For years, the call to “Legalize It” was widely regarded as a stoner’s pipedream. Now, Virginia leaders are not only seriously proposing to legalize marijuana, they are making elaborate plans for the industry that would result.
Two state reports emerged in recent weeks, one from the General’s Assembly’s study commission and one from the governor’s administration. Both describe the peripheral issues that come with legalization, from how to regulate it as a business, how to handle past convictions and how to prevent abuse and public safety issues.
The business implications are enormous, if figures from the governor’s’ office are any indication. The governor’s work group said a legal adult-use marijuana industry could be worth $698 million to $1.2 billion annually in economic activity and up to $274 million in tax revenues when the industry reaches “maturity.”
The tax figures impressed Steve Baril, a Richmond lawyer and lobbyist who represents the Cannabis Business Association of Virginia.
“I don’t know what the rate is, but that tells me that they think there’s a lot of money involved,” Baril said.
Many businesses now dealing in legal hemp products are eyeing the related and promising adult-use marijuana industry, lawyers say.
Lawyers at Virginia’s Vandeventer Black jumped in the field early, creating a practice group to work with the hemp and medical cannabis industry.
“It’s really a perfect niche for a business-oriented law firm like us,” said Jonathan V. Gallo of Norfolk.
The firm says it offers help with banking, licensing, commercial litigation, real estate, construction and collections.
“We’ve received quite a bit of interest in hemp-related businesses in the state,” Gallo said. “I expect an increased interest in marijuana” with the expected legalization effort in the General Assembly.
Gov. Ralph Northam’s work group offered a series of recommendations, starting with centralized state regulation.
“Virginia should consider putting its cannabis regulatory structure under one agency or umbrella structure to cover both adult-use and medical marijuana,” the report said. The new bureaucracy would be extensive.
“Virginia should build a robust agency structure with various functions to regulate a new legal adult-use marijuana industry,” the report continued. Planners envisioned a “Cannabis Cabinet” of secretaries required to meet on a regular basis to address “red tape” issues.
A licensing structure would regulate growers, processors, distributors, wholesalers, retailers and consumption businesses. Taxation should occur at the retail level, the group said.
One regulatory focus would be on the composition of the products and limits on potency and package sizes.
Banking issues will be challenging. “Virginia should explore options to allow the marijuana industry to conduct business with financial institutions, including state-chartered banks and credit unions,” the report said.
Another question mark is how to prevent and enforce impaired driving.
“There is not yet a simple, straightforward answer on how to deal with impaired driving,” the group acknowledged. Other states use different tools, some with per se limits and others using more subjective methods to judge impairment.
“Virginia should continue to explore new technologies and methods in this space,” the planners said.
The work group had no consensus on allowing personal cultivation. Some states allow it, but the planners pointed to “substantial pros and cons” on the policy decision.
How big the business?
A key question for business interests is whether the market will be dominated by large entities, like tobacco companies, or can the state limit control over the various steps in the supply chain.
The report from the Joint Legislative Audit and Review Commission says legislators will have to choose whether to allow “vertical integration” where a single business could be licensed to cultivate, process, distribute and sell marijuana at retail or prohibit such trade conglomeration.
If the state were to bar retailers from being licensed to cultivate or process, small businesses would have a better chance to participate in the market, the JLARC report said.
The Northam report says the state should consider allowing but not requiring vertical integration within the industry.
Northam himself identified five “key principles” he wants to see in any legalization plan:
• Social equity, racial equity and economic equity: Northam wants a focus on undoing the harms that discriminatory laws and enforcement have brought. Expungement of criminal records is a part of that effort.
• Public health: Northam urges substance abuse prevention efforts in schools and communities.
• Protections for young people: The governor said he hopes to see age limits and mandatory ID checks.
• Clean Air: Prohibiting indoor marijuana smoking
• Data collection: Creating a track record on safety, health and equity.