Highlights schism within industry over equity
A COALITION OF marijuana dispensaries has made good on the threat to sue state regulators over new regulations governing home delivery of marijuana, in a case that is illustrating the contentious divide among various segments of the state’s young marijuana industry.
When the Cannabis Control Commission approved the marijuana delivery regulations in November, the Commonwealth Dispensary Association, a trade association representing marijuana retailers, said their vote “will not be the final word on delivery.” The dispensary association’s lawsuit against the commission, filed in Suffolk Superior Court and dated January 13, seeks to overturn the new regulations.
“Simply, the CCC overstepped its authority and disregarded state law, radically upending the established rules that hundreds of small businesses and their host communities operated in accordance with since 2016,” the Commonwealth Dispensary Association said in a statement.
In addition to being a battle over a potentially lucrative segment of the marijuana market, the issue also has racial dimensions because the new rules give economic empowerment and social equity applicants exclusive access to delivery licenses until 2024. These are applicants who were disproportionately affected by prior enforcement of drug laws, which often means members of minority communities.
Chris Fevry, president of the Massachusetts Cannabis Association for Delivery, which represents delivery entrepreneurs, called the lawsuit “unfortunate” and said it is evidence that the dispensary association is uninterested in equity. “They post about social equity but at this point it’s becoming clear that this is lip service and they don’t really care about equity in the state,” Fevry said. “In a billion dollar plus Massachusetts cannabis industry, you would hope we could all work together to expand the pie and make money.”
The Massachusetts Cannabis Business Association, a separate business association that also represents retailers, as well as growers, manufacturers, and other licensees, also spoke out against the lawsuit, arguing similarly that the delivery regulations help equity entrepreneurs. “The commission’s new limited delivery regulations are poised to create new wealth-building opportunities for those who have been disproportionately harmed by cannabis prohibition,” said MassCBA president and CEO David O’Brien. “These small entrepreneurs merely want the opportunity to get their foot in the door, and it’s incredibly disappointing to see the wealthy and well-connected businesses who have already profited from this growing industry try to slam that door in their faces.”
In its statement, the Commonwealth Dispensary Association says it supports greater participation in the industry by equity applicants, and has supported accelerator and entrepreneurship programs for social equity applicants. It would support exclusivity for equity applicants for “marijuana courier” licensees who contract with retailers to offer delivery. But the association opposed the creation of a different type of delivery operator license, which will let delivery companies buy marijuana wholesale, then market it directly to consumers.
The core legal issue in the lawsuit is that under the delivery rules, existing recreational retailers will not be allowed to do their own delivery until they apply for a separate delivery license – and for now, that means they must be economic empowerment or social equity applicants. The retailers say this is counter to language in the state marijuana law, which explicitly allows retailers to deliver marijuana.
Separately, the lawsuit questions whether the commission’s adoption of the regulations was legal. Commission actions require approval from a majority of the five-person commission, or three commissioners. The vote on delivery was 3-1, with one vacancy. The suit argues that only two of the commissioners who voted in favor of the regulations were legally entitled to vote, since Commissioner Shaleen Title was a “holdover,” serving past the end of her term.
A spokesperson for the Cannabis Control Commission said the commission does not comment on pending litigation.
The filing of the lawsuit is highlighting conflicts over who is looking out for the interests of equity applicants. The Commonwealth Dispensary Association was formed to represent large medical marijuana companies, though it has expanded to include recreational companies, many of them retailers. It claims to represent 70 percent of the state’s recreational and medical marijuana businesses.
The Massachusetts Cannabis Business Association is smaller, with 33 members, according to O’Brien, the group’s chief executive. It represents many smaller and up-and-coming companies, including some that are not yet operational. In explaining the group’s support for the delivery companies, O’Brien said, “We think this is a billion-dollar industry already. If we’re not going to be intentional about inclusion now, when are we going to do it?”
Some equity entrepreneurs say the lawsuit is another example of attempts to stifle competition from equity applicants. Richard Harding, an equity applicant who founded marijuana retailer and cultivator Green Soul Organics, and led a fight to uphold Cambridge’s equity ordinance, is the founder of Real Action for Cannabis Equity, or RACE, a coalition that aims to create more opportunity for minority entrepreneurs. Harding said the delivery debate parallels what he experienced. “The larger multi-state operators … they speak of social equity, they speak out of one side of their mouth, but at every turn they undermine that with their advocacy,” Harding said.
Sieh Samura, a black cannabis advocate and a marijuana entrepreneur who created a cannabis-infused personal lubricant, said until recently, there have been few advocates for delivery. “The public narrative, unfortunately, has been controlled by people who haven’t been about equitable markets or serving the consumer,” Samura said. “If they were, delivery would have been more front and center.”
Samura, who has long supported delivery and is not a member of either business association, said he disagrees with the Commonwealth Dispensary Association’s decision to file suit. “We’re really for the growth of the industry, and generally I feel like lawsuits just hold back growth,” Samura said.