Delays in Maryland’s Social Equity Cannabis Program Hinder Progress

The rollout of Maryland’s social equity marijuana program has encountered significant delays. Nearly a year after licenses were awarded, none of the businesses have opened their doors.

Attracting investors has proven difficult, and finding suitable real estate presents another major hurdle.

Restrictions on Ownership Limit Investment Opportunities

Maryland’s cannabis regulations stipulate that the original social equity applicant must retain 51% ownership in the company. Additionally, a separate social equity partner can own up to 14%, leaving only 35% available for a non-social equity investor.

To prevent quick sales, the state mandates that original social equity licensees hold their licenses for at least five years. This rule was introduced after observing how social equity applicants in other states flipped their permits soon after receiving them.

These ownership restrictions make it challenging for businesses to attract investors. Attorney Meg Nash, a partner at the Vicente law firm covering Boston and Maryland, highlighted the difficulty in securing funding when investors cannot gain significant ownership or control.

Conversion Fees Strain Medical Cannabis Businesses

Social equity applicants are not the only ones facing challenges. When Maryland’s medical marijuana growers and processors transitioned to adult-use licenses in 2023, they were required to pay a conversion fee of 10% of their 2022 gross revenue, capped at $2 million. Retailers had to pay 8%, also up to $2 million.

For some businesses, these fees amounted to seven-figure sums. Wendy Bronfein, co-founder of Curio Wellness, noted that on top of these costs, license holders are not allowed to sell their licenses for five years.

Bronfein criticized this restriction, arguing that business owners should have the right to exit at the best time for themselves and their investors.

Maryland’s Medical Cannabis Program Had a Smoother Launch

Maryland’s medical marijuana program, launched in 2017, was structured to benefit providers, investors, and patients. Gail Rand, CEO of Grand Consulting, explained that the system allowed for heavy investment in capital expenditures, including automation.

Rand believes that social equity licensees and original license holders should be able to capitalize on their investments and exit as they see fit.

Strong Demand for Cannabis in Maryland’s Expanding Market

Despite the challenges, Maryland’s adult-use cannabis market has shown strong growth. Some industry insiders commend the state’s approach to ensuring access in rural areas.

Jake Van Wingerden, president of SunMed Growers, noted that dispensaries are setting up in underserved regions, and existing growers eagerly await their expansion.

Ben Burstein, an analyst at LeafLink, highlighted Maryland’s industry-leading sales per resident, indicating a robust market with high demand.

Maryland’s Cannabis Market Generates Significant Tax Revenue

Since launching adult-use sales in July 2023, Maryland has collected over $82 million in taxes. Tax revenue jumped from $12.2 million in Q3 2023 to $22.4 million in Q2 2024 before dipping slightly to $18.3 million in the next quarter.

Meanwhile, combined medical and adult-use cannabis sales have remained steady, ranging between $93 million and $100.6 million per month.

According to the Maryland Cannabis Administration (MCA), recreational cannabis sales currently average $72 million per month, while medical sales account for an additional $24–$25 million per month. The combined market exceeds $1.1 billion annually.

Sales are expected to increase further as social equity licensees receive permanent licenses and begin operations.

More Cannabis Licenses to Be Issued in the Future

Of the 172 cannabis business licenses issued, 100 are for dispensaries that transitioned from medical to adult-use sales. The MCA plans to issue nearly 1,000 additional licenses, primarily to social equity applicants, in the coming years.

Licenses are awarded via lottery, and verified applicants must reach the “conditional” stage before becoming operational within 18 months. Once operational, the five-year moratorium on selling the license begins. If a licensee fails to proceed, the state reallocates the license to another applicant.

Hope Wiseman, CEO of Mary & Main, expressed confidence in Maryland’s cannabis market stability, noting that growth will remain controlled to prevent oversaturation.

As Maryland’s cannabis industry continues to develop, the success of social equity applicants and the expansion of dispensaries will play a critical role in shaping the market’s future.