Cannabis Business Licenses
BPS Assisting Applicants with Cannabis Business Licensing, Planning, and Structuring
On June 22, 2021, Governor Ned Lamont signed into law legislation that legalizes the adult-use of cannabis in Connecticut, the “Responsible and Equitable Regulation of Adult-Use Cannabis Act” or “RERACA”. Retail sales of cannabis aim to begin in Connecticut by the end of 2022.
RERACA establishes eight new license types (some of which overlap in terms of which activities are permitted thereunder): (1) retailers, (2) hybrid retailers, (3) food and beverage manufacturers, (4) product manufacturers, (5) product packagers, (6) delivery services or transporter, (7) cultivators, and (8) micro-cultivators.
The Connecticut Department of Consumer Protection (DCP) will determine the number of total licenses available for each license type. Half of each license type will be reserved for “Social Equity Applicants”. To qualify as a social equity applicant, at least 65% of the ownership and control of the applicant must be held by people who meet the following criteria:
- First, their average household income must have been under 300% of the state median over the three tax years immediately before the application.
- In addition, they must have been residents of a disproportionately impacted area for at least:
- 5 of the 10 years immediately before applying for the license or
- 9 years before they turned age 18.
A map of the Disproportionately Impacted Areas as identified by the Social Equity Council can be found online here.
There will be separate lotteries conducted from the “general applicant pool” and the “social equity applicant pool” in order to select the licensees. The pool of social equity applicants is expected to be much smaller and therefore have higher chances of being selected for those eligible. In addition, social equity applicants receive various benefits such as having their license fees discounted by half.
Starting a cannabis business is an expensive endeavor. Costs to open a successful retailer range from $400,000 on the low end to $1 Million; and for a cultivation business the costs start around $1 Million and increase based on square footage. To be successful and beat out the competition, the business will need to be in a desirable location, have an aesthetically pleasing and functional build out, and have skilled employees and management running it.
Fortunately, the Connecticut legislature has learned from some of the states that legalized cannabis medically or recreationally before Connecticut. One way this shows is in the eight different type of licenses that exist under the law. Instead of having just two different license types as was the case in Connecticut’s medical marijuana program (one for a producer/grower and another for a retailer/dispensary), the variety of different licenses creates more opportunities for small businesses to get into the industry. For example, a delivery license is a much smaller start-up investment cost than a retailer or a cultivator might have. A small delivery business might be able to get up and running with start up costs in the range of $30,000 – $100,000, and can more easily expand by purchasing or leasing more vehicles and hiring more drivers, versus a dispensary/cultivator that would need to relocate or perform construction if it were to upsize. Additionally, the law established a micro-cultivator license type which allows for 2,000 – 10,000 sq ft of initial grow space (and can be expanded with DCP approval). Micro-cultivators are able to sell their own cannabis directly to a consumer, unlike a regular cultivator which must sell via a retailer).
The DCP will issue an announcement when it decides to accept new applicants. Those interested in applying cannot afford to lose any time. Completing an application is a substantial undertaking and requires substantial pre-planning. Applicants are encouraged to consult a law firm with attorneys who are experienced in the cannabis industry within Connecticut.
The law firm of Brown, Paindiris & Scott offers cannabis industry expertise and the experience of attorneys who have prior cannabis industry experience having represented applicants and current license holders of Medical Marijuana dispensaries and producers in Connecticut and are currently representing applicants for recreational adult-use cannabis licenses in Connecticut. Learn more about BPS’s Medical Marijuana Department here