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Massachusetts approves new marijuana delivery rules, as dispensaries threaten lawsuit

"This will not be the final word on delivery."

An employee stocks cannabis at a store in San Francisco. Noah Berger / AP

Massachusetts marijuana regulators approved final regulations Monday that pave the way for a new type of business to deliver adult-use cannabis to residents’ homes.

But not if the state’s existing marijuana dispensaries have their say on the matter.

“This will not be the final word on delivery,” the Commonwealth Dispensary Association said in a statement Monday, indicating plans to challenge the regulatory changes in court.

The slate of rules changes, which the state’s Cannabis Control Commission approved by a vote of 3-to-1 during a virtually held meeting Monday, include a new license for standalone marijuana delivery companies with their own warehouse of products.

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Under the state’s previous rules, the only adult-use marijuana delivery ostensibly allowed was for third-party operators to transport purchases from established dispensaries — basically following the model of food delivery platforms, but with far more restrictions.

The original license, which was approved a year ago, was created in part to foster more diversity and inclusion in the two-year-old, corporate-heavy recreational marijuana market in Massachusetts, since such a delivery business would require fewer upfront costs than a full-fledged brick-and-mortar store. But it was soon met with complaints from entrepreneurs that the delivery fees they could charge still weren’t worth the cost.

Chris Fevry, a co-founder of the prospective marijuana delivery company Your Green Package, told Commonwealth magazine in a podcast interview Monday that the model was “nearly impossible to operate” and made independent entrepreneurs reliant on dispensaries.

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“I’ve had many conversations with different dispensaries,” Fevry said. “Some are very nice — and some are very much, you know, ‘Give me 9.9 percent [ownership], I’ll help you get a [host community agreement]’ … or ‘Hey, we’ll partner with you, but at the end of the exclusivity period, we want to buy you out.’ These conversations have been very blunt.”

So individuals like Fevry pushed the CCC to create the additional license allowing delivery companies to buy their own wholesale inventory and store it in a warehouse. In other words, customers would order online directly from the company, as opposed to asking them to deliver another store’s product.

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The commission also extended the period of time during which both delivery licenses will only be available to applicants in their equity programs to a minimum of three years. While the new rules do allow dispensaries to own up to two delivery licenses, the exclusivity period effectively means that most wouldn’t be able to until at least 2024.

Steve Hoffman, the CCC’s chairman, said in a statement Monday that the changes portend “significant progress in our mission and statutory mandates on equity, patient access, and public health and safety.”

“These regulations are a major step towards the equitable cannabis industry that was envisioned by voters and lawmakers when they established the adult-use cannabis market in Massachusetts,” said David O’Brien, the president of the Massachusetts Cannabis Business Association, which represents a wide swath of the industry players.

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“Since 2018 alone, the retail cannabis industry has generated over one billion dollars in revenue, but entrepreneurs with limited access to start-up capital, especially Black and Latino entrepreneurs and those who have been harmed by the failed war on drugs, have been largely shut out of this fast-growing market,” O’Brien said. “These regulations will open the door.”

Dispensaries say that they, too, share that goal of opening the door to more diversity, after decades of marijuana prohibition that disproportionately hurt communities of color.

“To be clear, no one opposes equity,” the CDA, which represented 80 percent of the medical and adult-use marijuana market, said in their statement Monday.

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“Unfortunately, some have effectively framed this discussion as a means to distract from the very real, numerous, and unfortunate consequences this new policy will have for our small businesses, communities, and most importantly, for the very people this policy purports to support,” the group said, adding that the “unfortunate reality” was that the new delivery licenses would not actually boost participation in the state’s equity programs “due to the capital and technology required to operate an online retailer.”

Despite the three-year exclusivity period and other rules implemented by the CCC aimed at preventing consolidation, the CDA argued that the new licenses could have the opposite of their intended effect and “serve to cannibalize the legal industry by large, corporate interests at the expense of our small businesses, communities and Main Streets,” referring to the newly possible businesses as “online retailers.”

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“The very real concerns of introducing online retailers should be heard and addressed,” the group said. “To that end, we are prepared to contest the matter to ensure that policy continues to adhere to the statute and that the market is not upended.”

Some state lawmakers and municipal officials have also come out against the newly approved “direct-to-consumer” delivery model, arguing that the CCC didn’t have authority to create such a license. However, as the State House News Service reported after dispensaries first hinted they were prepared to sue over the dispute, Hoffman told reporters last month that they disagree. The state law that established the CCC gives the agency permission to “establish and provide for issuance of additional types or classes of licenses,” including for the “limited delivery of marijuana or marijuana products to consumers.”

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“We certainly wouldn’t have taken the action we took today without believing we have the authority,” Hoffman told reporters after the CCC first advanced the new license type last month.

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