Ocean State Cannabis Update: Municipal Approvals for Adult Use Retail in Rhode Island Provide Ample Opportunity for Interested Applicants

By Jen Flanagan, Sam Kovach-Orr, Meg Nash, Bridgette Nikisher

Nov 16, 2022

November saw a lot of local activity regarding Rhode Island's upcoming adult-use cannabis retail licensing round. As discussed in a previous post, the Rhode Island Cannabis Act (RICA) permitted cities and towns to include a resolution on their November 8th ballots as to whether a municipality should allow new cannabis-related business licenses within its borders. If a majority of voters voted against the resolution, the Cannabis Control Commission would not grant new licenses within the city or town, and the municipality would be prohibited from receiving tax revenue generated by the adult-use cannabis market.

Thirty-one Rhode Island municipalities chose to bring the question to the ballot, and voters in 26 of the 31 voted to approve adult-use cannabis retail sales in their communities. This widespread support at the local level follows the momentum of adult-use legalization passed in May and significantly expands opportunities for potential applicants seeking to obtain one of the 24 cannabis retail licenses expected to be available in 2023. In addition, because RICA created a 3% local tax on adult-use sales, communities that host licensees will receive significant economic gains while simultaneously seeing increased employment opportunities. As reflected in the election results, the enthusiasm for cannabis legalization in Rhode Island suggests exciting market developments will continue to emerge in the new year.

What to Expect Next

Applications for adult-use cannabis licenses are expected to open in 2023 after the appointment of the Cannabis Control Commission and the release of adult-use regulations. There will be 24 retail licenses available, which will be evenly divided among six geographic zones. All municipalities within Zones Two and Five have opted in to permit cannabis businesses. Of the four licenses in each zone, one will be reserved for a workers' cooperative applicant and another will be reserved for a social equity applicant. Additional information relative to these specific designations is available here.

Zoning

While many of the municipalities opted in to generally permit cannabis businesses, they are permitted to subsequently adopt ordinances and bylaws which regulate the time, place, and manner of those businesses' operations. This is standard practice for municipalities. For example, after the legislation went into effect permitting medical cannabis dispensaries, Providence enacted a zoning ordinance limiting where compassion centers may locate to C-3 (General Commercial District) and M-1 (Light Industrial District).

RICA Location Restrictions

In addition to local zoning limitations, RICA also restricts where cannabis businesses may locate. For example, RICA prohibits cannabis establishments from locating within 500 feet of a pre-existing public or private school providing kindergarten through grade 12 education unless a city or town adopts an ordinance or bylaw that reduces the distance requirement.

How to Prepare

Identifying Property

Those preparing to apply for a Rhode Island adult-use cannabis license in 2023 can begin by identifying potential commercial real estate within the municipalities that opted in. Choosing a location that satisfies both the RICA location limitations and the municipality’s zoning requirements will be required for the initial applications and is a crucial first step.

At the time of this article, most municipalities have not prepared zoning regulations for adult-use retailers, but existing medical marijuana zoning provides some guidance as to what adult-use zoning may look like. In South Kingstown, for example, medical dispensaries are only permitted in the Commercial Highway zone and only by special permit. In Providence, medical dispensaries are permitted by special use permit in the C-3 zone or M-1 zone. Providence also requires a setback of 0.75 miles from another medical dispensary or cultivation center, a buffer zone of 1,000 ft from the property line of a pre-existing public or private school, and evidence of noise mitigation, odor mitigation, and sufficient security plans.

Corporate Considerations

Interested applicants should also begin forming the corporate entity that will apply for the license and begin building a team of professionals to include as part of their organization. Note that pursuant to RICA, an "applicant" is defined as a Rhode Island resident or a business entity with a principal place of business in Rhode Island. The majority of the business entity (51%) must be owned by Rhode Island residents, whether the entity is formed as a corporation, limited liability company, limited liability partnership or partnership. Rhode Island allows for online filing with the Rhode Island Department of State. For more information on entity selection for a cannabis business, check out VS partner Charlie Alovisetti’s VS Insights series “Budding Companies: Forming Cannabis Startups.”

Conclusion

This is an incredibly exciting time for cannabis entrepreneurs in Rhode Island. Navigating the licensing process may seem daunting, but proactive engagement, particularly at the local level, will assist in making the path to licensure manageable.

Key considerations moving forward:

Monitor municipal zoning developments in your desired areas
Identify compliant real estate and navigate the leasing process
Form the corporate entity with the state of Rhode Island and ensure compliance with all state and federal tax requirements
Build a strong team of respected professionals who may (or may not!) have experience in cannabis, healthcare, hospitality, retail, or other highly regulated industry

Whenever a new market comes online, there is a flurry of activity. Vicente Sederberg has been on the front line across the nation and is available to assist! VS has a track record of success and is ready to help you navigate the Rhode Island cannabis licensing process and get started on initial preparation before applications are released—including corporate formation, market research, real estate, and community benefits outreach.

VS will continue to provide updates on the Rhode Island market as the state releases further guidance. If you would like to learn more about industry developments and cannabis licensing in Rhode Island, contact VS attorney Meg Nash.