Maine

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.

Maine to Allow Medical Marijuana Manufacturing Facilities

Maine will hold a public hearing on July 8, 2019 on the Office of Marijuana Policy’s proposed rules for medical marijuana manufacturing facilities. The regulator will accept public comments until July 18, 2019. The proposed rules establish minimum standards and a registration regime for entities, excluding caregivers, patients, and dispensaries, that process marijuana to create medical marijuana products and extracts.

The proposed rule would allow companies located in Maine to apply for a medical marijuana manufacturing license. The state will grant a license upon receipt of an application and approval from a local jurisdiction to operate a manufacturing facility. There appear to be no license caps or limits on out-of-state ownership. The proposed rules also permit volatile extraction methods.

It is unclear the market potential for medical marijuana manufacturers in the state given that caregivers and the eight (8) medical dispensaries may manufacture marijuana products including edibles. As of December 31, 2018, Maine’s medical marijuana market has 45,000 patients and 2,462 licensed caregivers. However, marijuana manufacturers will be able to also establish a presence in the state’s recreational marijuana market as the state has a population of over 1.3 million people.

Maine's Adult Use Regulations Limit Industry's Access to Capital

Maine’s Office of Marijuana Policy released its provisionally adopted rules last Friday. The rules are relatively modest as they include only 78 pages of regulatory requirements. However, the benefits of a friendly regulatory environment may not overcome the onerous in-state licensing and ownership limitations.

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 majority of shareholders are natural persons and Maine residents.

These restrictions limit the ability of Maine residents to access the capital needed to grow the industry in a manner that benefits the state and local license holders. Applicants may find it difficult to raise sufficient capital to fund the long road required in starting a cannabis business. A lack of capital may also reduce initial revenues and tax dollars generated in the state.

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 its 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.

Maine’s regulations may guarantee the continued slow roll out of the adult-use cannabis industry as applicants’ will need to raise funds from local friends and neighbors. Hopefully Maine will reconsider this approach and allow the cannabis industry to grow in a responsible manner. The industry is facing multiple challenges, and additional capital roadblocks should be removed.

5 Key Take Away's from Maine's Recreational Marijuana Regulations

Maine published draft recreational marijuana regulations more than two years after residents voted to legalize marijuana and amid contracting chaos. In September 2018, Maine hired a consultant to help draft the regulations, which resulted in a lawsuit from a competitor. Maine is now paying the losing consultant $10,000 to review the draft rules in exchange for dropping the administrative appeal.

Maine released the draft rules in response to a freedom of information act request from the Press Herald. The rules will be formally published twenty days ahead of a hearing to receive public comments.

Five (5) key take away’s from Maine’s recreational marijuana regulations include:

  • Maine chose a simple license regime that includes cultivation facility, testing facility, products manufacturing facility, and marijuana store.

  • Applicants obtain a conditional license, and then must obtain approval from a local municipality that has voted to allow that class of marijuana establishment or .where the county has opted in to allowing the class of marijuana establishment.

  • Except for independent testing facilities, Maine will verify that management and the majority of owners of licensees are natural persons who are Maine residents.

  • Maine is charging reasonable application fees ranging from $60 to $500. Annual license fees range from $350 to $15,000.

  • The regulations do not provide for social equity programs, social lounges, or temporary events.

Maine's Legislature Proposes Progressive Marijuana Production Tax

Most state regulators tax marijuana producers based on the quantity or a fixed rate applied to the square footage of the canopy growth. Maine wants to change this approach. Maine’s Committee on Taxation will hold a public hearing on Thursday, April 18th, 2019 on a bill that will charge marijuana producer’s 15% of the average market price that is determined by the state. The tax will not apply to vertically integrated marijuana producers.

Maine’s approach is novel. The industry can benefit from a transparent market prices. We are most concerned about the transparency and fairness of the approach used to generate the average market price, and the likelihood of manipulation. The legislation states that the department will determine an average quarterly market price for flower, trim, immature plants and seeks. The bill fails to address how the average market price is calculated per category including the look back period; the initial pricing used to create the average market price; how changes in local conditions are incorporated; and how the producers use the average market price to assess taxes to be paid. These details should be provided so that producers can adequately assess the changes to cash flow, the certainty of which a flat rate provides.

Free Cannabis Legislative Tracker For 20 States: Access THC, Hemp And CBD Bills

Access our free legislative trackers for Arizona, California, Colorado, Connecticut, Florida, Illinois, Kentucky, Massachusetts, Maine, Michigan, Missouri, North Dakota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Tennessee, Utah and Washington. Review and access the cannabis & hemp bills introduced by the State Legislatures in the 2019-2020 session. The trackers include a summary description of the legislation, status and link to the full legislative text. The legislative trackers will be updated on a weekly basis.

Maine's New Law Addresses Ban on CBD Infused Products

Hemp was federally legalized as a part of the 2018 Farm Bill on December 20, 2018. In early February, and in an effort to comply with Federal Regulations, the State of Maine ordered that all cannabidiol ("CBD") foods, beverages & other products be removed from shelves & that all sales of CBD infused products cease immediately.  Even pet stores were contacted & told to remove any products containing CBD. Complaints poured in, and on Feb. 5, Rep. Hickman introduced LD630 in a bi-partisan effort to resolve the apparent misunderstanding among the State of Maine, the FDA, the DEA and Maine citizens.

With a strong show of bi-partisan support from Congress, newly elected Democratic Governor Mills signed LD630 into law on March 27th. The law clarifies that products containing CBD are not considered "adulterated" under state law.  Further, the production, sale, manufacture, marketing or distribution of products containing hemp may not be prohibited. The State definition of "Hemp" now matches the federal definition, as set forth in the 2018 Farm Bill.

Free Cannabis Legislative Tracker For 20 States: Access THC, Hemp And CBD Bills

Access our free legislative trackers for Arizona, California, Colorado, Connecticut, Florida, Illinois, Kentucky, Massachusetts, Maine, Michigan, Missouri, North Dakota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Tennessee, Utah and Washington. Review and access the cannabis & hemp bills introduced by the State Legislatures in the 2019-2020 session. The trackers include a summary description of the legislation, status and link to the full legislative text. The legislative trackers will be updated on a weekly basis.

Free Cannabis Legislative Tracker For 20 States: Access THC, Hemp And CBD Bills

Access our free legislative trackers for Arizona, California, Colorado, Connecticut, Florida, Illinois, Kentucky, Massachusetts, Maine, Michigan, Missouri, North Dakota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Tennessee, Utah and Washington. Review and access the cannabis & hemp bills introduced by the State Legislatures in the 2019-2020 session. The trackers include a summary description of the legislation, status and link to the full legislative text. The legislative trackers will be updated on a weekly basis.

Free Cannabis Legislative Tracker For 20 States: Access THC, Hemp And CBD Bills

Access our free legislative trackers for Arizona, California, Colorado, Connecticut, Florida, Illinois, Kentucky, Massachusetts, Maine, Michigan, Missouri, North Dakota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Tennessee, Utah and Washington. Review and access the cannabis & hemp bills introduced by the State Legislatures in the 2019-2020 session. The trackers include a summary description of the legislation, status and link to the full legislative text. The legislative trackers will be updated on a weekly basis.