Under state law the number of dispensaries a person can open in Connecticut is limited to one and in some cases two, but some of the largest cannabis companies in the country are planning top open as many as six retail stores.
This has raised questions about the fairness of a legalization initiative that was intended, at least in part, to provide economic opportunity for groups disproportionately impacted by drug prosecution.
State statutes were amended last year to allow some individuals who partner with large companies only a single cannabis dispensary, but the companies they partner with are allowed two for every medical cannabis dispensary they already manage. This has enabled operators of medical cannabis dispensaries the chance to open multiple locations.
“The way I see it, it’s really nothing more than a written invitation for the deepest pocketed vultures to swoop in for more shameless cash-grabbing. That’s all it is,” Adam Lewis said during a recent interview. Lewis, of New Britain, is a cannabis user who testified before the Social Equity Council when the law was being discussed. “They’re literally using disproportionately affected folks as a token.”
State Rep. Josh Elliott, D-Hamden, said the legislature was “trying to allow people a foothold into the market,” but also that “at a certain point, we also recognize that the laws of capitalism would be central.”
“I don’t know how much these larger conglomerates becoming such outsized players in the equity market was really what we had envisioned,” Elliott said.
Out-of-state influence
So far, only so-called equity joint ventures have opened since Connecticut legalized recreational cannabis, all partially owned by large, multi-state cannabis companies.
Equity applicants, who must have an average household income of less than three times the state median household income and are or were recently a resident of an area that has been disproportionately affected by the war on drugs, may open one dispensary each.
Equity applicants may partner with other organizations or individuals with an existing medical cannabis establishment, called an equity joint venture (EJV). Each one of those existing medical dispensaries may open two such equity joint ventures.
That is how a company like Verano, the state’s largest cannabis producer and one of the largest cannabis companies in the country, can plan to open six recreational dispensaries.
“A social equity individual cannot own more than one EJV and cannot be less than 50 percent owner,” said state Social Equity Council spokesperson Kristina Diamond. “The limitation to two EJVs applies to the dispensary facility owned by the backer and each dispensary facility can have two EJVs.”
Social equity applicants must own at least 50 percent of the venture, and a dispensary facility, including its backers, may not increase its ownership in an equity joint venture in excess of 50 percent until seven years after the license has been issued.
When Chicago-based Verano last month opened up a cannabis dispensary in Norwich, a corporate spokesman said it was one of six planned equity joint ventures.
Verano is the minority partner in that venture. The majority partner is not listed in state license data publicly online. They are, however, limited to owning only a single dispensary, whereas the minority partner, in this case Verano, is able to open six.
James Leventis, Verano’s vice president for legal, regulatory and government affairs, confirmed that the Norwich dispensary is the first of six so-called equity joint ventures.
“We set off close to two years ago now to really lay strong groundwork towards realizing the potential of this program and maxing out the allowable footprint that the state will provide us under its licensing scheme,” Leventis said. “We have three existing medical licenses from before the program so we were allowed to open six if we found appropriate partners and we had the desire to pursue these, which we did.”
A ‘trade off’
Ben Zachs, chief operating officer of Fine Fettle, which under state law passed last year is allowed six equity joint ventures of its own, said, “It’s a law that I personally lobbied against, because I felt like the goal of spreading the wealth was likely to create significantly less wealth.”
Still, Zachs said EJVs “are a good way to get equity ownership into the industry.”
“It’s a capital-intensive business, it’s a hard business,” he said. “By definition, the social equity partners only have a certain amount of income or net worth. By giving them a partner who is established, it gives them an opportunity to succeed. We’re in an industry where you can’t take out a loan, you can’t get started, you need a ton of capital.”
But Zachs said the strict limitation on how many EJVs a social equity applicant can own blunts the intent of the program.
“We wanted to have a structure where multiple owners owned an equal piece of multiple entities so that it’s like, ‘Hey, we’re all in it together,’” he said.
There are currently 18 approved equity joint ventures in Connecticut, four of which are owned by Curaleaf, which did not reply to a request for comment on this story.
Leventis, from Verano, said the equity joint venture process is beneficial to both larger companies and their equity partners. A company like Verano has the capital, expertise and supply chain that allow majority equity owners to open cannabis businesses they might not otherwise be able to.
“It’s a 50/50 joint venture, and we’re not hiding anything here. I don’t think anything has gone against the intent of the legislature in setting up this program. It was very plain on its face,” he said. “This was actually more restrictive for the big national companies in that the only way that you could get any additional retail footprint is by partnering with somebody who otherwise a lot of these companies wouldn’t have.”
State Sen. Gary Winfield, D-New Haven, said the legislature recognized that it would be a “trade-off.” Without a system to create equity joint ventures, “There is no entry for those small players at all,” he said.
“A lot of what’s going on here is trying to figure out, how do you create a system with entry for those who have not had entry, and that means there’s a trade-off,” he said.
H/T: www.ctinsider.com
You can view the whole article at CT Insider
