Maine Quietly Prepares for Opening of Adult-Use Cannabis Market

Maine has entered the last stages of establishing an adult-use cannabis market and is putting the finishing touches on its online application platform. The Department of Administrative and Financial Services will adopt the final adult-use rules in the next sixty (60) days after incorporating revisions made to the adult-use marijuana law by legislation, LD 719, which was enacted this year. The adult-use regulations will be effective 30 days after they are adopted. This means that Maine could start accepting applications for adult-use facilities as soon as December.

Maine legalized recreational marijuana in 2016, but it is illegal to sell cannabis in the state until the state opens retail stores. Maine’s Legislature amended the adult-use cannabis law this year by requiring Maine’s cannabis regulator to establish licensing rules as well as certification requirements for testing labs. The legislation also legalizes the sale of food or beverages that are infused with THC. The DAFS issued provisional adult-use rules in June, and it will accept public comments on proposed rules establishing certification requirements for independent testing labs on October 10, 2019.

Maine has also selected the track-and-trace provider, BioTrackTHC, and released proposed track-and-trace rules for the medical cannabis market. Maine currently has eight (8) licensed medical cannabis dispensaries for its roughly 1.4 million residents and 45,940 certified patients. The state also has a caregiver regime, which permits registered persons to cultivate cannabis for patients.

Maine’s regulators will begin accepting applications for adult-use cannabis businesses in the state including cultivation, manufacturing, testing and marijuana store licenses. The Adult Use Marijuana law allows an unlimited number of each license type but sets the ownership cap to 3 cultivation facilities and 4 marijuana stores until January 2022.

Maine’s adult-use regulations are structured to award licenses to local residents. Applicants must be either a natural person who is a local resident; or a business entity whose officers, directors, general partners and a majority of shareholders are natural persons and Maine residents.

The regulations also require cannabis businesses to disclose any “party of control”, which refers to a person or group of persons who exert more than a minimum influence over the businesses operations. Cannabis businesses must transfer their license when the party of control changes. By defining a party of control, Maine can stop entities from using a side door contract to entering the market without transferring the license.

Maine requires cannabis businesses to disclose contracts for IP, branding or loans that may include provisions that exert control over a business in exchange for money. The lack of objective standards around determining when a person becomes a “party of control” increases the risk that Maine’s regulator may determine that these contracts constitute a transfer to a party of control or may prohibit contractual provisions that dictate the quality of products and services. Entities entering into such agreements should seek guidance from the regulator so it avoids triggering such an event.

The ownership restrictions in the adult-use regulations may prevent local businesses from obtaining the capital needed to responsibly own and operate a cannabis facility. The lack of license caps and low population density may also create an uber-competitive market that further exacerbates the intrastate capital crunch. For those interested in the Maine market, start drafting your business plan and collect your application materials as your chance to enter the market will happen imminently.