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BY BRIDGET HILL-ZAYAT, ESQ.

RECENTLY, MARYLAND’S GENERAL ASSEMBLY PASSED HB837 LEGALIZING ADULT-USE CANNABIS IN THE STATE. This does not mean that anyone 18 and over can run out and buy cannabis today. There is understandably confusion in the state regarding what is and what is not legal and when. So, what happened? When did it stop being marijuana? When is it going to be available in shops? Who will be able to buy it?

WHAT IS CANNABIS AND WHAT ISN’T CANNABIS?

Why Is Everyone Calling It Cannabis and Not Marijuana?

The word “marijuana” is actually newer to the United States lexicon than the word cannabis. Prior to the 1930s, the most commonly used term for the drug was cannabis. It was used primarily as medication and not as an intoxicant. In the 1910s Mexican immigration began to surge throughout the Southwest United States, motivated by the Mexican Revolution. Immigrants brought their traditional methods of intoxication, which included cannabis.1

The use of the word “marijuana” did not become commonplace until political entrepreneurs, eager to scare the public into creating a new prohibition, branded the drug with the foreign-sounding name. In 1937, Harry Anslinger, as the new Commissioner of the Federal Bureau of Narcotics (FBN), the precursor to the modern-day Drug Enforcement Agency, realized that the end of Prohibition and the paltry number of arrests for heroin alone would not validate his department’s budget.2 He needed to create a larger villain to battle in order to validate the FBN’s existence, so he pivoted. Anslinger began to push the Uniform States Narcotic Act (later replaced by the Marijuana Tax Act) at state-level legislatures, testifying that “marijuana” was causing people to lash out violently. While there was little evidence to support his assertion, Anslinger advocated the dangers of cannabis use nonetheless. He fueled the motivation to pass the Act with racially charged claims that minorities, specifically Black people and Latinos, were the primary users, making them primary targets for arrest. The use of the Spanish word for cannabis was likely purposeful. It ginned up racism and created the veil of otherness over a plant that was previously commonly used.3

So If Cannabis Is Marijuana, What Is Hemp?

Hemp is defined as any part of the Cannabis Sativa plant with no more than 0.3% tetrahydrocannabinol (THC). THC is the mind-altering substance in cannabis. The 2018 Farm Bill, passed by the U.S. Congress in 2018, removed hemp from the federal Controlled Substances Act.4

What Is CBD?

The cannabis plant contains hundreds of chemical compounds, including cannabinoids and terpenes. THC is one cannabinoid. Another cannabinoid with non-psychoactive properties is cannabidiol (CBD). Currently, the only CBD product approved by the Food and Drug Administration is a prescription oil called Epidiolex, produced by GW Pharmaceuticals for epilepsy. While CBD is being studied as a treatment for many conditions, including Parkinson’s disease, schizophrenia, diabetes, multiple sclerosis, and anxiety, research supporting the drug’s benefits is limited.5 The 2018 Farm Bill indirectly legalized certain forms of CBD, provided it is derived from hemp.

WHEN DID CANNABIS BECOME LEGAL IN MARYLAND?

The first move toward a legal cannabis market happened in 2011; Maryland’s General Assembly passed a law creating an affirmative defense of “medical necessity” if a patient was caught with cannabis and drug paraphernalia. The accused could assert that the drug was for medical purposes. Clearly, this did not meaningfully legalize cannabis but was a first step in the creation of a medical cannabis market.

The Creation of Maryland’s Medical Cannabis Market

In 2013, the General Assembly passed HB1101.6 State lawmakers spent years debating how to legalize medical cannabis in Maryland, and in 2013 passed a law that relied on academic centers growing, processing, and dispensing cannabis. The structure of the bill was awkward and impractical; it never got off the ground and was effectively scrapped. In 2014 the legislature rewrote the law to make the program accessible to private companies and charged the Maryland Medical Cannabis Commission (MMCC) with drafting regulations guiding production and sales. The process would be racked with controversy, lawsuits, and scandal, culminating in the first medical sales being delayed until 2017.

Controversy

When the General Assembly legalized medical cannabis in Maryland, the legislation required the MMCC to “actively seek to achieve racial, ethnic, and geographic diversity when licensing medical marijuana growers.” However, the Maryland Attorney General’s office advised theMMCC that, absent a study documenting racial disparities in the medical cannabis industry, creating racial and ethnic preferences was unconstitutional. As a result, the regulations the MMCC adopted made no mention of racial diversity.7 Predictably, few minority owners won licenses in any category.

After the public outcry generated by the failure of the MMCC to award licenses to minority owners, the state commissioned a “disparity study” confirming that minorities and women had been shut out of the industry by the high financial requirements. The analysis provided the evidence necessary to implement “race-and gender-based measures to remediate discrimination.” In response, the General Assembly passed HB2 in 2018 to expand the marijuana growing operations to try to give minorities an ownership role.8State requirements regarding locations, security, and testing continue to burden licensees and especially HB2 license winners, most of whom are yet to open their doors five years later.

2022 Adult Use Passes—We Wait for Regulations

In November 2022, Maryland voters overwhelmingly approved recreational marijuana legalization by ballot referendum. The legislation, HB837, stopped short of articulating how the market will function and who will be allowed to sell. Specifically, the bill failed to pre-approve existing medical licensees from entering the adult-use market for fear that the predominantly white-owned businesses will have an unfair head start before minority licensees could get a foothold.

The General Assembly and the MMCC, now part of the Alcohol Tobacco Commission (ATC), must move swiftly. As of January 1, 2023, possession of up to 1.5 ounces for adults 21 and over is decriminalized. Possession of cannabis is now a civil offense punishable by a fine of $100. On July 1, 2023, adult-use cannabis will be fully legal. Lawmakers must set up the market infrastructure if there is any hope of avoiding the explosion of the illicit market.9 Specifically, since the criminal code will decline to target possession of cannabis in small amounts, there will be very little stopping the illicit market from filling the void.

Additionally, discount pricing will continue to protect the illicit market. Illicit growers are unburdened by regulations ensuring contaminated product is kept from the market. No toxic herbicides are used on plants in the regulated market, and all product is tested before going to dispensaries. In effect, illicit growers can more easily keep plants alive and healthy by spraying herbicides or pesticides as mold, mildew, or pests emerge. Currently, licensed growers wear clean suits and use ascorbic acid (essentially lemon juice) and a very limited number of agents, in place of commonly used herbicides. The licensed market has costs associated with testing and other regulations; the illicit market does not, so the illicit market’s price per pound will be significantly less than the price per pound of product produced by licensed growers. It is worth mentioning that current medical licensees are not printing money; in fact, most are struggling. Current growers, processors, and dispensaries are cutting prices to compete with the illicit market. Regulatory burdens and unregulated competition are bleeding these companies dry.

COMPARISON WITH NEIGHBORING MARKETS

Despite the above-mentioned trouble, Maryland is (arguably) faring better than its neighbors. States like Delaware and Pennsylvania are mired in an expensive and, some say, poor-quality market. The greater competition is likely going to be the District of Columbia and Virginia.

District of Columbia

The District, notably, legalized adult-use cannabis in 2014. However, the congressional rider prevents the District from creating a tax or making any money from its sale. This created the gray market similar to what grew out of California’s legislation. Clearly, Maryland and other recently legalized states like Virginia will attempt to avoid a booming gray market situation. District sellers must work in a“gifting” economy, in which buyers do not buy cannabis, they buy a piece of art or a t-shirt, and the seller “gifts” the buyer with cannabis. The result is a regulatorily messy no-man’s land dominated by quasi-legal producers and questionably safe product.

Virginia

In Virginia, recreational marijuana possession was rammed through a legislative session in2021, but the commonwealth has not yet established a market. Virginia, unlike the District, successfully prohibited gifting.10 As the market stands now, in Virginia you can possess a total of one ounce of cannabis if you are over the age of 21. You may not sell that cannabis to others, but you may share that cannabis.11Interestingly, people over 21 may grow a total of four plants per household for personal use. Criminal penalties are still in place for having more than four plants.

Like the District, Virginia’s General Assembly has not yet created the regulatory framework necessary for a functional adult-use market. Dispensaries are still limited to selling to licensed patients.

WHAT’S NEXT FOR MARYLAND?

Delegates Charles Wilson and Vanessa E. Atterbeary introduced HB556 on February 3, 2023. The enabling legislation would tax cannabis sales at 6% for the fiscal year starting July 1, 2023, when possession of up to 1.5 ounces becomes legal. The rate would increase by 1% yearly, hitting a maximum of 10% in 2028. Medical cannabis patients would be excluded from paying the sales tax. Somewhat controversially, the bill would pre approve current medical licensees to enter and begin selling to recreational purchasers as of July 1, 2023. So, the approximate 100 dispensaries, 20 growers, and 20 processors will have a sizable head start before new licensees are able to apply and win licenses and build out new facilities. Perhaps in anticipation of criticism, the bill ensures the first new round of licenses must be social equity owners. That is, the new licenses must have lived in or gone to school in areas disproportionately impacted by the war on drugs.12

In essence, lawmakers are identifying their priorities with HB556. On the one hand, they clearly are attempting to undercut the illicit market by making sure medical licensees can sell as of July 1, 2023. Pre-approving medical licenses closes the window of opportunity for the gray market to provide products without fear of law enforcement. Pre-approval, however, works against the legislature’s other stated goal: to create an equitable marketplace with large companies helmed by women and minorities. Current medical licenses, while not entirely, are largely owned by white men.

In prior sessions, the General Assembly kicked around the idea of micro-licenses, an idea that limped its way back into the 2023 session. Legislators have carved out a category of smaller licensed facilities, more affordable than football field-sized grows currently in operation, to grow cannabis in

smaller batches. This would do two things. First, it would create an avenue for minorities to participate in the market in a meaningful way, lowering the financial bar for funding.

Second, it would allow current licensees, some of whom are minorities, to participate in the adult-use market, keeping them afloat in a stagnating market. However, the increasing tax on adult-use will, again, play in the favor of the illicit market, making their lower prices and arguably better-quality products more enticing.

To be clear, there is no silver bullet. The gray market will always be around so long as there is regulation governing how cannabis is produced and sold. How large that market will be is dependent on how legislators prioritize various factors. In the end, adult-use is coming. The details of that market are up in the air.

  1. Matt Thompson, The Mysterious History of ‘Marijuana,’ Code Switch (July 22, 2013), https://www.npr.org/sections/codeswitch/2013/07/14/201981025/the-mysterious-histo- ry-of-marijuana.
  2. Cydney Adams, The man behind the marijuana ban for all the wrong reasons, CBS News (Nov. 17, 2016, 5:45 pm), https://www.com/news/harry-anslinger-the-man- behind-the-marijuana-ban/.
  3. Id. 
  4. CBD: What You Need to Know, Centers for Disease Control & Prevention, https://www.gov/marijuana/featured-topics/CBD.html (last visited Feb. 17, 2023).
  5. What are the benefits of CBD—and is it safe to use?, Mayo Clinic, https://www.mayoclinic.org/healthy-lifestyle/consumer-health/expert-answers/is-cbd-safe-and-effective/faq-20446700 (last visited Feb. 17, 2023).
  6. Erin Cox, Marijuana panel suggests $125,000 grower fee: License for growing medical marijuana could shut out small local businesses, The Baltimore Sun, 24, 2014, at A3.
  7. Editorial, ’s geography of pot, The Baltimore Sun, Oct. 9, 2016, available at https://www.baltimoresun.com/opinion/editorial/bs-ed-marijuana-license-20161009-story.html.
  8. Doug Donovan, Maryland medical cannabis regulators extend application period as error mar process aimed at diversification, The Baltimore Sun, June 10, 2019, available at https://www.balti- com/health/marijuana/bs-md-cannabis-applications-20190610-story.html.
  9. Legalization of Non-Medical Cannabis, Med. cannabis Comm’n, https://mmcc.maryland.gov/Pages/Legalization-of-Non-Medical-Cannabis.aspx (last visited Feb. 17, 2023).
  10. Colleen Grablick, Demand for Cannabis in Maryland? It’s High, DCist (Jan. 9, 2023, 12:09 PM), https://dcist.com/story/23/01/09/maryland-high-cannabis-demand/.
  11. Rachel Kurzius, What You Need to Know About Legl Weed in Virginia, DCist (Apr. 23, 2021, 11:30 AM), https://dcist.com/story/21/04/23/legal-marijuana-virginia-ju ly-how-much/.
  12. Hannah Gaskill & Sam Janesch, Maryland lawmakers draft bills to regulate sale, tax recreational-use cannabis, The Baltimore Sun (Feb. 2, 2023, 6:24 PM),https://www.baltimoresun.com/politics/bs-md-pol-regulatory- cannabis-20230203-dx4mxqddyvbkllzmwkqphv4gjq-story.html.

Bridget Hill-Zayat is apartner with Smart Counsel. Sheworks in the Cannabis, Alcohol, and Energy fields, focusing on government relations, regulatory law, and compliance.