.”