Rhode Island Legalizes Cannabis: Key Provisions of the 'Rhode Island Cannabis Act'
By Meg Nash
May 26, 2022
After years of debate, Rhode Island's General Assembly voted to legalize adult-use cannabis on May 24, 2022. Governor Daniel McKee signed "The Rhode Island Cannabis Act" into law on May 25, making The Ocean State the 19th to legalize cannabis. The following article provides a summary of the legislation's key provisions.
Vicente Sederberg 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 in Rhode Island, contact Meg Nash.
The Rhode Island Cannabis Act legalizes the possession of up to one ounce of cannabis for personal use by adults 21 and older and establishes an independent cannabis control commission and advisory board responsible for regulating the cultivation, manufacture and sale of both medical and adult-use marijuana.
It also permits existing compassion centers to sell adult-use cannabis on or after December 1, 2022, upon payment of a fee of $125,000. In addition, once the cannabis control commission releases final rules and regulations, 24 additional retail licenses may be issued. 25% of the retail licenses would be reserved for social equity applicants and an additional 25% would be reserved for issuance to workers' cooperatives. There is a two-year moratorium on the award of additional cultivation licenses, which will commence when final regulations are released. The moratorium does not apply to existing medical cultivators.
Oversight: Cannabis Control Commission and Advisory Board
The Act calls for creating an independent three-member commission that will be responsible for the regulation, licensing and enforcement requirements pertaining to medical and adult-use cannabis establishments. The Governor will appoint all three members of the Commission.
The Commission will work in collaboration with a cannabis advisory board. The Board will consist of eleven voting members and eight non-voting members.
Between the effective date of the Rhode Island Cannabis Act and the final issuance of the Commission's rules and regulations (the "Transitional Period"), the Office of Cannabis Regulation (OCR) will be responsible for prescribing forms, procedures, and requirements necessary to facilitate the acquisition of hybrid retail and cultivation licenses by medical compassion centers and cultivators. Information regarding conversion must be made available by OCR no later than October 15, 2022, which will coincide with the commencement of an application period.
Adult-use sales cannot begin before December 1, 2022.
The law creates a moratorium on issuing new cannabis cultivator licenses until two years after the final issuance of the Commission's rules and regulations. However, this does not apply to existing medical cultivators, who will be permitted to cultivate, manufacture and process cannabis as a hybrid cannabis cultivator for both adult use and medical use as of August 1, 2022. Existing medical cultivators will be required to pay an additional licensing fee. OCR will determine the fee amount during the Transitional Period.
Product Manufacturer or Wholesaler
Cannabis product manufacturers are permitted to obtain, manufacture, process and package cannabis and cannabis products, deliver cannabis and cannabis products to cannabis establishments, and to transfer cannabis and cannabis products to other cannabis establishments, but not to consumers. The Commission will issue the license, and applicants will be required to apply for a license in a manner prescribed by the Commission.
Hybrid Cannabis Retailers
Licensed Compassion Centers will be permitted to sell adult-use cannabis for one year beginning on December 1, 2022, upon payment of a $125,000 fee to the Office of Cannabis Regulation. Following the final issuance of the Commission's rules and regulations, hybrid cannabis retailers shall be subject to the Commission's rules and regulations for all sales authorization and renewals, including any licensing requirements.
Adult-Use Cannabis Retailers
In addition to hybrid retail licenses, after issuing final rules and regulations, the Commission may grant up to 24 retail licenses. Retail licenses will be specific to six separate geographic zones, and no more than four adult-use retail licenses will be permitted in each zone. Of the four licenses available in each zone, one will be reserved for a worker's cooperative applicant, and one reserved for a social equity applicant.
A worker's cooperative applicant is defined as an applicant organized and operated pursuant to Rhode Island General Laws s. 7-6.2, which is democratically controlled and operated by its workers.
Social equity applicants must satisfy at least one of the following criteria, as well as any additional factors or specifications included in the final rules and regulations:
An applicant with at least 51% ownership and control by one or more individuals who have resided for at least five of the preceding 10 years in a disproportionately impacted area.
An applicant with at least 51% ownership and control by one or more individuals who:
Have been arrested for, convicted of, or adjudicated delinquent for any offense that is eligible for expungement under this chapter; or
Is a member of an impacted family.
For applicants with a minimum of 10 full-time employees, an applicant with at least 51% of current employees who:
Currently reside in a disproportionately impacted area; or
Have been arrested for, convicted of, or adjudicated delinquent for any offense that is eligible for expungement under this chapter or is a member of an impacted family.
Can demonstrate significant past experience in or business practices that promote economic empowerment in disproportionally impacted areas.
Had income that does not exceed 400% of the median income, as defined by the Commission, in a disproportionally impacted area for at least five of the past 10 years.
Cannabis Testing Laboratory
The final rules and regulations are also required to provide for the licensure and oversight of cannabis testing laboratories. A cannabis testing laboratory is defined as a third-party analytical testing laboratory licensed annually by the Commission, in consultation with the department of health, to collect and test samples of cannabis and cannabis products pursuant to regulations issued by the Commission.
Other than a city or town that is a host community for an existing licensed medical cannabis treatment center, any city or town can include a ballot question in an election held before November 8, 2022 as to whether new cannabis-related licenses for businesses involved in cultivation, manufacture, testing and retail sales should be allowed in the municipality. If a majority of ballots is against granting the licenses, then the Commission will not grant new licenses within the city or town. Any city or town that declines to allow for new cannabis licenses will be prohibited from receiving tax revenue generated by Rhode Island's adult-use cannabis market.
Municipalities are permitted to adopt ordinances and bylaws that regulate the time, place and manner of cannabis establishment operations, provided that they are not unreasonable or in conflict with applicable law.
Social Equity and Expungement
Rhode Island's legislation specifically calls for creating a social equity assistance fund. This fund shall be exclusively used for providing grants to approved social equity applicants to pay for expenses related to the following: establishing and operating a licensed cannabis establishment, implementing and administering programming for restorative justice, and supporting the waiver and reduction of application and licensing fees for social equity applicants, among other things.
The legislation approved by the General Assembly also amends Chapter 12-1.3 of the General Laws related to Expungement of Criminal Records to allow for automatic expungement for any person with a prior civil violation, misdemeanor, or felony conviction for possession only of a marijuana offense that has been decriminalized after the conviction date. All eligible records shall be expunged before July 1, 2024.
Notable Miscellaneous Provisions
Pursuant to the Act, 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.
The property where the proposed cannabis establishment is to be located must be identified in the initial application, and cannot be located within 500 feet of a pre-existing public or private school providing education in kindergarten or any of grades one through 12 unless a city or town adopts an ordinance or by-law that reduces the distance requirement.
Labor Peace Agreements
All retail licensees (including compassion centers, hybrid retails, and adult-use retailers) must enter into Labor Peace Agreements with a bona fide labor organization as an ongoing material condition of the license.
The act provides for additional tax revenue, with a municipal (3%) local excise tax for participating municipalities and a 10% state excise tax added to the sale price of adult recreational use cannabis.
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 in Rhode Island, contact Meg Nash.