Recommendations for Fair and Equitable Cannabis Policy Reform

 

 

Summary

 

 

Delaware CAN is committed to cannabis policy reform that redresses the historic impact of cannabis prohibition and the creation of a market that promotes participation by individuals and communities who have been adversely impacted by the war on cannabis.  Our recommendations for fair and equitable cannabis policy reform includes criminal justice reforms and social equity policy proposals to promote participation in the legal industry by racial minorities, individuals directly impacted by prohibition, and economically disadvantaged communities.     

Address the lasting impact of cannabis prohibition

  • Eliminating criminal penalties for most cannabis-related offenses and reducing other criminal offenses to civil violations
  • Expungement of all prior cannabis offenses for conduct which is legalized
  • Release from sentences for prior cannabis offenses for conduct which is legalized
  • Include non-discrimination provisions related to housing, professional and occupational licenses, parental rights, and education to mitigate the lasting impact of cannabis convictions

Promote legal participation in the industry by small unregulated retailers, and individuals and communities previously adversely impacted by cannabis prohibition

  • Create a cooperative licensing class to allow small-business entrepreneurs to combine resources and expertise, reduce startup costs, and leverage branding to compete with large companies
  • Create microbusiness licensing opportunities for cultivators and retailers and industry opportunities in low startup cost categories such as delivery and social consumption businesses
  • Fund programs to promote participation with cannabis industry tax revenue
  • Fund programs to connect experienced cultivators, manufacturers, and retailers with new licensees to offer technical support and mentorship
  • Reduced application and licensing fees for individuals who can show adverse historical impact as a result of cannabis prohibition, including a past misdemeanor conviction, felony conviction, incarceration, or being a member of a community disproportionately impacted by cannabis prohibition.
  • Establishing lower capital requirements for applicants who have been or are members of a community impacted by cannabis prohibition.

Reinvest Cannabis Industry Tax Revenue to Redress the Impact of Cannabis Prohibition

  • Building and renovating schools in impacted communities
  • Infrastructure improvements in impacted communities
  • Programs to promote affordable housing
  • Workforce development programs
  • Grant program – set aside a percentage of tax revenue and distribute to protect small businesses in impacted communities and allow them to compete with larger businesses – fund percentage of startup costs, technical assistance, and/or mentoring services
    • Can be used for cannabis businesses
    • Or used by individuals who were adversely impacted by prohibition to start other businesses
    • Or by individuals in impacted communities
  • Funding for programs and charities that promote entrepreneurship and small businesses in impacted communities

 

 

Proposed Criminal Justice Reforms

 

 

Eliminate racial disparities in criminal law enforcement by eliminating criminal penalties entirely for possession and related acts and reducing criminal penalties for unregulated distribution, manufacturing, and cultivation.

Acts that should not be subject to criminal or civil penalties

  • Sharing cannabis with other adults (included in HB 110 – Section 1303(a)(3))
  • Giving cannabis to another adult (included in HB 110 – Section 1303(a)(3))
  • Receiving compensation for costs associated with assisting another adult in the acquisition of cannabis for personal use
    • Consistent with provisions contained in the medical marijuana law, this will allow individuals who choose not to incur the costs or burden of obtaining a medical card to continue to receive assistance in obtaining cannabis, allow medical patients to have a third-party purchase and deliver cannabis should a cardholder choose to purchase product from an adult-use dispensary, and allow individuals who are not medical cannabis cardholders to use a third party for purchase and delivery. The compensation received shall be limited to the actual cost of the product.
    • It will also allow adults of lawful age to engage in conduct consistent with lawful acts related to alcohol. An adult can pick up a bottle of wine or a 6 pack at the liquor store for another adult and exchange it with them for the cost of the product without being subject to criminal charges for an unlicensed sale of alcohol.  The same conduct should be permitted for cannabis consumers. 
      • Section 1303(a)(4) of HB 110 allowed individuals to assist another individual in legal acts, but did not specifically authorize an exchange of currency required to conduct such acts. Clarification may be needed to avoid law enforcement confusing lawful acts with unlawful acts.
    • The cultivation of cannabis, to include up to 6 mature plants and 12 immature plants
      • Increases access for individuals who can’t afford retail cannabis prices
      • Opposition to home cultivation is profit motivated, not based on any rational or logical reason to oppose the right of individuals to cultivate cannabis for their own personal use. For example, after New York Governor Andrew Cuomo came out in opposition to home cultivation of cannabis, it was discovered that cannabis industry participants had been lobbying the governor to prevent consumers from growing their own product. 
      • Fears of home cultivation being used to promote unlicensed sales are nonsensical. A licensed cultivator has a competitive advantage derived from taking advantage of economies of scale that would render an individual home cultivator unable to compete with the regulated market in the retail space.
    • The possession of up to 175 grams of cannabis flower, 30 grams or less of cannabis concentrate, 15,000 milligrams of marijuana products, or a combination of flower, concentrate, and products utilizing equivalency limits. (1 gram leaf cannabis = 5 grams concentrate = 100 milligrams of cannabis product)
      • In states that legalize, there is often a dip in the number of registered medical marijuana patients. Because the recreational market is so much larger than the medical market, the demand for strains and the ability of companies to scale makes many states’ adult-use market’s price competitive with their medical market.  For example, at Good Chemistry in Denver, Colorado, the same ounce of high quality cannabis is $140 per ounce for medical patients and $150 for adult use.  Many patients choose to forego the process of obtaining a medical card for the minimal savings under such circumstances.  The law shouldn’t force these individuals or anyone else to buy into a higher personal use quantity.
      • A regular consumer can consume the personal use limit in 1-2 weeks or less depending on ingestion method – medical is 6 ounces for a reason and possibly too low for medical application in cases of serious illness, ie RSO regimens.
      • Low personal use limits requires more frequent trips to dispensaries
      • A 6 ounce limit would allow retailers to offer better prices per ounce to consumers when selling larger quantities – outcompete the unregulated market.
      • Fears of second hand sales if higher personal use possession limit exists is unfounded – example – if the personal use limit was 6 ounces, the discount that a licensed retailer would offer for buying 6 ounces versus 1 ounce would not allow for a large enough margin for the purchaser to resell the product for a reasonable profit for the amount of work involved.

Acts that should be subject to civil penalties rather than criminal arrests

  • Title 16, Section 4764 (d) – Public consumption
    • Continuing to criminalize such conduct only serves to perpetuate racial disparities in enforcement of cannabis laws
  • Exceeding personal use possession quantities without evidence of unlicensed distribution
    • Title 16, Section 4764(b) – if not repealed, the possession of other than a personal use quantity of flower cannabis will still be an unclassified misdemeanor. A person shouldn’t be subject to a criminal conviction and penalty for going a few grams over a likely arbitrary limit.
    • Title 16, Section 4751(3)(c) – Under current law, the possession of over 175 grams of cannabis (less than the personal use quantity in Oregon and slightly over Delaware’s possession limit for medical patients) is a felony. This is unduly harsh.  The possession of over 175 grams of cannabis without any other evidence is not dispositive proof of anything more than the possession of cannabis for personal consumption.  Arbitrary statutory limitations on personal consumption set by legislatures across the country should not be mistaken for dispositive proof of sales or anything else, but Delaware’s current law employs this faulty assumption.
    • Title 16, Section 4751C – Remove cannabis from list of tiered controlled substances related to drug offenses
    • Title 16, Sections 4752, 4753, 4756 – These sections apply to tiered offenses related to drug dealing and the mere possession of substances in over specified limits. If cannabis is removed from list of tiered controlled substances, these sections will no longer apply to cannabis offenses.  Should cannabis remain in Section 4751c for the purpose of drug dealing offenses, these sections should be amended to eliminate cannabis possession only offenses without proof of delivery of intent to deliver.  (Add exceptions to exclude cannabis under 4752(a)(2), 4753(a)(2), and 4756(a))
    • Allow for community service in lieu of fines to prevent disproportionate impact of fines and remove financial incentives for overenforcement or overzealous enforcement of minor civil offenses
  • Cannabis cultivation by an individual without evidence of unlicensed distribution & Cannabis manufacturing by an individual without evidence of unlicensed distribution
    • If the intent of cannabis policy reform is to eliminate criminal penalties for conduct related to personal consumption of cannabis, the cultivation of cannabis, even if over the limit of allotted plants, without evidence that the individual is growing for the purpose of engaging in unlicensed sales should be a civil violation.

Acts that should be subject to lesser criminal penalties than under existing law

Existing law treats the cultivation, manufacture, and sale of cannabis the same as every other substance.  A person growing cannabis for their own consumption, or selling small quantities is subject to a violent felony conviction and a presumptive sentencing guideline sentence of 0-2 years in jail.

  • Cultivation with the intent to sell
    • Currently a violent felony. While the State may have an interest in deterring unregulated cultivation and sales and the prevention of a “grey market” that exports cannabis to surrounding states, the conduct implicated – growing cannabis with the intent to sell the crop, is not inherently violent and should not be classified as such.  There are many peaceful unregulated cultivators who engage in wholesale transactions – they do not possess firearms, engage in turf wars, or other violent acts in furtherance of their business.  There are other criminal actors engaged in unregulated cultivation who use violence to resolve business disputes and retain power in the market.  If criminal actors engage in cannabis cultivation and engage in violent behavior related to their participation in the unregulated market, they will be charged with violent felonies for the related conduct.  It is fundamentally unfair to treat all for-profit unregulated cultivators as violent felons.    
  • Cannabis sales without a license
    • The unlicensed sale of alcohol is a misdemeanor – 4 Del C. 901 – 3 to 6 month maximum penalty

Other actions needed to remove cannabis from the criminal justice system

  • Remove Cannabis from the State’s list of Schedule I controlled substances (16 Del. C 4714(d)(19))
    • How can we have a medical cannabis program and leave cannabis in Schedule I, where that designation requires a finding that the substance “has no accepted medical use in treatment in the United States or lack accepted safety to use for treatment under medical supervision?”
  • Prohibit the revocation of pre-trial release based on a positive test for THC
  • Prohibit the institution of violation of probation proceeding based on a positive test for THC
  • Allow for the expungement of all prior cannabis offenses for conduct which is legalized
  • Allow for the release from sentences for prior cannabis offenses for conduct which is legalized
  • Explicitly prohibit the initiation of a probable cause search based solely on an odor of cannabis
  • Clarity the possession of a firearm by a person prohibited statute (11 Del. C. 1448) to remove criminal penalties for the possession of a firearm by a person who is in possession of cannabis
  • Clarify the endangering of a welfare of a child statute (11 Del. C. 1102) to exclude possession of cannabis and other civil violation related to cannabis contained in Chapter 47 of Title 16 as a grounds to charge an individual with endangering the welfare of a child under 11 Del. C. 1102(a)(6)
  • End civil asset forfeiture for cannabis offenses (included in HB 110 – Section 1303(a))

 

 

Creating an Equitable Market and Redressing the Disproportionate Impact of Cannabis Prohibition

 

 

Reinvestment of Cannabis Industry Tax Revenue

Historically impacted communities and individuals have been disproportionately bearing the social, human, and economic costs of prohibition.  Participants in the unregulated market have had their products and the proceeds of their businesses seized and forfeited to the State.  They have lost economic opportunities due to incarceration and the impacts of criminal convictions on employment and earning potential.  The impact extends to their families, their children, and their communities.  The greatest barriers to entry that past and present participants in the unregulated market will have to entering the regulated market will be capital and access to professional services such as attorneys, consultants, and accountants.  There are individuals who are highly skilled at cultivating cannabis, manufacturing products, and cannabis retail who will be excluded from the market by virtue of the impacts of prohibition.  Those individuals, their families, and their communities have been paying in for decades.  It’s only fair that a portion of the tax revenue be paid back to these individuals and communities.  

  • Building and renovating schools in impacted communities
  • Infrastructure improvements in impacted communities
  • Programs to promote affordable housing
  • Workforce development programs
  • Grant program – set aside a percentage of tax revenue and distribute to protect small businesses in impacted communities and allow them to compete with larger businesses – fund percentage of startup costs, technical assistance, and/or mentoring services
    • Can be used for cannabis businesses
    • Or used by individuals who were adversely impacted by prohibition to start other businesses
    • Or by individuals in impacted communities
  • Funding for programs and charities that promote entrepreneurship and small businesses in impacted communities

Cooperative Licensing

The current unregulated cannabis market in Delaware serves approximately 130,000 to 145,000 resident consumers per year (SAMHSA, 2017-18 National Surveys on Drug Use and Health).  Based on market estimates included in the fiscal note to HB 110, and the likelihood that the unregulated market is currently fulfilling a similar level of consumer demand, the unregulated market for cannabis in Delaware likely produces in excess of $100 million in annual revenue.  The market is highly segmented.  While a portion of the cultivation and sales is conducted by gangs and criminal enterprises, the vast majority of market participants are sole proprietorships, partnerships, or a loosely affiliated group of growers and sellers.   

The vast majority of current market participants will be left out of the industry without expanded opportunities for licensing and policies that promote the ability of small businesses to compete with large existing entities.  Legal companies will grow and scale in a way that is impossible in the unregulated market.  Limited licenses will exclude most current growers and retailers.  Those individuals could become employees of licensed cannabis businesses, but it is more likely that many will continue to engage in unlicensed cultivation and sales or leave the industry entirely. 

Limited opportunity to enter the market, barriers to entry, and insufficient competition will perpetuate the unregulated market and stifle the growth of the regulated market.  While some portion of unregulated market cultivators and retailers will be left out of the new system, a cooperative licensing option would allow small cultivators and retailers to work together to compete against larger companies.  It will also encourage unlicensed market participants to enter the regulated market and contribute to the overall goals of reducing and eliminating the unregulated market, reducing law enforcement costs, and preventing the human and societal costs of prohibition and unregulated markets.      

  • Intent of Cooperative Licensing Program
    • To ensure that small local farmers and retailers have the ability to cultivate and sell cannabis in their communities
    • Allows smaller market participants to leverage branding and shared resources to compete with large companies
    • Provides educational opportunities for workers who may be prospective cannabis industry entrepreneurs to learn the business while accumulating capital to start independent small businesses
  • Benefits
    • Reduced barriers to entry
    • Education & mentorship – provides individuals with an interest in cannabis industry entrepreneurship the opportunity to learn trades applicable to the industry by bringing together individuals with expertise
    • Promotes legal participation in the industry to defeat the illicit market
    • Promotes participation in the market by individual adversely impacted by prohibition by reducing startup costs and capital requirements and allowing small business entrepreneurs to combine resources and expertise to enter the legal market

Creating a Cannabis Market Without Undue Barriers to Entry

  • Application and Licensing Fees must be reasonable and low to prevent barriers to entry, in particular, barriers to individuals who have been adversely affected by prohibition entering the industry. Retailer licenses should be on par with alcohol retail licenses ($1,000).  Cultivator licenses should be tiered based on canopy size and consistent with fees for beer manufacturers ($1,500 to $9,000 biennial license fee).  Cannabis manufacturer licenses should also be consistent with beer manufacturer license fees.
  • Don’t exclude potential business owners on the basis of prior drug convictions – HB 110 (2018-2019) included provisions that could have been used to deny licenses to individuals with past convictions. Section 1332(b)(4)(d-f) – gives discretion to deny a license on the basis of a past conviction for growing or selling cannabis.
  • Regulators should be required to develop programs and procedures to promote and encourage participation in the regulated cannabis market by individuals and communities that have historically been disproportionately impacted by cannabis prohibition, including:
    • Public outreach and the dissemination of information prior to the application and licensing period to encourage historically impacted individuals to apply for licenses
    • Conducting regular disparity studies to determine what remedial and/or regulatory actions are necessary to promote and ensure a diverse industry
    • Using the results of disparity studies to develop and promote programs to increase representation of people of color and individuals previously impacted by cannabis prohibition in the legal industry
    • If a competitive scoring process is used in the selection of licensees, allocating points to applicants based on the impact of prohibition, including allocating points to individuals who have been previously convicted of a cannabis offense or incarcerated for a cannabis offense.
    • Reduced application and licensing fees for individuals who can show adverse historical impact as a result of cannabis prohibition, including a past misdemeanor conviction, felony conviction, or incarceration.
    • Establishing lower capital requirements for applicants who have been impacted by cannabis prohibition.
    • Create programs that connect experienced cultivators, manufacturers, and retailers with new licensees to offer technical support and mentorship.
    • If a competitive scoring process is used in the selection of licensees, allocating points to applicants based on their adoption of a diversity plan, the employment of a diversity officer, their adoption of a plan to reinvest business revenue in communities historically adversely impacted by prohibition, or their development of a plan or program to increase diversity in the cannabis industry, including but not limited to race, ethnic background, gender identity, and sexual orientation.
    • Providing for reduced license fees for cannabis industry businesses based on their continuing implementation of their diversity plan, the employment of a diversity officer, their reinvestment of business revenue in communities historically adversely impacted by prohibition, or their implementation and execution of a plan or program to increase diversity in the cannabis industry, including but not limited to race, ethnic background, gender identity, and sexual orientation.
      • This provision, similar to the preceding provision encourages reinvestment in impacted communities and industry diversity without a mandate. Together, they create a system whereby if two applicants are equal in all respects, but one has a plan to promote social equity and the other simply wants to sell cannabis, the applicant that will promote social equity will receive a small allocation of points in the competitive scoring process.  Similarly, an operating business that promotes workplace diversity or engages in charitable efforts in impacted communities will be subject to a reduced biennial licensing fee.  This proposal is essentially a Pigovian subsidy intended to promote positive externalities – diversity, charity, and reinvestment in impacted communities.
    • Requiring reporting from cannabis industry businesses on the diversity of its workforce and corporate officers with the reporting to be made available to the public.

 

 

Individual Protections

 

 

Housing non-discrimination (included in HB 110 to a degree – Section 1308)

  • Could be expanded to prohibit the use of past cannabis offenses or cannabis use as a basis to deny housing (to include narrow exceptions for halfway houses, sober living home, and therapeutic facilities)
  • Prohibit the denial of housing assistance and related aide based on past cannabis offenses or cannabis use

Employment & Employee Rights

  • Prohibit state and local government agencies from taking any action against an employee for cannabis consumption outside of work
  • Prohibit state and local government agencies from requiring prospective employees to submit to testing for use as a condition of employment
  • Prohibit state agencies from refusing to issue professional or occupational licenses based on past cannabis offenses or cannabis use

Parental Rights

  • Prohibit the consideration of the use of cannabis, employment in the cannabis industry, or other lawful activities by Family Court judicial officers when making child custody, guardianship, and adoption determinations of when deciding a termination of parental rights matter

Education

  • Prohibit state-funded colleges and universities from revoking financial aide, scholarships, grants, or other education assistance based on lawful activities related to cannabis
  • Prohibit the denial of admission into a state-funded college or university solely on the basis of past cannabis offenses or cannabis use

 

 

Creating a Safe, Consumer-Friendly Market

 

 

Promote small business entrepreneurship rather than limiting licenses to a small group of large companies

  • Craft growers
    • Provides opportunities for cannabis industry entrepreneurship to individuals who may need to work a job with steady income while launching a startup cultivation business
    • Low barriers to entry and capital requirements will promote small unregulated cultivators entry into the legal market
  • Micro-businesses
    • Promotes market participation by skilled entrepreneurs presently operating in the unregulated market. Just as some individuals drive Uber or work a part-time job to supplement their income, there are individuals across the State with years of expertise and experience in particular areas of the cannabis industry who presently supplement their regular income with an unregulated cannabis business.  They make edibles; press rosin and hash; make tinctures, ointments, salves, and other topical products; and market and sell cannabis products on a small scale.  Their businesses are too small to financially justify seeking a license with application and licensing fees as high as those proposed in previous legislation and would surely be denied in a system with limited license opportunities given the competition from larger businesses.  On the other hand, their businesses are lucrative enough that barriers to entry will merely perpetuate unregulated participation in the market.  A pathway to licensing for microbusinesses is a tool for quashing the unregulated market and promoting regulatory compliance, safety, and oversight. 
  • Social consumption businesses
    • Low startup costs compared to a cultivation, manufacturing, and retail businesses
    • Promotes legal participation in the industry by small unregulated retailers
  • Delivery
    • Low startup costs and minimal barriers to entry
    • Promotes legal participation in the industry by small unregulated retailers

Make cannabis access and consumption safe

  • Promote environmentally friendly cannabis sales and packaging
    • Overly burdensome packaging requirements and pre-packaged cannabis regulations have a staggering environmental impact. Much of the packaging for cannabis involves the use of plastics.  Requirements for pre-packaged cannabis and other unnecessary safety regulations leads to the overuse of plastic packaging materials.  Apothecary style retail sales of cannabis and policies that promote reusing child-resistant packaging and storage options are a more environmentally friendly route.   
  • Transparent labeling regulations with enough information for consumers to make informed purchases and engage in informed consumption (Detailed labeling requirement proposals available in Delaware CAN’s October 4, 2017 report to the Adult Use Cannabis Task Force)
  • Limit the use of non-organic nutrients and pesticides and require labels on cannabis products identifying the use of non-organic pesticides or nutrients
  • Create special event licenses and permit to permit the sale of cannabis at licensed gatherings of persons
  • On-site consumption
    • Permit cultivators, manufacturers, and retailers to permit on-site consumption in designated areas similar to breweries and tasting rooms
    • This policy would produce an additional stream of revenue for businesses, but also promote more informed consumer choice and satisfaction with the regulated market by decreasing the likelihood that the customer will be dissatisfied with the product and turn to the unregulated market. (Perhaps it is worth mentioning that many unregulated retailers will let you try before you buy and sample product). 
  • Promoting locations for social consumption
    • With the ability of landlords to prohibit smoking cannabis and prohibition on public consumption it is important to provide a safe space for cannabis consumption. In addition to on-site consumption at cultivation, manufacturing, and retail facilities, which is intended to be and aide to consumer choice, responsible adult-use legislation should include provisions allowing for the establishment of businesses or social clubs where cannabis consumption is permitted in indoor spaces.  The absence of safe and legal places for consumption will only contribute to public consumption and individuals violating the terms of their lease.