It’s never too early for prospective marijuana entrepreneurs to start looking at the new legalization law and start preparing to submit an application for a license to sell or cultivate the plant, according to one Hampton Roads lawyer.
“Businesses should think about what type of license they might want to obtain, then position themselves to be ready for when applications are available,” said Jonathan Gallo, a lawyer with Vandeventer Black in Norfolk who specializes in cannabis law.
Virginia’s just-passed legalization bill allows possession of up to an ounce for those 21 and older starting July 1. However, retail sales are delayed until 2024, giving lawmakers time to establish rules and regulations about the marketplace.
Meanwhile, the current law tries to head off at least two potential side effects of legalization, Gallo said. The bill tries to close a gray market loophole and allow for greater equity in dispensary and production permits issued by the state.
“It’s going to be an interesting time for the commonwealth,” Gallo said.
One provision tries to prevent the creation of Washington, D.C-like marijuana “gifting services.” Voters in that city passed a ballot initiative legalizing the substance in 2014, but marijuana sales remained banned under the law. Would-be weed sellers got around the law by setting up services in which customers purchase unrelated items, like digital artwork for $50-$90, and receive a “gift” of marijuana as well.
Under the new Virginia law, adults 21 and older may give each other up to an ounce of cannabis. However, the law prohibits giving it away “contemporaneously with another reciprocal transaction between the same parties” and bans advertising related to such transactions. The law makes those forbidden sales a Class 2 misdemeanor punishable by up to six months in prison and a fine of up to $1,000.
Portsmouth businessman Johnny Garciawelcomed the potential for local entrepreneurs to enter the recreational cannabis market. Garcia and his business partners opened Cativa CBD in 2019, which offers products with cannabidiol, or CBD — a non-psychoactive ingredient in marijuana and hemp plants.
Garcia said Cativa is doing well, and the business is well-positioned to transition into the recreational marijuana market.
“We want to do it right,” he said.
Still, he worried about the potential for national companies to swoop in and take license spots away from local businesses. The licensing process for medical marijuana dispensaries attracted criticism from local companies after the Virginia Board of Pharmacy granted the region’s sole license to an out-of-state company: New York-based Columbia Care.
The new law solves at least one of the problems that led to the decision — the Virginia Cannabis Control Authority can issue many more licenses, including up to 400 for retail stores, 25 for marijuana wholesalers, 60 for manufacturing facilities and 450 for cultivation facilities.
Another provision aims to prevent a single company from controlling multiple aspects of the industry by forbidding a single investor from possessing licenses in more than one category, including stores, wholesalers, manufacturing facilities, testing facilities and cultivation facilities.
One noteworthy exception: existing medical marijuana businesses and hemp manufacturers are allowed to possess multiple licenses if they pay a $1 million fee to a state equity fund. The board may also create other exceptions to this rule if they are “drawn narrowly to limit vertical integration to small businesses and ensure that all licensees have an equal and meaningful opportunity to participate in the market,” according to the bill text.
Virginia will start accepting applications for retail sales, manufacturing, cultivation and all other categories in July 2023.
Trevor Metcalfe, 757-222-5345, trevor.metcalfe@insidebiz.com