On Friday, April 3rd, the Massachusetts Cannabis Control Commission (CCC) held an open public meeting (via webcast video, for obvious reasons), in which the Commissioners and Executive Director discussed the impacts of the novel coronavirus (COVID-19) on the Commonwealth’s marijuana industry. The main thrust of the meeting was aimed at addressing the effects of the recent decision made by Governor Baker to deem the recreational/adult-use portion of the industry as “non-essential,” and therefore, subject to closure during the state-wide period of emergency – a move that is unique to Massachusetts. Therefore, the recreational marijuana businesses in the state, while being unable to access any of the fiscal support offered by the recent federal CARES Act, are unable to sustain much needed cash flows at a critical time during this health and economic crisis. As a result of these issues, the CCC, during their meeting today, sought to explore possible avenues and develop strategies for remedial action.
- Fee and deadline waivers/deferrals. One of the quickest and easiest ways for the CCC to provide financial relief to the recreational marijuana businesses in Massachusetts, is to waive, reduce, or delay the deadlines of fees owed by these businesses to the CCC. The assessment of fees and enforcement of payment is under the direct control of the CCC and, while the comparative amount of these fees is generally quite small in light of the businesses’ other costs and expenses, the expediency of this relief and ease of implementation is notable. During the public meeting today, the CCC indicated a likelihood for fee deferrals, extensions, and possibly pro-rata deductions for the period of shutdown, but stressed that this would be assessed on a case-by-case basis. In addition, it is likely that deadlines for license renewals and other filings may be extended or deferred for the time being.
- Medical marijuana supply chain support. Quite possibly the tact with the potential for the highest impact on mitigating the financial harm experienced by the in-state recreational marijuana industry, is the prospect of permitting recreational cultivators and manufacturers to sell wholesale to their medical marijuana counterparts. The supply chains for both the medical and recreational sections of the industry rely heavily on each other and, from a practical operational sense, if the medical marijuana industry in Massachusetts is going to survive as an “essential” businesses, it will need support from recreational cultivators and manufacturers. Another positive of implementing this change (permitting the co-mingling of the recreational and medical supply chains) is that only the retail portion of the recreational industry would then be deemed as “non-essential”, as the cultivation and manufacturing portions would fall under, and be covered by, the medical marijuana umbrella. Although this move has not yet been adopted by the CCC, the tenor at today’s public meeting points to a strong likelihood of steps being taken in this direction, especially if the ban on recreational sales continues.
- Priority for those with existing licenses. The CCC also noted that there is a large amount of unexpected financial loss that is, or will be, suffered by existing and already licensed recreational businesses, as compared to those simply seeking to obtain approval for their first license(s) and who, therefore, have yet to begin building out facilities and hiring personnel. For this reason, in addition to other existing priority application review statuses already in place prior to the outbreak of the virus, consideration will be given to those already licensed businesses seeking approval of additional licensure (e.g. applications to open at a new location, change of location applications, applications to expand up the supply chain and vertically integrate, etc.).
- Delivery application start date on track. The implementation of the “Delivery” licensure program in Massachusetts and start of the application process for such remains on track to begin in May. This should be highly beneficial if the virus and related shut-downs and isolation procedures continue into the summer. Not only will this help to lower the risk of spreading the virus at open medical dispensary facilities, but if the ban on recreational sales persists, the ability to provide delivery services may help to open up recreational sales via limited deliveries to just MA residents (nullifying a major concern and argument used by the Governor to justify his blanket ban on recreational sales).
- Re-classification of recreational marijuana as medical marijuana. The idea was put forth that the CCC begin exploring the idea of re-classifying the entire recreational industry as “medical marijuana” in an attempt to skirt the restriction put in place by the Governor’s office. Despite the myriad legal hoops to jump through to accomplish that and despite it seeming to be, on its face, a mere wordsmithing trick used to subvert the intent of the temporary ban in place, there is some merit to this mode of thinking. Certain statistics and data show that many consumers purchase recreational marijuana for medical purposes, opting to avoid obtaining the products via the “proper” medical route for a number of reasons (e.g. veterans could lose federal medical and other benefits if they were to be officially registered as medical marijuana recipients, high costs and logistical difficulties associated with applying and receiving medical prescriptions, etc.). Although a longshot and likely to remain a pipedream, the CCC agreed to at least begin assessing what would be required to pursue this strategy of re-classification, indicating that they are open to just about every possibility and willing to look at all options to help support the industry during these trying times.
The above list of considerations is not an exhaustive list of all the potential solutions that the CCC is exploring to provide assistance to the recreational marijuana industry in the commonwealth during the temporary ban, but rather some of the main points touched on during today’s meeting. Also, while none of the above “solutions” have yet to be officially adopted or implemented, some appear to be quite close at hand, such as the deferral of fees and license renewals, and the CCC is making every effort to push forward in doing all it can to provide financial support, while also cognizant of the many health concerns that need to be taken into consideration.
About the Author: Joshua Robinson
Joshua Robinson is an associate at Burns & Levinson and a member of the firm’s Corporate, Finance, Restructuring, and M&A practices. As a member of the Cannabis Business Advisory group, he represents both borrowers and lenders in connection with loan and other credit-related transactions in the marijuana industry. He also counsels equity investors, operators, consultants, businesses, and other enterprises seeking to enter the cannabis market and advises them on mergers, acquisitions, capital raises, and other corporate and commercial transactions.