Virginia’s adult-use cannabis market stalled indefinitely

Virginia’s recreational marijuana industry is on indefinite hold.

Less than two years after the state became the first in the South to legalize adult-use marijuana for adults 21 and older, the projected start date for legal sales of Jan. 1, 2024, has been effectively scrapped.

It’s unclear when – or if – recreational MJ sales will begin.

The issue: The legalization bill that the then-Democratic-controlled General Assembly sent to former Gov. Ralph Northam two years ago was a half-measure. Northam signed the bill into law in April 2021,

The new law allowed Virginians to possess cannabis and cultivate up to four plants. It also called for recreational sales to begin no later than Jan. 1, 2024.

But the law also required the General Assembly to later reenact a number of provisions of the 2021 legislation, including those that detail a regulatory and market structure such as licensing.

Prospects for passage of those measures dimmed after a November 2021 state election: Republicans regained control of the governor’s office plus the House of Delegates, the Legislature’s lower chamber.

And with what observers say is encouragement from GOP Gov. Glenn Youngkin, the legislation needed to set up an adult-use market was on track at the weekend to fail during the General Assembly’s short, odd-year legislative session – following a similar failure in 2022.

On Jan. 31, a Republican-controlled subcommittee in the House of Delegates killed a pair of Republican-sponsored cannabis regulatory bills, which would have set up a licensing scheme in time for sales to begin sometime in 2024.

A similar bill proposed in the Democratic-controlled Senate by state Sen. Adam Ebbin, a Democrat, died in the same committee earlier this month.

Multiple sources cited pressure from Youngkin to defeat any adult-use cannabis bill as a major factor in the defeats.

At the same time, Republicans pushed a proposal to slash nearly 70% from the budget of the state’s marijuana regulatory agency, the Cannabis Control Authority.

‘No path’ forward

Virginia’s part-time General Assembly meets in regular session for only 30 days in odd-numbered years, meaning there’s no time left in the state’s legislative calendar to introduce an alternative. 

Lawmakers were scheduled to adjourn on Saturday, Feb. 25.

Greg Habeeb, a former state Republican lawmaker who now lobbies for the Virginia Cannabis Association – an industry trade group – said last week that he held little hope for a 2024 sales launch, noting the General Assembly was scheduled to adjourn Saturday.

“I see no path,” Habeeb said in an interview with MJBizDaily.

With adult-use cannabis regulation dead for the year, the major multistate operators that hold some of Virginia’s existing medical cannabis licenses – as well as possible new market entrants – are stuck in a holding pattern.

“Given the current legal and regulatory ambiguity, Columbia Care does not anticipate adult-use sales beginning on Jan. 1, 2024,” Ngiste Abebe, Columbia Care’s vice president of public policy, told MJBizDaily.

The New York-based multistate operator is one of four companies with medical marijuana business licenses in Virginia, where it currently operates eight dispensaries.

Crisis in a vacuum

In the absence of legal adult-use retail, illicit-market alternatives have appeared across the state, including illegal storefronts and pop-ups.

Add that to the proliferation of untested products containing hemp-derived delta-8 THC, and what’s left is a status quo that Republicans and Democrats in Virginia alike have called a “public health crisis.”

Legally purchased delta-8 THC gummies are what led to the death of a 4-year-old boy last year, according to local prosecutors trying the boy’s mother on murder charges.

“We are in a public health crisis,” Republican Delegate Keith Hodges, sponsor of the failed bill that would have directed the Virginia Cannabis Control Authority to craft adult-use cannabis regulations, said during the Jan. 31 sub-committee hearing in Richmond.

Hodges did not respond to a request for comment from MJBizDaily but he said during the hearing that the current situation in Virginia is a paradox that is “propping up organized crime.”

“You can legally possess marijuana in the Commonwealth of Virginia, but you can’t legally purchase it,” he said. “If we do nothing, we have a problem on our hands. We need to protect the citizens of Virginia from the illicit market.”

A few minutes later, the subcommittee voted to kill Hodges’ bill.

Where the buck stopped

Lobbyists and industry observers said that lawmakers, like those overseeing the Republican-controlled subcommittee where regulatory bills died over the past few weeks, received clear direction from Youngkin, a possible contender for the 2024 Republican presidential nomination, not to advance any adult-use cannabis legislation in Virginia this year.

“Whether explicitly or implicitly, the words or signal was: This was not where the governor wanted the Assembly spending its time,” Habeeb said. “The governor wants nothing to do with it.”

Instead, Youngkin is pushing for a bill to tightly regulate hemp-derived cannabinoids.

As of Friday, the day before adjournment, both houses of the General Assembly were hammering out a compromise bill.

But whatever form hemp regulations take, they are unlikely to address the burgeoning illicit market, critics say, including the rampant “pop-up” markets selling cannabis.

“It’s pretty simple,” said Trent Woloveck, chief strategy director at Florida-based multistate operator Jushi Holdings, which operates five dispensaries in Virginia. “The governor, with his no vote, has voted yes to license cartels and organized crime in the Commonwealth of Virginia.”

The governor’s office did not directly respond to that allegation.

In an e-mail, Youngkin spokesperson Macaulay Porter directed MJBizDaily to a Jan. 25 comment the governor gave to reporters.

“Let me be clear, the bill that I am tracking and looking for is a bill that deals with hemp and delta-8 and the regulations and consumer safety around those products,” Youngkin said.

“Right now, we have products that are being mislabeled, mis-sold and targeted toward children. That is the bill that I am watching to make sure that comes out, because that’s the bill I want to sign.”

Porter did not respond to further questions.

Now what?

Habeeb, the former Republican lawmaker and current industry lobbyist, said Republicans were effectively asked to solve a problem not of their own making, as it was Northam and a Democratic-controlled General Assembly that legalized cannabis without simultaneously passing ironclad regulations for an adult-use market.

“They (Democrats) just assumed they’d win a majority in the next election and fix the bill the next year,” he said.

“We all now know that did not happen. So now you’re in a situation where Republicans – almost all of whom voted against legalization in the first place, and all of whom voted against Democrats’ idea for setting up an adult-use marketplace with social equity provisions and all of those things – are being told to fix a problem someone else created.”

At the same time, it was Republicans – including Hodges as well as Delegate Michael Webert – who carried the regulatory bills that fellow GOP members tabled and who are voicing the same concerns as cannabis advocates and industry lobbyists.

“Our problems are going to continue until we start regulating and taxing the market we have now,” Webert said during the Jan. 31 hearing.

Going forward, absent another political shakeup in Richmond, it’s unclear when Virginia’s marketplace can expect to begin.

“The most impactful change to the outlook for the next year is the General Assembly elections this November,” Columbia Care’s Abebe said. “With every delegate and senator seat up for election, voters have a chance to pick pro-cannabis legislators who will finish the job of legalizing cannabis in the commonwealth.”

Gov. Youngkin’s four-year term, meanwhile, doesn’t end until January 2026.

Source: https://mjbizdaily.com/virginias-recreational-marijuana-market-stalled-indefinitely/