Key Provisions of Delaware’s Recently Passed Legislation to Legalize and Regulate Cannabis
By Sam Kovach-Orr, Sahar Ayinehsazian
May 16, 2023
In late April 2023, Delaware became the 22nd state to legalize cannabis with the passage of House Bill 1 and House Bill 2. The legislation went into effect without the need for Gov. John Carney's signature. HB1 is a short bill that updates the state's Controlled Substances Act, including several definitions (e.g., "personal use quantity"), and lays out which cannabis-related activities are considered legal under the new law. HB2 is more robust and addresses the regulatory framework under which the state will administer the Delaware Marijuana Control Act.
Key Provisions of the Laws
Delaware’s adult-use cannabis laws impose a 15% tax will apply for adult-use sales, which will not apply to medical sales. The state has also updated the definition of "Personal use quantity" (one ounce of "leaf marijuana" i.e., flower) to include the state's equivalents for concentrated cannabis (12 grams or less) and "products containing 750 milligrams or less of delta-9 tetrahydrocannabinol."
Notably, municipalities may restrict the time, place, manner, and number of licenses permitted therein or prohibit cannabis licensees altogether.
Likewise, employers, schools, hospitals, and similar entities are expressly permitted to prohibit the possession, consumption, or transfer of cannabis. However, a landlord of rental property may not prohibit said activities unless under certain circumstances (i.e., the landlord lives in the building and there are less than four rented rooms and/or tenants).
Finally, a Restorative Justice Fund will be appropriated to the Criminal Justice Council to administer grants, contracts, services, or initiatives that focus on issues including, but not limited to: restorative justice, jail diversion, mentoring services, reducing the state's prison population, and creating/developing technology to assist with the restoration of civil rights and criminal records expungements.
What Will Delaware’s Cannabis Licensing Process Look Like?
Gov. Carney is required to appoint the Marijuana Commissioner and the three-member Appeals Commission by July 22, 2023. Several types of licenses will be available including retail, testing facilities, cultivation facilities, and product manufacturing facilities.
Social Equity licenses will include: retail, testing facilities, cultivation facilities, and product manufacturing facilities. Social Equity applicants will be eligible for a technical assistance program and may further be eligible to receive a conditional license which affords 180 days from the date of license award to identify a physical location. An additional 180-day extension may be granted. Microbusiness licenses, available for cultivation and manufacturing facilities, may also be eligible for conditional licenses.
All applications will undergo a competitive scoring process focused on elements of each application including, but not limited to: each applicant's business plan, operational plans (including a social responsibility plan), security and safety plans, and, for retail only, the proposed location in relation to geographic distribution and/or population density.
Open license applications will be subject to additional competitive scoring criteria, including submission of a qualified labor peace agreement and, for cultivation and product manufacturing facilities, an environment and sustainability plan.
License Application Fees
Applications will be subject to the following fees:
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Open licenses: $5,000
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Social Equity licenses: $1,000
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Microbusiness licenses: $3,000
License renewals will be subject to the following fees:
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Open licenses:
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Retail: $10,000
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Cultivation: $2,500 - $10,000 (tiered based upon canopy)
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Product Manufacturing: $10,000
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Social Equity & Microbusiness licenses:
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Retail: $4,000
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Cultivation: $1,000 - $ 4,000
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Product Manufacturing: $4,000
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Licensing Timeline
Delaware’s adult-use program will roll out according to the following timeline:
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May 23, 2024: the Commissioner will begin accepting applications for all licenses
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June 23, 2024: The Commissioner will begin issuing licenses
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July 23, 2024: Provided there are a sufficient number of qualified applicants, the Commissioner will begin issuing cultivation licenses
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August 23, 2024: the Commissioner will begin issuing product manufacturing licenses
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November 23, 2024: the Commissioner will begin issuing retail and testing facility licenses
After April 23, 2025, the Commissioner may open applications for additional licenses.
Who Will Regulate Cannabis in Delaware?
The Marijuana Commissioner will be responsible for adopting rules and regulations in addition to conducting hearings related to licensing and enforcement. The regulations will focus primarily on public safety and the best interests of the consumer while not unduly restricting competition in the industry. These regulations will create requirements addressing a myriad of matters, including:
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Licensing
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Product production
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Testing and sales, including the state’s traceability system
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Facility requirements
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Product advertising, packaging and labeling
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Enforcement
The Commissioner will also conduct hearings related to the granting, refusal, suspension, or cancelation of licenses and enforcement and business conduct complaints.
The Appeals Commission will hear appeals of the Commissioner's decisions upon petition from a party within 30 days of the date of the postmark of the decision. The Commissioner's decision may only be reversed upon a finding of abuse of discretion.
Finally, the 15-member Delaware Marijuana Control Act Oversight Committee will consist of appointments from across state government, the General Assembly, and marijuana advocates from each county.
Looking Ahead: Start Preparing Now for Delaware Cannabis Business Licensing
Vicente LLP will continue to actively monitor developments in Delaware’s cannabis program implementation. Please contact us for assistance in achieving your goals in this new cannabis market. It’s never too early to start preparing for licensing by building your team, forming your business, applying for trademark protection, performing community outreach, finding real estate, and more! Vicente’s team is ready to assist.