Graphic by: Julia Meyer.
In June 2021, Connecticut legalized adult-use cannabis. Since then, adults 21 and older have been able to legally possess 1.5 oz of cannabis.
While residents are able to possess certain amounts of cannabis for recreational use, they cannot buy it. Retail sales will likely not be available until at least the end of 2022, according to the Connecticut Department of Consumer Protection (DCP). But the state is already preparing to open its retail market. On February 3rd, for example, state officials began accepting applications for cannabis establishment licenses.
The announcement of applications opening follows a January 4th meeting of the state’s Social Equity Council (SEC). The council is tasked with ensuring the adult-use cannabis program is grown equitably. Additionally, The SEC ensures the program’s funds are given back to communities hit hardest by the War on Drugs, according to the council’s website.
In the meeting, council members approved a technical assistance plan for the upcoming cannabis industry. The plan includes resources for people interested in participating in the market. These resources include accounting, legal, and startup information for cannabis businesses and general business information support.
The plan’s finalization triggered the start of the licensing process outlined on pages 65-72 of the state’s cannabis legalization law, SB 1201.
Who Can Apply For a License and How?
As seen in the statute, Connecticut opted for a lottery system for cannabis establishment applicants. The DCP oversees the lottery. The DCP is the state’s primary regulator for adult-use cannabis, said Kaitlyn Krassel, communications director for the DCP. “So that means that we regulate and license all of the businesses that will ultimately be a part of this marketplace”
The DCP will conduct two separate lotteries: a general lottery and a social equity lottery. On February 3rd, the first applications opened for social equity applicants and will last 90 days. Once the SEC selects and approves these applicants through the lottery process, the DCP will conduct the general lottery.
Krassel explained that the DCP must give half of all retail licenses to social equity applicants.
“The law designates that 50% of all licenses have to go to social equity applicants. So in this first lottery round, for example, we’ve said that we will issue 12 retailer licenses; half of those have to go to social equity applicants,” she said.
General lottery applicants will also have a 90-day application period starting at different times from February 3rd through March 24th. According to regulators, there likely will be an additional lottery period for most license types in the second half of 2022. Applicants not selected in the first round of lotteries can participate in subsequent lottery opportunities. If interested, these applicants must reapply and pay the lottery fee .
There will be application rounds for eight different license types. All social equity-approved applicants and those selected in the general lottery will be eligible to apply for a provisional license. All lottery applications will be completed online and become available at elicense.ct.gov on the opening date of each application period.
Criticisms of the Social Equity Model
Despite the state opting for the social equity lottery, some applicants are critical of this model.
Luis Vega is the CEO of Wepa! Farms, a solely minority-owned licensed hemp cultivator and manufacturer. Vega is applying as a social equity applicant for an adult-use cultivator and manufacturer license. Additionally, he hopes to open a dispensary in the adult-use market.
Vega teaches cannabis-growing classes at Wepa!. He hopes that the adult-use market will allow his business to teach people how to grow cannabis for the sake of helping communities hit hard by the drug war. Vega also aims to partner with job training organizations to train people to grow cannabis.
“What we’re really hoping for out of the adult-use cannabis space is a place where people who were affected by the war over the last 25 to 30 years [are] actually being able to create some type of generational wealth for themselves,” he said.
As a social equity applicant, Vega claims that the model the state chose does not highly prioritize these applicants. He said that cannabis advocates fought for a different cannabis licensing system rather than the one that the Connecticut legislature passed because it does not prioritize social equity enough.
He explained that the DCP attempts to show that they prioritize social equity applicants and greatly consider their applications when applying for a license. In reality, the DCP is more focused on prioritizing wealthier applicants’ license applications behind closed doors.
“It [the DCP) prioritizes [social equity] by putting it in the forefront, so it’s the biggest picture you see, but it’s not the actual biggest activations happening,” he added. “The biggest activations are happening way behind closed doors without being consulted to everybody else.”
How Connecticut is Prioritizing Social Equity
As designated by the state’s cannabis law, SEC is responsible for ensuring that those selected through the social equity lottery meet the state’s social equity requirements. These applicants must have at least 65% ownership or control of their business and “meet the income and residency requirements for a social equity applicant outlined in the law,” the DCP explained in a press release.
Krassel said that these applicants must present documentation to the SEC to prove that they meet the criteria. When selected in the lottery, applicants are subject to SEC review to confirm their social equity status.
The council also approved a list of geographic areas disproportionately impacted by the drug war, known as “Disproportionately Impacted Areas.” These areas will be used to determine eligibility for social equity business licenses. Applicants in these areas can surpass the lottery process by paying a $3 million fee to obtain a cultivation license. The social equity lottery will set two micro-cultivator licenses aside.
Roadblocks to Finding a Retail Space
Finding a location for adult-use cannabis businesses will likely be a challenge in the state. For example, federal law makes obtaining loans to buy a property for cannabis businesses difficult, according to industry experts. Further, many landlords who have an outstanding debt with large lending institutions are unable to rent to these types of businesses.
Since cannabis sales are federally illegal, banks could face penalties if they accept money from these sales. However, The U.S. House of Representatives attempted to prevent banks from receiving penalties when they passed the SAFE Banking Act last year. This act awaiting Senate action would prohibit federal regulators from penalizing banks that accept money from legitimate cannabis businesses.
Vega explained that finding a future retail location has been a difficult process for Wepa!. “We’ve reached out to about one hundred banks until we found a bank that was willing to take our money,” he added. “Then from there, real estate agents and realtors, we went through about 10 before one decided they want to work with us.”
Not only is securing funding difficult, but finding a retail location is challenging. For instance, CT Insider reported that several Connecticut municipalities have already prohibited recreational-use cannabis sales. Further, communities allowing cannabis sales have zoning regulations that limit the possibilities to open a business.
For example, Vega explained that his business encountered many declined offers to walk through potential retail locations. He also encountered community disapproval of opening a cannabis retail space in certain locations.
Currently, only five application types are available. A breakdown of when the DCP is accepting applications and how many applications will be accepted for each type can be found on the DCP’s website.
Application periods will close in May, and an application review process will follow. From there, applicants will have to go through a provisional application period of 60 days to set up their businesses, Krassel said.
She encourages applicants to take their time with applications. “Because it is a lottery there’s no advantage to being the first person to get your application in. We’re really encouraging people to be thorough and to make sure that they complete the application to the best of their ability to ensure that if they are selected in the lottery, they’re not then ultimately disqualified for an incomplete application.”
For that reason, she also says that applicants should pay special attention to instructions and information for the specific license type that they want to apply for on the DCP’s website.
As of now, Krassel said the DCP will expect some retail sales to begin by the end of this year. Retail sales expected will be through hybrid retailers or those that sell cannabis to adult-use and medical cannabis consumers.