Pending a governor’s signature, Virginians 21 and older can have their cannabis and buy it, too.
Senate and House lawmakers voted March 13 and 14 to adopt a conference committee report for competing bills to legalize adult-use cannabis dispensary sales starting Jan. 1, 2027, sending the finalized legislation to Democratic Gov. Abigail Spanberger’s desk.
The bicameral deal also included negotiations around a license conversion fee for the state’s existing medical cannabis operators, a tax structure, tax revenue allocations, penalties for illegal distribution, and regulatory and enforcement authorities, among other fine-tunings.
The reform package comes nearly five years after former Democratic Gov. Ralph Northam signed a legalization bill in April 2021, allowing those 21 and older to possess up to 1 ounce of cannabis and grow up to four plants at home.
“This is an important bill, and this has been a culmination of like five years of work,” Del. Paul Krizek, D-Fairfax, who sponsored the House bill, said March 14 on the chamber’s floor, before members voted, 64-32, to adopt the conference committee report.
“It creates a licensed structure, consumer protections and a tax framework that allows the commonwealth to move from an illicit market to a regulated and safer system,” he said.
In 2021, Virginia’s then-Democratic government trifecta intended to return in 2022 and vote on reenactment language to implement a licensed and regulated adult-use cannabis program. However, Republicans took control of the House and the governorship in 2022, upending that plan for the next four years.
With Democrats reclaiming their trifecta this year, Virginia is aligned to become the 24th state in the nation to commence adult-use dispensary sales, including the first state in the South.
Sen. Aird Lashrecse, D-Petersburg, who sponsored the legislation in the upper chamber, told her colleagues that the committee report reflects months of collaboration and negotiations among not only state lawmakers, but also among regulators, industry representatives, advocates and public safety stakeholders.
“Many parties did not get everything they asked for, but everyone got what they needed to legally and safely operate a marketplace,” she said, before the Senate voted, 21-18, on March 13. “This is the hallmark of a good compromise, and this legislation represents a balanced path forward to responsibly regulate Virginia’s cannabis market.”
Before taking the governorship in January, Spanberger indicated along the campaign trail that she would support an adult-use sales bill.
Pending her signature, those 21 and older could purchase and possess up to 2.5 ounces of cannabis flower or an equivalent product amount from licensed dispensaries beginning next year. Edible cannabis products would be capped at 10 milligrams of THC per serving and 100 milligrams per package.
The committee report included a $10 million license conversion fee – meeting at the middle point of the House and Senate bills – for the state’s five existing medical cannabis operators to transition their operations to adult-use. The one-time fee could be paid over three years.
Each of the state’s medical licensees is currently allowed to operate up to six dispensaries in their respective health service regions.
The legislation would authorize the Virginia Cannabis Control Authority (CCA) to oversee the adult-use program, including licensing and regulating cultivation, processing, retail sales and testing laboratories. The Virginia Alcoholic Beverage Control Authority could assist the CCA with enforcement related to illicit market activity, particularly through monitoring an illicit market tip line.
The conference report adopted the House’s recommendation to create escalating penalties for repeat violations of unregulated cannabis distribution, including misdemeanors for first and second offenses, and a Class VI felony for a third offense.
New language in the adopted report shifts the regulation and enforcement of intoxicating hemp products from the Virginia Department of Agriculture and Consumer Services to the CCA, “ensuring that all cannabinoid products are regulated under one agency and subject to consistent testing, safety standards and enforcement,” Aird said.
The senator pointed out that this shift addresses “loopholes” in the 2018 Farm Bill that led to hemp product manufacturers circumventing the federal government’s intended THC limits. Instead, Virginia plans to align its definition of hemp with a forthcoming federal ban on intoxicating hemp products that will be implemented in November.
When Krizek explained this shift in the House, Del. Tom Garrett, R-Buckingham, took issue with the conference conferees adding the provision, which neither the House nor the Senate included in their original bills.
“What it does is it takes us back to where we were before by creating a criminal offense, for people who are selling marijuana products, that doesn’t currently exist,” Garrett said.
Previously, Garrett served one term in the U.S. House and helped carry the 2018 Farm Bill, which federally legalized the commercial cultivation of hemp. Before Saturday’s vote in the Virginia House, he accused the conferees of being more concerned with cannabis tax revenue than with the impacts of legalization.
The conference report adopted the House’s structure for taxing adult-use cannabis products, but the Senate’s framework for allocating tax revenue.
Under the report, adult-use sales would include 6% cannabis excise tax, in addition to the state’s 5.3% retail sales and use tax, and localities would be allowed to levy a 1% to 3.5% tax rate.
“It also requires an annual report to support assessing the tax structure,” Krizek said. “That was because the Senate wanted a higher tax. And so, I said, ‘Well, why not do a report annually to see if the tax rate is too high or too low?’ So, they agreed to that.”
Meanwhile, the tax revenue would be allocated as follows:
- 40% toward supporting early childhood care and education;
- 30% toward a Cannabis Equity Reinvestment Fund to support people, families and communities “historically and disproportionately targeted and affected” by drug enforcement;
- 25% toward the Department of Behavioral Health and Developmental Services; and
- 5% toward public health programs, such as those that discourage impaired driving and underage consumption.
Fifty percent of the equity fund would go toward the Virginia Cannabis Equity Business Loan program to support equity licensees.
Aird said this tax allocation ensures communities most impacted by prohibition benefit from the legal market.
“The report makes several adjustments to support small businesses and includes [those] disproportionately impacted by prohibition, including reducing the ownership requirement for impact licensee applicants from 66% to 51%,” she said. “[It also expands] the eligibility criteria for communities disproportionately policed for marijuana offenses by extending qualifying residency back to 1999.”
Finally, the adopted report also removes provisions that would have limited microbusinesses from buying and selling only among themselves. Instead, these businesses would be allowed to participate in the broader regulated cannabis market under the finalized legislation.
Aside from negotiated provisions, the legislation retains bicameral similarities that aim to provide a market that prioritizes consumer health and public safety, from age-gating to packaging and labeling standards, testing requirements, youth prevention, and other final tweaks in the conference committee.
“We’ve updated the testing, the labeling, the product registration standards to better ensure that the products meet clear safety and quality requirements,” Krizek said. “So, it really is a month of collaboration that this report is a reflection of.”
Pending the governor’s signature, the final legislation would prevent localities from opting out of allowing adult-use cannabis businesses to operate in their jurisdictions, although they could pass zoning requirements. Also, it mandates cannabis businesses to have labor peace agreements with their workers, and it includes language for state-tribal government compacts.
Spanberger will have 30 days to sign, veto or amend the bill once it officially reaches her desk.
