Top 5 Considerations for Maryland Cannabis Licensees

By Meg Nash, Casey Leaver, Bridgette Nikisher

Nov 7, 2024

Congratulations to those who won a cannabis social equity license in the Maryland lottery! Here are some key items to keep top of mind as you work towards your final license.

Draft Cannabis Regulations Released and Public Comment Period is Open

On October 31, 2024, the Maryland Cannabis Administration (MCA) posted a draft regulatory proposal to the Laws and Regulations Page.

Make your voices heard! The public comment period is open now through November 13, 2024 at 5 p.m. All comments should be submitted via email to mca.policy@maryland.gov. If you would like assistance or guidance preparing your comments, feel free to reach out to our Maryland team.

Updates within the Draft Regulations include, but are not limited to:

• Medical Product Scarcity Reporting: Medical patients may submit information about medical products that are scarce or unavailable to MCA. MCA may implement programs or incentives to address product scarcity. (14.17.04.10)

• Conditional License Period Extensions: Applicants seeking an extension of the conditional license period must demonstrate consistent good faith effort. Under the proposed regulations, the MCA will consider demonstrating legal control of a premises as consistent good faith effort if the premises are suitable for cannabis operations and comply with local planning and zoning requirements. (14.17.05.05)

• Display Storage Requirements: Dispensaries may store cannabis in clear, tamper-evident canisters for display purposes under specific conditions. See 14.17.12.10 for additional information.

• Novel Product Requests: Licensed processors may submit “novel product requests” to the MCA for approval. See 14.17.13.12 for additional information.

• General Labeling Requirements: Required labeling may be printed on an inner layer of the label or made available through a link or QR code. See 14.17.18.03 for additional information.

Supplemental License Applications for Conditional Licensees

Conditional Licensees are required to submit a Supplemental Application within six months of receiving their Conditional License. Please be sure to double-check the date of your conditional license letter from MCA to ensure you have a strategy in place to submit your supplemental application by the deadline.

Some of the items that will be required in the supplemental application include:

• Disclosures related to founders, owners and investors of applicant entity

• Disclosure related to entity’s financial institution and accounts held

• Proof of Adequate Capitalization. MCA will accept the following:

  • An independent financial statement

  • Credit history

  • Lines of credit

  • Promissory notes

  • Deeds, appraisals and equity in real estate

  • Stocks and other investment holdings

  • Bank statements

• Disclosure related to existing and past litigation

• Audited financial statements (or unaudited financial statements if audited financials are not available)

Please note that if such documents do not exist upon initial filing, individuals must provide an upload explaining that the document does not exist and whether it will exist at a later date. If it will exist at a later date, this document must include an estimation of when the MCA may expect to receive that document.

Adequate capitalization requirements by license type are in the chart below.

Class	Type	Amount of Adequate Capitalization
Micro	Dispensary	$25,000
Standard	Dispensary	$125,000
Micro	Grower	$100,000
Standard	Grower	$500,000
Micro	Processor	$35,000
Standard Processor	Processor	$175,000

Property Considerations

There is no specific timeline as to when Conditional Licensees must notify the MCA about the location of their proposed operations, but all Conditional Licensees must become operational within 18 months. It is important to identify and secure a location as soon as possible as most sites will require significant buildout or modifications to comply with the regulations. There is also a market share benefit to opening earlier.

Remember, the location of the proposed operation must be within the region or jurisdiction of license award.

Once a Conditional Licensee secures a location, whether that be through a binding letter of intent, lease, or purchase agreement, the licensee must notify their assigned investigator to report the location. The Conditional Licensee must also provide proof of zoning approval to its assigned investigator.

Strategies for Ensuring a Compliant Cannabis Business Facility Buildout  

Per the MCA’s FAQ, “a conditional licensee is encouraged, but not required, to contact their assigned investigator when building out their facility to ensure compliance with the relevant regulations. However, if aspects of the build out are not compliant, this may delay final licensure.”

Once a property is secured, we recommend providing a draft floor plan and security layout to your assigned investigator and requesting an inspection schedule. By being proactive and seeking feedback prior to commencing buildout, you can make necessary adjustments and ensure you are compliant and on the right track towards opening your doors.

The Vicente team is available to assist with compliance reviews prior to submission to the MCA to streamline regulatory approval. Contact us for all your compliance needs.

Transfers of Ownership

The MCA has published information to inform licensees about regulatory requirements related to Transfers of Ownership and Financing Options.

Transfers of ownership less than 5% do not require MCA approval. Note that 65% of the applicant entity must be held by a qualified Social Equity Applicant throughout the first five years of licensure. The original Social Equity member can be diluted to 51% ownership, but only if the remaining 14% of ownership that makes up the 65% threshold is held by another Social Equity Applicant. There is no restriction on who may hold the other 35% interest in the applicant entity.

In order to transfer ownership interests above 5%, Conditional Licensees must submit a Transfer of Ownership Interest request form. The following documents are required to be submitted the transfer request:

• Existing and updated capitalization tables

• Tax returns and attestations for ownership above 5%

• Any additional document that shows the effectuation of the transfer and the terms of that transfer (definitive documents)

• A description of the ownership interest that is being transferred, including the number of shares or units and the overall ownership percentage to be transferred

• Criminal background check information for everyone who holds more than 5%

For additional details, read the article Raising Capital for Maryland Social Equity Cannabis Businesses.

The Vicente LLP team is here to support your cannabis business goals in Maryland throughout the licensing process and beyond with corporate, real estate, compliance services, and more.

Please review the draft regulations carefully and consider submitting a public comment. Don’t hesitate to contact us if you have questions or need assistance drafting an impactful comment.

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