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Three years after Democrats legalized the possession of marijuana in Virginia, a Senate committee on Thursday passed legislation that would create an adult-use cannabis market in the state.
For the first hour of its nearly three-hour meeting, the members of the Senate Rehabilitation and Social Services Subcommittee on Cannabis, which is made up of three Democrats and two Republicans, grappled with picking one of the two rival proposals before the body, both of which shared the same goal of establishing a legal marketplace for regulated, tested and taxed cannabis products, but with different means of getting there.
The panel eventually elected to move forward with Senate Bill 448, sponsored by state Sen. Aaron Rouse, D-Virginia Beach, merging it with SB 423 by Sen. Adam Ebbin, D-Alexandria.
A major point of contention was a provision in Ebbin’s bill that would have given the medical marijuana facilities that are already operating in Virginia a six-month head start as early as July 1, and required them to incubate smaller businesses. Rouse’s legislation creates a level playing field for big and small players alike and would also allow for outdoor cultivation of cannabis, which Ebbin’s bill did not.
“I’m not very comfortable with a head start. I think we can have a process where everybody is trying at the same time to make it work,” said Sen. Schuyler VanValkenburg, D-Henrico County, a member of the committee.
VanValkenburg also pointed out that House Bill 698, sponsored by Del. Paul Krizek, D-Alexandria, which is identical to Ebbin’s measure, will likely reach the Senate later during the 2024 session, providing an opportunity to “continue to have conversations,” Van Valkenburg said. “It’s probably valuable to have two different vehicles moving in across the Capitol.”
When the Democratic majority in the General Assembly decriminalized some personal possession and home growing of cannabis effective in 2021, they did not finalize the parts of the legislation that would create a fully regulated marketplace by 2024. And when Republicans won back the majority in the House of Delegates in the following year, they did not make it a legislative priority to fix a problem that they said Democrats created.
The vacuum that followed legalization allowed for the creation of an illicit market that has skyrocketed from $1.8 billion a year to $2.4 billion in 2023, according to New Frontier, a group that studies the cannabis industry.
A survey from Christopher Newport University released this week found that 57% of Virginians support a legal retail market for cannabis. Support was highest among Democrats, at 70%. Among Republicans, 49% were opposed, 46% in favor.
Ebbin argued before the committee Thursday that his legislation presented “the fastest path to a responsible regulated market” by as early as this summer.
“The bill allows for cultivation, processing and retail sales by existing medical operators by July 1, 2024, and in exchange for that privilege they would pay $1 million at least as a licensing fee, and they would be required to incubate six microbusinesses each, allowing entrepreneurs who want to get into the cannabis business to get the valuable experience,” Ebbin said.
The $1 million that the medical marijuana companies would pay in licensing fees, plus the tax revenue from the sales of cannabis products during the first six months, would “go exclusively to help small businesses, including disadvantaged businesses to have the working capital to enter the marketplace themselves,” Ebbin said.
Both bills would also allow localities to hold referendums in November on whether they would welcome cannabis retailers.
Ebbin’s proposal would have also required the Virginia Cannabis Control Authority to propagate regulations by Nov. 1 of this year, and by Jan. 1, 2025, it would have allowed for cultivation, processing and retail sales by 16 microbusinesses and five industrial hemp processors. All other cannabis businesses would have been allowed to apply for licenses by July 1, 2025.
Ebbin justified the provision in his bill giving pharmaceutical companies a head start with the urgency of countering illicit sales of cannabis products. “I feel like we should try and meet that demand outside of the black market as soon as possible with people we know that can meet the demand,” he told the panel.
Phillip Thompson, an attorney from Loudoun County and the president of Cannabis Equity Consultants, hailed Ebbin’s proposal for the “unique provisions that provide for minorities to get into this market,” referring to the so-called cannabis incubation program under which medical cannabis operators would develop programs intended for minority and microbusinesses to help educate people who want to work in the industry and others who want to become entrepreneurs.
“If you put everybody in a starting line and fire a gun, we know who is going to win that race, and we know who is going to lose,” Thompson said. “We’ve worked with Senator Ebbin to put some provisions into that bill relating to the incubation program, provisions that target some of the communities that have been hit hard by the war on drugs, and we hope that we can have these provisions included in whatever legislation comes out.”
Hunter Jamerson, a lobbyist speaking on behalf of Jushi, a medical marijuana processor in Northern Virginia, said that Ebbin’s bill “immediately launches a marketplace on July 1 to address the illicit marketplace,” while Rouse’s bill, “which we respectfully oppose, does not. It delays the launch of that marketplace until at least Jan. 1.”
Jamerson said that Ebbin’s bill was not a head start, but a necessary step in order to launch an effective program.
“In 11 out of 12 states, the medical marijuana companies have launched a retail marketplace at least six months early in order to provide a wholesale system for small businesses to set up retail six months later, and to immediately address the quality, safely tested and state-licensed products circulating in the illicit marketplace. That has worked,” Jamerson said.
He added that Rouse’s bill suggests following New York, “the only state that has not launched with medical cannabis companies first. I don’t need to tell you that New York is a mess. Senator Ebbin’s bill not only provides a microbusiness program, but also provides a dedicated equity round for that licensing. It ensures fairness in competition for these licenses.”
Chelsea Higgs Wise, the executive director of Marijuana Justice, a Richmond-based nonprofit that works to legalize marijuana and achieve social equity, urged the committee to support Rouse’s legislation over social equity questions in Ebbin’s proposal.
“The micro pieces in Ebbin’s bill are not guaranteed to go to minorities or those impacted,” Wise said. “There is also absolutely no guarantee that on Jan. 1 the accelerators will be operational, there are also no penalties to the pharmaceutical operators for not having them operational.”
Wise also pointed out that no incubation program in the country has been successful to date. “Thinking that this is the program and an opportunity for the people impacted, that is a lie. And the referendum piece allowing them to start would actually create a monopoly in those areas. These non-guarantees that are in this bill that seem very good have been pulling us by the blindside across the country and we have been getting duped.”
Speaking to his bill, Rouse said that he would not attach his name to a measure without a social equity component ensuring that those who have been historically disadvantaged or overly criminalized did not have an opportunity to partake in the new market. “It’s about leveling the playing field and ensuring that everybody has a fair shot at a free market,” he said.
Rouse also underscored the urgency of creating a legal cannabis marketplace that would provide adults access to safe legal products, address existing public safety concerns, create jobs and generate tax revenue.
“SB 448 does all these things while ensuring that our adult-use market is well regulated. It provides opportunities for equal access, it does justice to communities ravaged by poverty and prior drug policy, and it generates tax revenue to protect our communities.”
One of the big distinctions between his bill and Ebbin’s, Rouse said, is that his proposal ensures fair participation.
“In this bill, no one applicant is preferred over another, and there are no head starts. SB 448 is the only option to prevent multistate operators from monopolizing the market and ensure that all licensees have an equal and meaningful opportunity to participate in this market on day one,” he said.
Rouse signaled his willingness to consider provisions from Ebbin’s bill as his legislation continues to take shape, because both proposals share a common goal.
“We’re hearing from law enforcement from Scott County to Virginia Beach that this is turning into a true public safety and public health crisis,” Rouse said. “But regardless of where you stand on the legalization of marijuana, we all can agree that we are never going to recriminalize it, so therefore it is up to us to finally create a well-regulated adult-use market.”
The committee passed Rouse’s proposal on a 3-2 party-line vote. The panel’s two Republican members were counted as no votes by proxy, because they had to leave the hearing prematurely to attend a caucus meeting.
The full Senate Rehabilitation and Social Services Committee is set to take up Rouse’s bill on Friday.
