The rollout of Maryland’s social equity marijuana program has faced significant delays, with none of the businesses open nearly a year after they were awarded licenses.

Part of the issue is that it’s difficult to attract investors to a business and challenging to find real estate.

Maryland’s cannabis regulations require that the original social equity applicant retain 51% ownership in the company.

A separate social equity partner can own 14% of the company, leaving just 35% for a non-social equity investor.

Further complicating matters is that the original social equity licensee must hold the license for five years, a measure that was taken after Maryland witnessed social equity applicants in other states flipping their permits soon after they were awarded.

“It can be challenging to entice investors and raise capital if you can’t give them any ownership or control,” said attorney Meg Nash, a partner who covers Boston and Maryland for the Vicente law firm.

Medical to recreational conversion

Social equity licensees aren’t the only cannabis businesses struggling.

When medical marijuana growers and processors added adult use to their licenses in 2023, they had to pay the state a conversion fee of 10% of their total gross revenue in 2022 up to $2 million. Medical marijuana retailers had to pay 8% up to $2 million.

“These were seven-figure charges for some businesses,” said Wendy Bronfein, a co-founder, chief brand officer and director of public policy at Curio Wellness, which is among the cannabis businesses that had to pay seven figures for an adult-use license. Curio is based in Towson, Maryland, but also has a footprint in Missouri.

On top of that, business owners are not allowed to sell their licenses for five years from the date they converted, which makes it difficult to attract investors.

“The idea that you cannot exit your business at the time that’s best for you and your investors is not a decision the state should be making,” Bronfein said.

The state’s medical marijuana program, which launched Dec. 1, 2017, was set up to be beneficial to the recommending providers, licensees, investors and patients, said Gail Rand, founder and CEO of Annapolis-headquartered Grand Consulting.

“As such, the licensees were able to invest heavily in capital expenditures, including automation,” Rand said.

“It would be impactful if the new social equity licensees and the original licensees would be allowed to capitalize on their hard work and investment and exit as they see fit.”

High-demand market

Some in the industry say Maryland has done a great job of rolling out its adult-use program in a way that ensures people in rural communities are served.

“Stores will locate themselves in cannabis desert areas,” said Jake Van Wingerden, president of Warwick-based SunMed Growers.

“As an existing grower/processor, we’re eagerly waiting and hoping for those new dispensaries to come online.”

Ben Burstein, an analyst at New York-headquartered cannabis wholesale commerce software platform LeafLink, noted that Maryland retailers generate an industry-high in sales per resident, showing strong market growth with high demand, according to the company’s recent “State of the U.S. Cannabis Market” report.

“They’ve done a good job of having a large-scale adult-use market where you have operators who can supply all those stores,” Burstein said.

And since the state launched adult-use sales on July 1, 2023, it’s collected more than $82 million in taxes, jumping from $12.2 million in the third quarter of 2023 to $22.4 million in the second quarter of 2024 before dipping to $18.3 million the following quarter, according to the Maryland Quarterly Cannabis Update.

Meanwhile, combined sales of medical and adult-use marijuana have remained steady at between $93 million and $100.6 million per month, according to the Maryland Cannabis Administration (MCA).

An MJBizDaily analyses estimated that current monthly recreational sales are averaging about $72 million per month, or $840 million per year, while medical sales are averaging $24 million-$25 million per month, or about $300 million per year, for a combined total of more than $1.1 billion.

Those figures likely will increase as social equity applicants are awarded permanent licenses and allowed to open their doors in the coming months.

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More licenses to be issued

Of the 172 cannabis business licenses issued, 100 are for stores that have converted from medical to recreational.

The MCA is poised to issue nearly 1,000 licenses, mainly to social equity applicants, in the coming years.

Social equity applicants win their licenses through lotteries.

After being verified as qualified applicants, they advance to the “conditional” stage, after which they have 18 months to become operational and the five-year moratorium to begin sales begins.

If the licensee doesn’t proceed with the opportunity, the permit returns to the state to be placed with another applicant.

“I don’t think anyone expects every one of those licenses to come on board, but the state wants to make sure they’re successful,” said Hope Wiseman, founder and CEO of Capitol Heights-based Mary & Main.

Wiseman described Maryland’s cannabis market as stable but with some room remaining before it begins to plateau and normalize.

“We’re seeing realistic growth in our market,” she said. “The speed at which the new licenses come on board will match demand.

“I don’t think there will be an oversaturation ever for cannabis businesses.

“Our market will stay pretty controlled and prices will be stable until we get to the point of interstate commerce, and we’ll have to adjust from there.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.



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The information provided in these blog posts is intended for general informational and educational purposes only. It is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or other qualified healthcare provider with any questions you may have regarding a medical condition. The use of any information provided in these blog posts is solely at your own risk. The authors and the website do not recommend or endorse any specific products, treatments, or procedures mentioned. Reliance on any information in these blog posts is solely at your own discretion.

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