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The status of medical cannabis licenses in Maryland

The Maryland General Assembly recently punted the question of whether to legalize recreational cannabis to the public to be decided in November by a referendum. However, that vote will occur at a time when many medical cannabis businesses already exist in Maryland.

Accordingly, not only is there a question as to whether Maryland will legalize recreational cannabis, but there are also many questions associated with how such legalization will affect existing Maryland medical cannabis licensees. For example, will Maryland medical cannabis licensees be permitted to grow, process and dispense recreational cannabis?

While the answers to such questions cannot yet be formulated, it is important to understand the present Maryland medical cannabis environment.

The three types of Maryland medical cannabis licenses issued by the Natalie M. La Prade Maryland Medical Cannabis Commission are: (1) a grower license, (2) a processor license, and (3) a dispensary license, and the very specific limitations on obtaining and transferring these licenses are as follows.

Limits on licenses

At present, grower and processor licenses are still available for issuance by the commission, but no dispensary licenses are available. Thus, the only way to enter the Maryland cannabis market as a dispensary at this time is to purchase the license or interest of an existing dispensary.

Maryland also restricts the number of licenses in which a person or an entity can have an ownership interest, and how many licenses a person or entity may actually control, as follows:

Grower license: A party may not have an ownership interest in or control of, including the power to manage or operate, more than one grower license.

Processor license: A party may not have an ownership interest in or control of, including the power to manage or operate, more than one processor license.

Dispensary license: A party may not have an ownership interest in or control of, including the power to manage or operate, more than four dispensaries.

Certain governmental officials are also prohibited from having an ownership interest in, or being an employee of, any business entity that holds a license.

Also, health care providers who write certifications for individuals to purchase medical cannabis may not receive compensation, including promotion, recommendation, advertising, subsidized rent, or anything of value, from a licensed grower, processor or dispensary, unless the certifying provider submits an application to the commission for approval for the compensation.

Transfer of ownership

No licensed medical cannabis business may apply to have a controlling ownership interest in its license transferred unless the originally awarded business has been physically and actively “engaged” for at least three years in its licensed activity of either the growing, processing, or dispensing of medical cannabis.

A licensee is considered to be actively “engaged” in its licensed medical cannabis business beginning on the date the licensee becomes an active user in the state’s cannabis supply chain tracking software.

In addition, when more than a 5% ownership interest of a publicly traded business or any percent of a privately held business are involved in a transfer, certain steps must be followed to obtain approval of the transfer by the commission, including the submission of certain forms, the payment of a fee, as well as the submission of an audited financial statement and criminal history record of each transferee.

A transfer of a license should be approved by the commission if the following requirements are met; however, the commission has the discretion to deny a transfer for other good cause:

  • The documents and required forms are complete, and all required fees are paid;
  • The proposed license transfer does not violate state law;
  • The criminal history record of a transferee does not include a felony drug conviction within the past seven years or a nolo contendere plea to a crime involving moral turpitude, whether any appeal or other proceeding is pending to have the conviction or plea set aside; and
  • Taxes of the transferee due in any jurisdiction are not in arrears.

Barry F. Rosen is the chairman & CEO of the law firm of Gordon Feinblatt LLC, heads the firm’s health care practice group, and can be reached at 410-576-4224 or brosen@gfrlaw.com.