Connecticut Becomes 18th State to Legalize Recreational Cannabis

On June 17, 2021, the Connecticut General Assembly voted to pass the Responsible & Equitable Regulation of Adult-Use Cannabis Act (the “Act”). With Governor Ned Lamont’s signature, expected today, Connecticut will be the 18th state – and this year the fourth state – to legalize the recreational use of cannabis by people 21 and older.

Under the expected new law, which begins July 1, 20211, almost immediately, all adults 21 and older will be allowed to own up to one and a half ounces of cannabis. Personal cultivation rights will be available to medical marijuana patients from October 1, 2021, and later on July 1, 2023 for consumers consumed by adults. Like the state’s existing medical marijuana program, the Commissioner and the Department of Consumer Protection (or Commissioner ”and“ Department ”) will enact rules to implement the law and regulate the new retail cannabis market. The law stipulates restrictions on the number of manufacturers and dispensaries of recreational cannabis as well as restrictions on the number of applications for licenses. The law also establishes a tax structure that includes the general state sales tax rate of 6.25%, consumption taxes between 0.625% and 2.75% per milligram of total THC, and a tax of 3% on gross receipts. In addition to legalizing the recreational use and sale of cannabis, the law contains a number of social justice initiatives and criminal justice reforms for the benefit of individuals and communities in the state who have historically been negatively impacted by the state’s prosecution of cannabis crimes.

THE NEW REGULATORY FRAMEWORK

The law mandates the Commissioner and the Ministry to develop, manage and regulate the new legalized adult cannabis program. Under the law, the Commissioner is required to issue preliminary guidelines and procedures related to, among other things, dosage parameters, portion size restrictions, product packaging and labeling requirements, and laboratory test standards. The commissioner will also set the maximum number of pharmacies and manufacturers allowed in the state. As the adult use program develops, the Commissioner will consult with other government agencies to regulate, develop support programs such as a business acceleration program and a workforce training program, and legislate for related services, including banking, psychiatry and insurance recommend.

Licensing

The law categorizes licenses as follows: (1) licenses for cannabis operations, (2) licenses for key employees, (3) support licenses, and (4) licenses for laboratory or research programs. Cannabis business licenses also include the following types: retailers, hybrid dealers, breeders, micro-breeders, product manufacturers, food and beverage manufacturers, product packers, delivery services, and transportation companies. For more information on license types and their associated fees, see the table below

For each license type, the Ministry not only sets the maximum number of licenses to be issued, but also the maximum number of applications to be considered. Half of the maximum number of applications for consideration is reserved for “social equity applicants” and selected through a social equity lottery. “Social Justice Applicants” are defined by law as applicants who are at least 65% owned and controlled by an individual who (i) has an average household income of less than 300% of the median national household income for the three years prior to the and (ii) resided in a disproportionately affected area for at least five of the ten years prior to the application or resided in a disproportionately affected area for at least nine years before reaching the age of 18.

If the ministry receives more requests for a license type than the maximum number to consider, a lottery is held to determine the requests for review, but half of the slots are reserved for social justice applicants. The examination of applications and the issuing of licenses do not begin until the ministry has issued the rules and regulations necessary to implement the law.

Non-Social Justice Applicants3 must pay fees for the issuance or renewal of all licenses and registrations according to the following table:

License type License defined License fees
Dealer license
  • License to buy cannabis from producers and sell cannabis to retail customers (but not to other retailers)
  • Application fee: $ 500
  • To obtain a temporary license: $ 5,000
  • To get a final license: $ 25,000
  • To renew a final license: $ 25,000
Hybrid dealer license
  • License to buy and sell cannabis and medical marijuana products
  • Application fee: $ 500
  • To obtain a temporary license: $ 5,000
  • To get a final license: $ 25,000
  • To renew a final license: $ 25,000
Cultivator license
  • License to grow, grow, and propagate the cannabis plant in a facility with at least fifteen thousand square feet of grow space
  • Application fee: $ 1,000
  • To obtain a temporary license: $ 25,000
  • To get a final license: $ 75,000
  • To renew a final license: $ 75,000
Microcultivator license
  • License to grow, grow and propagate the cannabis plant in a facility with a cultivation area of ​​at least two thousand square meters and no more than ten thousand square meters of cultivation area
  • Application fee: $ 250
  • To get a temporary license: $ 500
  • To get a final license: $ 1,000
  • To renew a final license: $ 1,000
Product manufacturer license
  • License to acquire cannabis, to extract and manufacture products that apply exclusively to this license type
  • Application fee: $ 750
  • To obtain a temporary license: $ 5,000
  • To get a final license: $ 25,000
  • To renew a final license: $ 25,000
License for food and beverage manufacturers
  • License to own and operate a business facility that acquires cannabis and manufactures food and beverages
  • Application fee: $ 250
  • To obtain a temporary license: $ 1,000
  • To get a final license: $ 5,000
  • To renew a final license: $ 5,000
Product packager license
  • License to package and label cannabis
  • Application fee: $ 500
  • To obtain a temporary license: $ 5,000
  • To get a final license: $ 25,000
  • To renew a final license: $ 25,000
Delivery service or van license
  • License to supply cannabis from retailers to qualified individuals
  • Application fee: $ 250
  • To obtain a temporary license: $ 1,000
  • To get a final license: $ 5,000
  • To renew a final license: $ 5,000
Backer license
  • License to hold a direct or indirect financial interest in a cannabis company
  • To get an initial or renewal license: $ 100
Key Employee License
  • License to fill an executive position or equivalent, including: President or Chief Officer, Finance Manager or Compliance Manager
  • To get an initial or renewal license: $ 100
Employee registration
  • Registering for employment with a cannabis company, including general employees, board members, and access holders such as independent contractors
  • To get a first-time or annual renewal registration: $ 50
License conversion
  • To convert from a medical pharmacy to a hybrid retailer: $ 1,000,000
  • For a producer expanding medicinal cannabis cultivation to include adult recreational cannabis only: $ 3,000,0004

TAXATION

The sale of cannabis is subject to the general state sales tax of 6.25%, in addition to consumption taxes of 0.625% to 2.75% per milligram of total THC and a 3% tax on gross receipts. Excise duties do not apply to: (i) the sale of cannabis for relief; (ii) the transfer of cannabis from one licensee to another licensee; and (iii) the sale of cannabis by a delivery service to a consumer.

All cannabis tax revenue will be paid into the general fund of the state for the tax years 2022 and 2023. Thereafter, most of the cannabis tax revenue – around 85 to 100% – is allocated to a “Social Equity and Innovation Fund”. and a “Fund for Prevention and Recovery Services”. The law also empowers municipalities to tax cannabis sales in their jurisdiction, with the tax revenue being used for road improvements, educational programs, services for those released from suspended or suspended sentences, mental health services, youth services, or community involvement.

SOCIAL EQUITY PROGRAM AND CRIMINAL REFORM

As noted above, the law creates a robust social justice program that aims to support individuals and communities who have been disproportionately harmed by the criminalization of cannabis. In addition to providing social justice applicants with expanded opportunities to enter the state’s cannabis retail market and reduced royalties, the law establishes a Social Justice Council and is considering various program initiatives, including business accelerator programs, employee training and development, as well revolving loan programs for social equity applicants and licensees. Program initiatives are funded from cannabis tax revenues that are paid into the Social Justice and Innovation Fund.

The law also provides for a number of criminal law reforms to de-stigmatize cannabis, remove the effects of historical discrimination in cannabis enforcement, and ensure economic opportunities for families affected by cannabis crime. These reforms include the lifting of certain cannabis convictions, law enforcement reforms, the decriminalization of cannabis possession for minors and young adults under the age of 21, and a number of other changes to existing criminal law.

1 The date of entry into force of all provisions of the Act varies and may be linked to additional measures by the state supervisory authorities.
2 The law does not provide any further details for laboratory or research program approvals. Nonetheless, a “laboratory” is defined as a facility in the state that is licensed to research and analyze the effects of cannabis use. A “Research Program” means a program of research into cannabis with the aim of expanding available information about the growth, processing, medicinal properties, dosage forms, administration, or use of marijuana to treat or alleviate symptoms of disease or the effects thereof.
3 Social justice applicants are entitled to a 50% discount on license fees for the initial application and for the first three renewal cycles.
4 A grower wishing to expand cultivation can receive a reduced fee of $ 1,500,000 if they have equity stakes in at least two joint ventures.

Katherine Thill contributed to this warning.

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