February 13, 2019

CCC chief: alcohol, marijuana regulation not the same

Photo | State House News Service
CCC Chairman Steven Hoffman.

The 2016 push to legalize marijuana began with an activist campaign that sought to "regulate marijuana like alcohol" and many legalization supporters continue to argue that the two substances should be treated similarly by government.

But the state's chief marijuana regulator said Wednesday it is simply not practical to try to apply the framework for alcoholic beverage regulation to the cannabis industry and defended the way the Cannabis Control Commission established rules for and then rolled out the legal pot sector.

"I think there are some fundamental differences between alcoholic beverages and cannabis, one of which is that cannabis is still federally illegal. Whether we like that or not, it's a fact," CCC Chairman Steven Hoffman said during his keynote remarks at the National Cannabis Industry Association's conference in Boston. He added, "I think we can learn from the alcoholic beverages regulatory structure, but it's not the same."

Hoffman was responding to a question from NCIA Executive Director Aaron Smith about how the complex and lengthy process for obtaining a marijuana licensee compares with the state's process for approving alcohol licenses. Smith said the process for obtaining an alcohol license is "streamlined" compared to the CCC's licensing procedures.

The chairman pointed out things that "are not issues for alcoholic beverages" but are issues for the cannabis industry because of the federal prohibition, like diversion to the illicit market or to states where marijuana is illegal, and ensuring that organized crime is not profiting from legitimate businesses.

Another reason, Hoffman said, is that marijuana is newly legal and the vote to allow legal adult use of marijuana in Massachusetts was fairly close, with 53 percent in support and 47 percent opposed.

"Alcoholic beverages went through their prohibition back in the '20s," Hoffman said. "It's been legal for a long time. Marijuana, that's not true for."

Hoffman left open the possibility that, as marijuana more firmly establishes itself as a legal part of American society, regulations around the drug could be relaxed to more closely align with the regulation of alcohol.

"Over time, perhaps those requirements will get mitigated a little bit. But as long as the federal prohibition stays in place -- and I'm not going to forecast when it's going to change -- as long as that's in place I don't think it's comparable to say, 'look, this is how alcoholic beverages are regulated and we should do the same,'" he said. "It just doesn't work, in my opinion."

"Greedy" communities

While he was addressing the cannabis industry Wednesday, Hoffman also defended himself and the CCC against criticism from consumers and some entrepreneurs that Massachusetts has dragged its feet as it rolls out legal marijuana. Though Hoffman and others at the CCC said they expected legal sales to begin in July 2018, the first stores did not open until Nov. 20. As of Wednesday, nine retail stores have opened across Massachusetts.

"I'll take issue with the use of the word delay. I don't perceive there being any delays at least with respect to the commission," Hoffman told Smith. He added, "We have hit every legislative mandate. My objective and I believe the rest of the commission's, is to do this right."

Hoffman said the CCC researched each state that had legalized marijuana before Massachusetts to try to learn something about how the new industry was rolled out there. He said the CCC tried to emulate things it saw in some states and tried to avoid the pitfalls of other states.

"I will not criticize other states but I will say that other states have tried to meet an arbitrary timeline, opened broadly across the states, had inventory issues, had no seed-to-sale tracking in place, had no background checks in place for some of their licensees," he said. "We chose not to do that. We're going to do this right. We care a lot more about what this industry looks like in 2019 and 2020 and on, than hitting some arbitrary date."

David O'Brien, president and CEO of the Massachusetts Cannabis Business Association, said after Hoffman's remarks that the businesses already operating in Massachusetts or that already went through the licensing process for a medical marijuana license "are well aware" of how the CCC operates.

"I think, as he indicated and as have all the commissioners indicated over time, Massachusetts is fairly deliberative about its process and wants to avoid any of the sort of hiccups that happened in other states before us," O'Brien said. "I think all of that is very intentional, so if it's a little slower as a result I think they think it's worth it."

He added, "We're a newly legal state still and implementation is tricky, it takes a little time."

O'Brien, whose organization works with businesses hoping to enter the Massachusetts marijuana industry, said the more significant barriers to entry crop up in the local approval process, not at the CCC.

"The local control issue and the host community agreements is the most challenging aspect of getting into business," he said. "I think we're seeing, and the chairman alluded to this, a handful of communities are being, quite frankly, greedy."

The CCC has wrestled with the issue of host community agreements (HCAs) for months as businesses and advocates point to the required contracts as a cause of the slower-than-anticipated rollout. The CCC maintains that state law around the contracts is not clear enough and that the Legislature needs to make it clear whether the CCC can review and regulate the agreements.

Because the CCC will not consider a license application until an HCA has been executed, businesses and advocates say municipalities are using the required agreements to extract more than 3 percent of the marijuana business's gross sales, the cap in place under the law.

"I will not get into city or town bashing, but I will say there are some cities and towns playing fast and loose with that," Hoffman said Wednesday, using his strongest language yet in saying there is a problem with HCAs. "There are some cities or towns that instead of asking for 3 percent are asking for 5 percent, instead of asking for a percentage they're asking for a flat fee, some of them are asking for five years with auto-renew which seems to violate at least the spirit of the five-year term. Not all of them, most cities and towns I think are doing the right thing here, but some are not."

Last month, the CCC voted to "seek statutory authority to review and regulate" HCAs from the Legislature, though legislative leaders have said they think the law already empowers the CCC to enforce the requirements around HCAs.

Rep. Sarah Peake and Sen. Julian Cyr filed a bill (SD 2143) to make the CCC's authority to regulate HCAs explicit, but the bill has not yet begun to move through the legislative process and no other lawmakers signed on as co-sponsors.

Rep. Mark Cusack and Sen. Patricia Jehlen led the Marijuana Policy Committee last session and pushed back against the CCC's requests for clarity in the law -- Cusack said the issue "has less to do with ambiguity than it does reading comprehension." House and Senate leaders are expected to make committee assignments Thursday and the Marijuana Policy Committee could be under new leadership by the time the Cyr/Peake bill is considered.

"It's something that we're very focused on and we really want to jump into, we just want to make sure it's clear that we have the regulatory authority to do so," Hoffman said.

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