Medical pot dispensaries can cash in with ballot question
May 24, 2016
THE MEDICAL MARIJUANA INDUSTRY in Massachusetts, which has been struggling to get off the ground, could hit the jackpot if voters this fall approve a ballot question legalizing the commercial sale and recreational use of the drug.
The ballot question gives the operators of medical marijuana dispensaries, even those who have only filed applications for a dispensary license, the first shot at retail marijuana licenses. Marijuana advocates say it makes sense to give the initial retail licenses to firms with some experience growing and selling medical marijuana, but critics say the language of the ballot question shows how the industry’s profit motive is driving public policy.
Walpole Police Chief John Carmichael, who was a member of the commission that reviewed and approved the first round of applicants for medical marijuana dispensary and cultivation licenses, said Massachusetts voters are being victimized by “the old bait and switch.” He said voters approved medical marijuana in 2012 out of a sense of compassion, but it now looks as if that whole initiative was designed to set the stage for legalizing retail sales at medical marijuana establishments. “It’s about making a profit,” he said.
According to the proposed ballot initiative, the state during the first year after passage would issue as many as 75 licenses to retail establishments, as well as a similar number of licenses to product manufacturers and to cultivators. The referendum allows medical marijuana operators to go to the front of the line, even if they’ve never opened a dispensary, before any new applicants are considered.
“The commission shall issue licenses first to qualified applicants who submitted applications for registrations to operate medical marijuana treatment centers to the Department of Public Health by October 1, 2015, and then by lottery among qualified applicants,” according to one section of the referendum.
Six medical marijuana dispensaries are currently operating in Massachusetts and another 16 have received provisional certificates to open, according to the Department of Public Health. There are also at least 80 organizations with nearly 150 pending applications that would be eligible to open retail marijuana operations under the ballot question. Of the 225 retail, manufacturer, and cultivator licenses that could be awarded in the first year, 75 percent could theoretically go to medical marijuana operators or applicants.
When the medical marijuana bill was passed, organizations looking to operate dispensaries and cultivation facilities were required to form nonprofits, with revenues strictly regulated and profits limited. The referendum legalizing marijuana sales would allow those companies to switch to for-profit status with the approval of two-thirds of their directors.
Kris Krane, president and cofounder of 4Front Ventures of Arizona, which advises, manages, and invests in medical and legal marijuana operators around the country, was part of the group that wrote the Massachusetts ballot initiative and said the wording is based on the laws passed in Colorado and Oregon.
“This is the formula that has been followed in every state that has legalized marijuana use,” said Krane, who now lives in Roslindale. “I’m not going to hide the fact there’s going to be a short-term business benefit for [medical dispensary operators.] There is certainly some truth to cthe laim the medical marijuana business will see a business boon if this thing passes. Those existing businesses in the state are going to have a competitive advantage no matter what.”
Krane’s company has a medical marijuana arm called Mission Partners, which operates Mission Massachusetts with an office on State Street in Boston.
The group running the push for the ballot question, the Campaign to Regulate Marijuana like Alcohol, operates out of office space donated by 4Front and the rent is listed as an in-kind campaign contribution. Mission Massachusetts has also donated $2,500 to the campaign and 4Front has donated $3,500.
Mission Massachusetts, which records show was started with $2 million in seed money from 4Front Ventures, has three applications pending before the Department of Public Health to operate medical marijuana dispensaries in the state. Because Mission Massachusetts has yet to be awarded a license, the organization has not identified where it plans to site the dispensaries.
Krane said he’s been advocating for changing marijuana laws for years, long before states began passing laws allowing the sale of medical marijuana and decriminalizing personal possession. “My involvement in this goes way beyond the industry, way before there was an industry,” he said.
A DPH spokesman said the agency is aware of the wording in the referendum but declined comment.
Will Luzier, a former assistant attorney general who is the campaign manager for the Campaign to Regulate Marijuana like Alcohol, said it’s “theoretically possible” all 75 retail licenses could be gobbled up by the medical marijuana applicants before any other commercial ventures get a chance to apply.
Luzier said the referendum calls for the creation of a Cannabis Board that would issue the 75 “transitional” licenses for operating in 2018, the first year pot would be able to be sold legally if the ballot question passes. Dispensaries that are already operating or have been issued provisional licenses would be the first, followed by groups that have applications pending before the DEP that were submitted before October 1, 2015. The medical marijuana law states that groups can submit up to three applications for dispensaries and Luzier said one commercial license could be issued for each application.
“They would certainly get preference,” said Luzier. “It’s also important to remember there’s only three [applications.] It’s not like there’s six or eight. And there’s hundreds of thousands of people buying from the criminal market. Right now, it’s commercialization by criminals. This way, it’s tested and safe, not tainted or contaminated with whatever.”
The referendum would also prevent cities and towns from restricting medical dispensaries from adding a retail component to their existing operations, although side deals with individual dispensaries can be negotiated. Boston, for example, is finalizing a host agreement with Patriot Care Corp. for a medical marijuana dispensary on Milk Street. That agreement is likely to contain a clause barring the company from launching retail sales at the site.
Norwood Selectman William Plasko was in the majority on the board when members gave the thumbs-up to two medical marijuana dispensaries in the town. Plasko, who opposes legalizing marijuana, said he was not aware the medical marijuana dispensaries could add for-profit retail operations if the ballot question passes.
Plasko also said the agreements have not been finalized and he may ask colleagues to redraft it.
“We haven’t signed final agreements so maybe we’ll stick that in there,” he said. “We’re still working on the final wording.”
Norwood Police Chief William Brooks, president of the Massachusetts Chiefs of Police Association, warned officials that this was a potential result if medical marijuana dispensaries were allowed to open even as nonprofits.
“I think the whole thing is ludicrous,” he said. “To have a large-scale shop in town, that would be one of the first in the state, selling medical and commercially, I think it will draw a lot of people into town… Medical marijuana is supposed to be nonprofit but there’s an awful lot of money going into this.”
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