As state regulators began accepting business applications this week to grow and sell legal cannabis, a coalition of advocates voiced concerns that Connecticut’s plan to initially limit the number of licenses may hinder a fair marketplace.
In a letter to Gov. Ned Lamont and Consumer Protection Commissioner Michelle Seagull, the group of cannabis associations said it was “disheartened” by state plans to issue 56 business licenses in its first lottery under a law passed last year legalizing recreational sale of cannabis.
“Low license numbers often allow the cannabis market to be controlled by the interests of the
wealthy and politically connected, which is contrary to the equity-minded spirit with which
Connecticut’s legalization law was drafted,” said the letter signed by members of the Marijuana Policy Project, Students for Sensible Drug Policy, CTCure, and the Minority Cannabis Business Association.
The DCP, which has been coordinating the rollout of licenses with the state Social Equity Council, plans to issue licenses to 12 retailers, four micro-cultivators, 10 delivery service providers, four hybrid retailers, 10 food and beverage businesses, six product packagers, six manufacturers, and four transportation businesses.
Under the law, half of the business licenses issued by the state will go to social equity applicants, disproportionately impacted by the prohibition of cannabis. Others will be awarded through a lottery system. The application window for retail licenses opened Thursday for a 90 day period. Application periods for the other types will open between now and late March.
However, the advocacy groups worry that the limited number of licenses present an opportunity for existing companies operating under the state’s medical marijuana program to crowd out new minority-owned small businesses.
The law allows those existing companies to enter into “equity joint ventures,” or partnerships half-owned by someone who qualifies as a social equity applicant.
“Allowing Connecticut’s four existing producers, some of which are vertically integrated, to create an unlimited number of cultivator and retail licenses, while licensing only a meager number of minority-owned and small businesses, will negatively skew the marketplace for equity and small business applicants for years to come,” the groups wrote.
However, the number of licenses available will increase over time and at the moment is limited in part by workflow logistics, Kaitlyn Krasselt, a spokesperson for the Consumer Protection Department said. The agency, which has also been tasked in recent months with developing regulations for Connecticut’s newly-legalized online gambling and sports betting market, arrived at the numbers in consultation with the Social Equity Council, Krasselt said.
“There will be another lottery in 2022 and many more after that,” Krasselt said. “There’s no limit to the total number of licenses issued aside from population restrictions that are in the law.”
However, Jason Ortiz, policy director of CTCure, said the delay could be longer than state regulators expect. In other states that have legalized cannabis, Ortiz said litigation has slowed the process of issuing subsequent licenses.
“So by thinking we can fix this later, we may just be creating a snowball effect where later we have a massive problem and won’t be able to go back in time and do it correctly from the beginning,” Ortiz said. “It makes more sense to issue those licenses immediately.”
At an unrelated event earlier this week, the governor told reporters he believed the rollout of the state’s new cannabis industry was proceeding smoothly.
“Look, we’ve had a very clearly defined process,” Lamont said. “We legalized possession back last summer. We’ve got a process in terms of how you apply for a license. We have a process that puts a big emphasis on social equity and training and I think it’s proceeding on schedule and we ought to have those licenses awarded, I think it’s in the next month or two.”