The Cannabis Control Board has begun its search for an Executive Director, and with crossover a few weeks behind us, the House has finally taken up bill S.25, the preeminent legislation to amend Act 164, which landed in the Committee of Government Operations where lawmakers overviewed the status of the new market’s rollout along with key provisions in the bill.

We are now past the halfway mark in the 2021 legislative session, the rollout of Act 164 is significantly behind, important milestones in the formation process are being missed, and the House chamber is just getting around to discussing bill S.25, the leading legislation to address the issues with Vermont’s adult-use and medical cannabis markets.

VGA and Coaltion members were met with moderate inclusiveness in the Senate, when we worked on bill S.25, over the past few months, some of our proposed amendments were adopted, most were not, and we anticipate continuing that same level of engagement with lawmakers in the House.

Act 164 Update

To briefly overview Vermont’s new adult-use market formation process, the Nominating Committee was to send the Governor candidates for the Cannabis Control Board (CCB) by December 18, 2020. The CCB was to be formed and have an Executive Director by the end of January 2021 and deliver sweeping recommendations to the legislature by April 1, 2021. The importance of this milestone cannot be understated because the CCB needs the legislature to establish licensing costs and fees, along with advertising and other vital components of the emerging marketplace, and without meeting this April 1 deadline significant delay is likely. From there, the next important milestone in Act 164’s market formation is June 1, 2021, when the CCB is to be fully operational and initiate rulemaking. Check out the Act 164 Info Sheet for the entire rollout timeline for Vermont’s adult-use market and more information about implementation.

So, where are we now? The Nominating Committee sent the Governor candidates for the CCB on February 15, 2021, practically two months behind schedule, and the Governor announced the final names on March 29, 2021. On Tuesday in House Government Operations, Legislative Council shared that the search for the Executive Director has just begun and is expected to take a few weeks. According to Act 164’s timeline, the formation process is still in January 2021. The next milestone in the process is April 1 when the CCB is to deliver sweeping recommendations to the legislature. Can the CCB deliver those recommendations to the legislature before the State House adjourns at the end of May? Not likely. On Tuesday in House Government Operations, both, Legislative Council and Representatives openly expressed concern that meeting the April 1 deadline for this legislative session was not realistic. As a result of these significant delays, which effectively started when bill S.54 was enacted in October 2020, lawmakers are now trying to use bill S.25 to repair the process and avoid further delays.

What’s in Bill S.25?

Bill S.25 is what’s called a clean-up bill for Act 164. Most major pieces of legislation, such as S.54 (2020), don’t have clean-up bills because so much time and energy is typically poured into developing them. The only reason Act 164 has a clean-up bill is because of all the noise Vermonters, VGA, and our Coalition partners made last year in proclaiming that S.54 did not fairly represent our shared interests. So, in theory, S.25 should be the bill that addresses the racial, agricultural, economic, and medical inequalities that were raised last year and currently exist in the new law. However, despite earning some amendments in the bill in the Senate, the legislation fails to address any of the issues in the new taxation and regulation law and we cannot support this bill, as it stands now. Below are the key provisions in bill S.25, along with our analysis.

Regulation by Local Government
The local control provision in bill S.25 will reform the retail opt-in process for towns and cities. Act 164 currently requires a town’s residents to vote by Australian ballot to approve retail sales, this is called opt-in, meaning, a town cannot participate in retail operations without first going through the process to opt-in.

The provision in bill S.25 will effectively transform our opt-in process into opt-out. The language says that if a town has not previously voted on retail opt-in by March 2023, they shall be deemed to be opted-in. This means, if a town has voted and not approved the opt-in, before that March deadline, their measure will remain. A town may also vote to opt-out after that March deadline, but every Vermont municipality will automatically opt-in on March 2023 under bill S.25. We generally support this measure.

Cannabis Control Board and Advisory Committee
There is language in bill S.25 we fought to include that will bring greater accountability to the CCB and Advisory Committee (AC) and better represent the interests of Vermonters. Under Act 164, members of the CCB have overreaching authority over the market and little accountability, for instance, it’s difficult to remove them and they serve a 3-year term, so we requested the AC gain removal authority over members of the CCB, and that AC also include a 13th member to represent medical cannabis patients.

The provision to bring greater accountability to the CCB in bill S.25 is our language and we support it, but our amendment to include a 13th member to the AC to represent medical cannabis patients was hijacked by corporate lobbyists and was rewritten to define that new member as someone from the Vermont Cannabis Trade Association (VCTA). We will fight to correct this issue with our amendment, but this process battle shines a light on the corporate influence in Montpelier.

We also fought for a timeline change between the AC and the CCB. Under Act 164, the AC is to be formed after the CCB proposed sweeping recommendations to the legislature and we feel that the AC should be formed before then to inform the recommendations sent to lawmakers. Our language was accepted in the Senate to form the AC before the CCB is to deliver sweeping recommendations to the legislature.

Licensing Fees and Costs
Under Act 164 the CCB is to report sweeping recommendations to the legislature by April 1, 2021, which includes proposals for license fees and costs. This step in the formation process is critical. Licenses for Vermonters are not completely defined in Act 164, only dispensaries have an application process, costs, and fees defined in the statute allowing them to get started despite formation delays. The legislature is responsible for budgetary matters, the CCB cannot define licenses on its own, so licenses must be defined through legislation.

The provision in bill S.25 says that the CCB no longer needs to report to the legislature for license costs and fees, since it is so behind, and they can report to the Joint Fiscal Committee for licensing approval. Circumventing the General Assembly for a committee is seen as less oversight, and it’s recognition from lawmakers that Act 164’s implementation and formation process was not well designed from the beginning.

Advertising
Last year the House won a ban on advertising, for the adult-use market, in negotiations with the Senate to pass bill S.54 (2020), and this year they’re revisiting the issue with bill S.25. Similar to the licensing fees and costs, the CCB’s authority over advertising is limited and must rely on the legislature to enact regulations. Since the formation process is so behind, bill S.25 is being used to reform the process and begin to define advertising regulations and a different process to develop them.

The advertising provisions in bill S.25 include no advertising that appeals to individuals under 21 years of age, no prizes or giveaways, no advertising on a medium where over 15% of the audience is reasonably expected to be under 21 years of age, and all advertising must be submitted to the CCB before dissemination. We anticipate much of this language will be fluid for the next year, but we will watch the advertising guidelines as they form, as, we have concerns for pay-to-play type regulations we see in others states.

Integrated Licenses
Under Act 164, only integrated license holders may retail cannabis and cannabis-related products at the rollout of Vermont’s adult-use marketplace. This is called staggered licensing, it is bad cannabis law, and we generally regard it as a tool for regulatory capture, which is when dominant industry actors apply political pressure and, through regulation, take over the operations of an entire market. Senators introduced a provision in S.25 that, on the surface, tackles this issue of market dominance by making dispensaries obtain 25% of their cannabis by craft cultivation license holders between August 2022 and October 2022. 25% is not enough of a percentage to shift price control over to the small producers, and a three-month window is a negligible amount of time, not to mention producers have no control over the labeling and marketing of their products when on the dispensaries shelves. We feel if lawmakers want to address the issue of market dominance by the dispensaries, then open up the marketplace for Vermonters, give them licenses in statute, implement our craft licensing tier this year and allow people to responsibly retail cannabis themselves.

Social Equity
Bill S.25 includes provisional to-do’s for the CCB when it comes to social equity and developing business assistance and funding programs. Vermont did not include a social equity program in its taxation and regulation law and now lawmakers are attempting to construct one by directing the CCB to develop one. Bill S.25 says that the CCB will create a program to reduce or eliminate the fees for those most harmed by prohibition. From our standpoint, this language is too broad and fails to miss the mark entirely on creating equity in this new marketplace and we are urging lawmakers to adopt components of H.414, which is Vermont Racial Justice Alliance’s social equity program bill, into bill S.25.

Medical Cannabis Program
Bill S.25 includes reforms to the State medical cannabis program. Provisions in S.25 fold the state medical program under the authority of the CCB by July 2021 and absorb its medical cannabis fund. It is critical Vermont retain a functioning medical cannabis program, and we oppose these changes to the state medical program.

Closing

The Vermont State House is expected to adjourn in late May so we’re realistically looking at a few weeks in the House, with bill S.25, before moving back into the Senate where procedures for enactment will commence. While all of this legislative activity is occurring, over the next month, we also anticipate the CCB will finally get its footing, open up an office, and begin its work. VGA and Coalition members will continue to advocate and lobby the lawmakers and the CCB to fight for greater representation for all Vermonters in the adult-use and medical markets.