After months of high-stakes legislative drama, adult-use cannabis is actually, really, finally coming to Montana. Retail sales are scheduled to begin on Jan. 1, 2022.
Retail sales are scheduled to start on Jan. 1, 2022.
Earlier today, Montana Gov. Greg Gianforte (R) signed HB701, notching an enormous victory for cannabis reform that was far from guaranteed.
Even though voters passed a statewide adult-use measure, Initiative 190, by a margin of 57-43 last November, the state’s Republican legislators, who control both houses, have worked for months to replace the initiative with their own legislation. While their initial draft was rife with crippling restrictions, it was heavily amended by a Senate committee.
Despite a last-minute effort by House Republicans to rewrite much of the bill and dismantle the state’s medical program, the final version, signed by Gianforte, generally tracks with the voter initiative’s emphasis on small businesses, and similarly allocates a good chunk of the revenue to public land conservation.
“I feel really good about it,” Rep. Mike Hopkins (R-Missoula), the bill’s sponsor, told Leafly. “The legislative process worked, even though from the outside looking in it could seem messy at times.”
Locals get a head start in the market
In an explicit effort to give current Montana-based dispensaries a temporary advantage over out-of-state players, the new law imposes an 18-month moratorium on all new licenses. Once the moratorium expires, new license holders will be limited to a small Tier 2 license, which limits the amount of cannabis they can grow.
Adult-use licenses are locals-only for the first 18 months.
Furthermore, new license holders will need to show one year of Montana residency in order to even apply. That being said, there’s nothing stopping an out-of-state business from buying an existing business from a current Montana resident.
Pepper Petersen, who spearheaded the legalization campaign and is now the CEO of the Montana Cannabis Guild, told Leafly he was pleased with the outcome. “It’s an even playing field,” he said. “Anybody from out of state has to go through the same things we had to as residents.”
Tribes allotted eight licenses
One of the most innovative features of the new law is a provision that automatically allocates an all-encompassing license to each of the state’s eight Indigenous tribes. “We were trying to get them an open door so they could get their feet wet and get into the business, finally,” said state Sen. Jason Small (R-Busby). Small is a member of the Northern Cheyenne tribe and was instrumental to the provision’s passage. “There’s quite a bit of earning potential.”
No vertical integration required
Montana’s market will be horizontally integrated, which means each license holder does not have to do everything: Grow, process, manufacture, and sell. Each company will be free to streamline their operations and focus on what they do best. Farmers can just farm, retailers can just sell.
Farmers can just farm, retailers can just sell. Or do both. The new law lets companies do what they do best.
“It’s mighty wasteful to have every provider buying the same equipment and having to try to learn the requisite skills to safely operate it and turn out a decent product,” said Jay Bostrom, co-owner of Dancing Goat Gardens, which has stores in Missoula and Havre. “Let those with an interest and experience focus on their niches.”
Half the state’s counties opted out
There’s one big catch to the program’s licensing structure: The counties that didn’t vote in favor of Initiative 190 (roughly half of Montana) will need to take a separate vote to opt-in to the program.
Did your county opt out? Check now, or you may be disappointed on opening day.
That’s a compromise from the original bill draft, which required all counties to opt-in, and required businesses to acquire a vague and arbitrary “certificate of good standing” in order to be licensed. As for the tribal licenses, they are valid anywhere within 150 miles of the exterior boundary of a reservation, which Sen. Small hopes will guarantee their validity.
New limits on advertising
The opt-in policy isn’t the only restriction that survived the original bill draft. There are significant limitations on cannabis packaging and advertising. Cannabis brands can reach consumers only through digital ads, either on a shop’s website or through a site like Leafly, thanks to a separate bill).
Home growers: Know your new limits
The new law also contains new restrictions on who can grow what, where. For licensed commercial growers, only pre-existing outdoor grows will be permitted. All others must be indoor grows. (Greenhouses and hoop houses count as “indoor” grows.) Individual residents will only be allowed to grow two plants at home, with a maximum of four plants per household.
Mild potency caps, nothing extreme
There are some mild potency restrictions in the mix as well. Flower is capped at 35% THC, and edibles are limited to 100mg per package, with no more than 10mg per serving, which is a common industry standard. Most other products, like vape carts and tinctures, cannot contain more than 800mg of THC.
“What more could you possibly ask for?” said Marc Lax, the CFO of Spark1, a dispensary chain with stores across the state. “That seems very workable and very reasonable.”
Cannabis tax: 23% maximum
Customers will be subject to middle-of-the-road taxes. The new law establishes a flat 20% cannabis excise tax on all purchases. Individual counties may choose to add an additional 3% local tax.
Opponents of the bill have bemoaned these taxes, warning in recent hearings that they could fuel the illicit market and attract an influx of unlicensed products produced by Chinese, Mexican, Vietnamese and Cuban drug cartels.
Nonetheless, the most recent fiscal note for the program estimates that the state’s cannabis industry will generate at least $51 million in tax revenue by FY 2025. 20% of that revenue will be invested in public land conservation, starting in 2023, while $6 million will support a new substance abuse treatment program championed by Gov. Gianforte.
“I think the money is distributed very fairly,” added Lax, of Spark1. “I think it’s fantastic.”
A successful defense of the legalization vote
While the final version of HB701 adheres somewhat closely to the voter initiative, lawmakers’ willingness to brazenly override the will of the people has raised concerns among citizens and lawmakers that may not dissipate anytime soon, especially considering other anti-democratic policies the legislature has embraced this year.
For the moment, however, cannabis consumers, farmers, manufacturers, and retailers can finally breathe a sigh of relief.
“It’s been a long time coming,” said Petersen, of the state Cannabis Guild. “We knew this [prohibitionist] legislature was coming, and there was a lot of angst in terms of what we were dealing with. A lot of those fears came true. I feel good that we’ve gotten to a good negotiation with HB701, but I know that we’re not done.”
