Why We Sued The State Of Maryland Over The Cannabis Reform Act.
Posted by Nicholas Patrick — 11/30/23
Legalized Cannabis: A Maryland Mirage
When the average person hears “cannabis is legal,” they likely envision a vibrant, accessible market akin to any other legalized industry. They imagine walking into a store with a variety of affordable, high-quality cannabis products, where competition spurs innovation and variety. They think of a market where small, local entrepreneurs can thrive alongside larger companies, contributing to a diverse and dynamic industry. There’s an expectation of safety, with products tested for contaminants, ensuring consumer well-being. However, the reality in Maryland starkly contrasts these expectations despite the pretty package and the facade of equity. Instead of an open and inclusive market, residents face a landscape dominated by monopolies, exorbitant prices, limited product offerings, and stringent regulations that stifle both innovation and consumer choice. This disparity between expectation and reality underscores the significant influence of large, corporate-backed cannabis companies in shaping industry policies, often at the expense of the consumer and small business interests.
As a plaintiff in the pivotal lawsuit against Maryland’s Cannabis Reform Act (CRA), and a co-founder of The Maryland Healthy Alternatives Association I find myself at the forefront of a critical battle for fairness in our state’s cannabis industry. The CRA, initially conceived to regulate and improve the industry, has instead fostered a monopolistic environment, particularly detrimental to legitimate hemp businesses like mine and to the countless would-be cannabis entrepreneurs who will be locked out of this industry. For lawful existing hemp businesses, we’re being forced into an arduous licensing process which includes a lottery system where established businesses must compete with thousands for a very limited number of licenses in order to continue operating the businesses we have had open for years, a stark departure from our foundational business model and a direct threat to our livelihood. This initiative to destroy the hemp industry was led by The Maryland Wholesale Medical Cannabis Trade Association (CANMD) and was bankrolled by large cannabis companies like Sunmed.
Our industry has been advocating for the last 4 years for a regulatory plan for hemp-derived products. We agree that all cannabis products should have public health and safety regulations including testing standards, as well as packaging and labeling requirements. We have never opposed that, in fact we begged for it to weed out bad actors and foster a healthy and growing industry. We even worked with members of the General Assembly to draft a bi-partisan bill that would have legitimized the hemp industry and created a regulatory framework that protected public safety and allowed for the continued growth of the industry in a free and open market where many small and minority owned businesses could continue to thrive. That bill was killed immediately and our words fell on deaf ears despite the sheer size of the hemp industry.
According to a recent report from Whitney Economics, The forecast for sales of hemp products in Maryland is as high as $600 million and hemp related businesses employ over 4200 people. Sales of hemp derived products nationwide surpassed all combined sales of medical and adult-use cannabis and rivals that of craft beer. This fact has created a sort of civil war inside of the cannabis industry between big cannabis MSOs (multi state operators) and the small business driven hemp industry. This civil war is being fought in courtrooms and state houses across the country as massive cannabis Goliaths wield political influence and use state legislators to stomp out their competitors under the guise of public safety concerns which could easily be addressed by establishing common sense health and safety regulations.
The hemp industry has set the model for what a truly free and open market for cannabis products can look like and that has the monopolies scared to death. This industry belongs to the people who created it and sustained it for decades and that is why I believe that the days of limited license cannabis monopolies will eventually come to an end and a craft cannabis revolution will be birthed out of battles like the one we are fighting against corporate cannabis.
The Lawsuit — Ruling Shakes CRA Foundations
The Cannabis Reform Act included language to further consolidate the industry by stripping lawful hemp products from the free market and forcing them under the same monopolistic regime that governs the existing medical cannabis industry. To briefly summarize, beginning July 1st you now need an adult-use cannabis license to sell federally lawful hemp products. Which meant that businesses like mine would have to close for 6 months and then apply for a license through a limited lottery system on the off-chance that we would win a license that could allow us to reopen our existing businesses. This language gutted the entire hemp/CBD industry in Maryland. Farmers, manufacturers, and retailers lost an entire industry overnight. I myself had to close all 3 locations of my business as I had lost 74% of my revenues. After 2 years of failed lobbying efforts we decided to take our fight to the courts and were granted a preliminary injunction that allowed us to continue the sale of our hemp products and placed the entire cannabis licensing process under judicial review.
Circuit Court Judge for Washington County, The Honorable Brett Wilson ruled that “It is clear that the CRA creates an Article 41 monopoly that unfairly excludes many from their right to continue, or enter, a profession of their choosing, all to the detriment of the public… As a further restriction, the overall total number of licenses that may be obtained is capped for the purpose of manipulating, supply, price, and license value. In doing so, the CRA licensing scheme confers a significant benefit on those few who obtain a license while barring many, such as Plaintiffs, from engaging in their chosen field of occupation. The public does not benefit when government intentionally constrains power and wealth in the hands of a few.” The CRA was enjoined because it “violates the Maryland Declaration of Rights, which embodies similar protections as those found in the Equal Protection Clause of the Fourteenth Amendment in the US Constitution.” This decision was based on the fact that the CRA “barred many of the plaintiffs from continuing in a legitimate business which continues to be legitimate, albeit with additional regulations for health and safety. He goes on to say that “The court cannot find a rational basis to support the exclusive, and exclusionary, licensing scheme that has put Plaintiffs out of their legitimate businesses.” The court also clarified that hemp industry participants were lawfully operating under both federal and Maryland state law prior to the enactment of the CRA, which suddenly and unfairly made their operations illegal: “Although their products were still legal under state and federal law, Plaintiffs lost the right and opportunity to sell them solely due to the CRA licensing scheme… Plaintiffs were instantly frozen out of the market, because, as discussed above, they did not need licenses to sell their products.”
Maryland’s Baffling Licensing Logic
The limitation of cannabis dispensary licenses to be issued in Maryland, capped at 300 (including the 100 already existing medical dispensaries), starkly contrasts with the state’s approach to alcohol licensing, where there are 775 liquor stores, plus numerous bars and restaurants totaling 8000 licenses. This discrepancy raises questions about the state’s commitment to social equity and restorative justice. The stark contrast between the regulation of alcohol and cannabis in Maryland highlights a profound inconsistency in public policy. Despite alcohol being a significantly more dangerous substance, its sale is far less restricted. Consumers can purchase unlimited quantities from numerous outlets across the state, reflecting a regulatory approach that balances safety with accessibility and consumer choice. In contrast, cannabis, a substance with a much lower risk profile, is heavily regulated. The cannabis market is characterized by restrictive licensing, limited points of sale, and stringent controls on quantities and product types. This disparity not only seems incongruent with the relative risks of these substances but also underscores a missed opportunity to apply a more reasoned, balanced regulatory framework to cannabis, akin to that of alcohol. The overburdensome regulations that strangle the growth of this industry and keep small businesses out should be replaced with a simplified plan for protecting the public safety including testing requirements, and packaging and labeling standards and then create a free and open market for cannabis. In doing so we will curb illicit sales, stimulate local economies, lower prices, and encourage innovation, all to the benefit of local communities and families. How can such a limited number of cannabis licenses address the widespread impact of the war on cannabis, which has affected countless lives and families?
The State of Maryland claims that licenses are being limited to protect public safety. That just simply isn’t true. And if it is, if cannabis can pose a public health and safety concern, then why legalize it at all? During our preliminary injunction hearing Will Tilburg, director of the MCA stated that too many points of retail or too many growers and processors will lead to an oversupply which could cause more cannabis to escape into the illicit market. This logic is counterintuitive. If you restrict the number of licenses to artificially keep prices high you will only serve to bolster the already massive illicit market that has been thriving for a century. Oversupply brings down prices for consumers, and competition breeds innovation. Limited licenses lead to high prices, stagnation, and an increase in illicit sales and exports. The real reason that they are limiting licenses is so that the state can maximize their tax revenues.
The Social Equity Illusion
The social equity provisions of Maryland’s Cannabis Reform Act, while intended to address historical injustices, are mired in flaws and inconsistencies. The criteria for an eligible social equity applicant, based on residence in areas with high cannabis possession charges, fail to consider the actual impact of these charges on individuals. The process overlooks significant population disparities within designated zip codes, leading to arbitrary and unfair determinations of eligibility. A more equitable approach might involve the state using tax revenues from cannabis sales to provide direct financial compensation to those adversely impacted by cannabis criminalization, rather than offering a limited and competitive licensing system that benefits only a few. A more effective approach would involve clearly defining a bona fide social equity applicant as an individual who has personally experienced arrest and conviction for cannabis-related charges or has a family member who has. Additionally, creating a fund to offset startup costs and application fees for eligible applicants would be beneficial, allowing them access to a free market for cannabis. This approach would promote genuine social equity and restorative justice in the cannabis industry.
Moreover, affluent areas with high median household incomes are also included under these provisions, allowing individuals with no real connection to cannabis criminalization to qualify. Based on testimony by the director of The Maryland Cannabis Administration Will Tilburg, he himself would be considered a “social equity” applicant based on his zip code, though he personally is prohibited from applying given his position. This superficial approach to social equity overlooks those genuinely affected and the likelihood of an individual who was truly impacted by cannabis criminalization being awarded a license is very slim.
Judge Wilson also agreed with our position on the social equity provisions stating “The CRA licensing scheme is based on an assumption that everyone residing in a community that had a history of a disproportionately high rate of marijuana charges was disproportionately affected and, therefore, entitled to be eligible to apply for a license to the exclusion of all persons not from such a community. He then goes on to say “the Defendants did not offer any evidence that this severe scheme would actually benefit the communities found to have been impacted.” For context, when adjusted for population, and using the state’s metric of 250 cannabis arrests, with such a small number of licenses set aside for each area of the state, you have a less than 2% chance that the awardee will be someone who was actually impacted by the war on weed.
The many bonafide social equity applicants who wish to enter this industry or those who already exist in the “legacy market” are up against competing in an extraordinarily limited license lottery with many massive corporate cannabis companies with endless resources and countless “straw applications” at the ready. If licenses are given out by pulling names out of a hat, then the key is to put your name in that hat as many times as you can. With application fees starting at $5000, most bonafide social equity applicants may be able to afford one license application, but large cannabis companies can afford dozens. Not to mention they can afford to hire the best lawyers and consultants to make sure their application is perfect as the application process itself requires a detailed operational plan, business plan, and diversity plan, all of which will be reviewed by someone who can decide whether or not they see it as sufficient enough for you to be entered into the lottery. Additionally the state cautions against securing any property prior to being awarded a conditional license but then expects the applicants to draft a business and operational plan without having a property to base that plan on. The Maryland Cannabis Administration has far too much subjective authority over this process.
This system leaves behind the very individuals who sustained the cannabis industry during prohibition, and the thousands of people who make up the Maryland Hemp Industry contradicting the law’s stated goals of restorative justice and equitable access.
Free the Plant and Empower the People
Though this lawsuit was started over the unlawful destruction of the hemp industry, this issue is much bigger than the civil war that has broken out between hemp and big cannabis. This fight is much larger than fighting over the regulation of hemp products. We agree that the state has the right to regulate cannabis and hemp, we just want fair and equal access to the industry that we built. This lawsuit represents something much bigger. It represents a call for a paradigm shift in Maryland’s cannabis policy and similar policies nationwide.
As a plaintiff in this lawsuit, my stance is clear: the current trajectory of the CRA misses its intended mark of equitable distribution and accessibility in the cannabis industry. Maryland needs to urgently reassess and realign its policies to truly embody fairness, inclusivity, and justice. This isn’t just a call for reform; it’s a demand for an overhaul of the system, ensuring that the cannabis industry becomes a model of equitable economic opportunity and social justice.
It is time to truly free this plant. It is time to stop allowing outdated fears and ignorance concerning cannabis to inform our regulatory structures for this industry and it is time to embrace the American principles of free markets, fair competition, equal protections, and equal access.
We have a unique opportunity to change this industry for the better, and I think it’s high time to return this plant to where it belongs, to the people.
Thank you for coming to my Ted Talk.
Nicholas Patrick
Based in Maryland, Nicholas Patrick is a dynamic leader and passionate advocate in the hemp and cannabis industry. As the founder of Embrace CBD Wellness Centers and the Maryland Healthy Alternatives Association, Nicholas has been at the forefront of pivotal legal and legislative battles, championing the rights of small businesses and pushing for equitable cannabis policies.
Nicholas' commitment to the industry is rooted in a deep belief in the economic and social benefits of a free and fair cannabis market. His efforts have significantly contributed to protecting the interests of hemp businesses against restrictive legislation, promoting a vision where the industry thrives on inclusivity, innovation, and responsible growth.
An influential voice in Maryland’s cannabis debate, Nicholas' work extends beyond business leadership to encompass advocacy for regulatory changes that favor both the hemp industry and the wider cannabis community. He is dedicated to ensuring that the cannabis industry remains accessible and beneficial for all, from entrepreneurs to consumers.
