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Who gets access to new industry? Marijuana legalization, sports betting face same question in Maryland

An effort to legalize recreational marijuana in Maryland will face challenges similar to those currently delaying the implementation of sports wagering.

Lawmakers will wrestle with issues such as regulation and taxation, as well as the thornier issues of how to level the playing field — especially for Blacks, who have disproportionately been affected by America’s war on drugs. Finding a way to bring minorities and women into an established industry expected to reach $600 million in sales this year will look a lot like concerns related to sports betting.

Del. C.T Wilson, D-Charles and a member of the House Cannabis Referendum and Legislation Work Group, called it an issue of “the crumbs versus the cake” when it comes to ensuring fair minority participation. Licensed medical cannabis growers, processors and dispensaries are chomping at the bit to sell to recreational users, he said. 

“Some of these businesses have had an unfair advantage to start with in the medical marijuana industry,” Wilson said during a meeting of the workgroup this week. “It’s very well known that once you … make adult recreational use legal that the medical marijuana market goes on a downward direction and many times they stop being patients because they can just be customers.” 

If passed, Maryland would join 19 states and the District of Columbia in legalizing recreational use after legalizing medical cannabis.

In 2017, gross sales of medical cannabis in Maryland was $1.8 million, according to the state’s Medical Cannabis Commission. That figure exploded the following year to more than $111 million.

Will Tilburg, executive director of the Medical Cannabis Commission, said gross sales are projected to reach $600 million this year. That’s a nearly 42% increase over 2020.

“How do we set up a system that allows new growers?” Wilson asked. “What I’ve seen happen in other states is that all the product being sold comes from these mature growers and there’s no need for any more product. These small businesses end up not being able to ever catch up.”

The question is similar to one that has delayed the awarding of the first sports wagering licenses to five casinos. A commission tasked with reviewing applications has yet to establish a process for smaller owners that could be more likely to be minority owned.

Some lawmakers including Del. Darryl Barnes, D-Prince George’s and the chair of the Legislative Black Caucus, worry that the first to open will reap the lion’s share of the industry before licenses are awarded to Black-owned businesses. 

“At the end of the day, the equity piece is all about generational wealth,” said Barnes, who is also a member of the House work group. 

House Speaker Adrienne Jones created the cannabis workgroup earlier this year in advance of an expected push to legalize recreational cannabis for adults. Some legal experts warned that determining who gets the first access to recreational users and how they encourage minority participation will be important issues and potential legal quagmires. 

Mathew Swinburne, associate director of the Network for Public Health Law Eastern Region, said timing when minority licensees enter the market is important in competing with existing medical cannabis businesses that will expand into the recreational market. 

“A huge competitive advantage has been given to established businesses, and social equity applicants miss out,” Swinburne said. 

If equity is important, Swinburne said established businesses “may have to wait until the newer licensees are at a point where they can enter the market. If you’re committed to giving them a realistic chance of competing it’s about entering the market at the same time so that these existing hybrid licensees aren’t given early access and just given a bigger and bigger market share within the industry.”

Jones, the first woman and first Black presiding officer in state history, championed a self-described “Black agenda” in the 2021 session. The effort, focused on social justice and equity issues, resulted in both the passage of police reforms and sports wagering. 

Jones pushed for passage of legislation ensuring Black licensees an opportunity for generational wealth building in sports betting. 

Jones and other lawmakers wanted to avoid the mistakes of the recent past. Early efforts in medical cannabis resulted in just one majority Black-owned medical cannabis grower or processor license. 

Strict legal standards prevent states from offering specific set asides for minorities without clear evidence of discrimination. 

States, especially those in the west, that were early to legalize the drug didn’t immediately address equity issues. More recently, others have attempted to address the issue. Some of those efforts, such as in Ohio, have been struck down by state courts as unconstitutional set asides for minorities. 

More recently, states including Connecticut, New York and New Jersey have passed laws more clearly defining disadvantaged groups and establishing grant other programs to help minority owners, including joint operating agreements where established growers partner with minority-owned licensees. 

Swinburne said it is worth watching “the new wave of states who are seeing things aren’t working and are trying to make a new model. There’s a lot of experimentation.” 

The established company gets a break on licensing fees for the seven-year partnership and are limited to owning less than 50% of the venture. At the end of the seven years, those established companies could purchase controlling interests — something lawmakers including Barnes and Wilson said is a concern. 

“I don’t want the established grower or processor to have that seven-year equity piece to be able to buy out the other guy,” Barnes said.