Adult use of marijuana outside of Maryland’s medical program will become legal on July 1 next year but the state’s legislative arm must still hash out rules from taxation to regulating sales from marijuana dispensaries. Dispensaries won't be able to sell marijuana to anyone at least 21 years old or older in the next seven months. The voter referendum, which passed with 66% of the vote statewide, legalizes recreational marijuana but the state legislature, known as the General Assembly, is tasked to build a framework for the industry.
Details like license distribution or measuring consumer demand need to be hammered out. Adults can grow two of their own marijuana plants at home and possess up to 1.5 ounces of bud. It’s unclear how much recreational marijuana may cost consumers or how much the state tax would be.
In California and Colorado recreational marijuana sales tax is 15% while in Arizona it’s 16% and 17% in Oregon. Washington state levies a 37% tax on recreational marijuana.
Medical marijuana patients are not taxed for medicine but the state does charge for patient identification cards. Insurance does not cover the cost of marijuana. Out of pocket charges include the cost of a doctor visit which runs between $100 to $300 for providers familiar with marijuana.
The licensing process for a new marijuana dispensary usually takes several months.
“Then to build facilities it typically also takes months,” said John Hudak, a senior fellow at the Brookings Institution who advised the Maryland legislature on marijuana issues.
Cannabis is grown as any other agricultural crop in cycles, though highly regulated on the state level. It takes between three to four months for a seed to become a plant that has a harvestable flower, or bud.
In Maryland, cannabis is sold in the medical program as raw plant material known as buds and in edible format where THC is extracted from the plant and infused into gummies or chocolate. The average price per gram of marijuana was $10.81 in 2021, according to the state. The price of edibles is roughly $20 for a package of 100 mg of THC-infused product in Maryland.
All cannabis is still illegal on a federal level and cannot be transported across state lines.
“Typically what we see in other states that it's several years, three, four years before the market is fully meeting adult use demand,” Hudak said.
There are about 160,000 Maryland residents with medical marijuana cards, according to the Maryland Medical Cannabis Commission. In 2021, medical dispensaries sold about $600 million of marijuana. But next July, upwards of 4 million residents will be able to legally possess recreational marijuana.
It’s unlikely that the existing dispensary networks, even if they are expanding from a medical market to recreational, would be able to meet consumer demand of the general public.
Columbia-based cannabis business Remedy Maryland is already expanding its retail footprint to three locations to meet the expected uptick in demand including a ‘superstore’ later this month. Remedy Maryland’s Baltimore retail store spans 9,500 square feet and has space for 25 cash registers.
Cannabis is often a cash-only business though some customers may reserve their shopping cart of products online for pickup. Behind Remedy Maryland’s Baltimore retail storefront is a stock room and cannabis processing facility.
While waiting for an open cash register, customers can play ping pong or video games if there’s a long line. And that’s what the CEO of Remedy Maryland expects in the coming months.
“In every one of these newly legal states, there's these famous drone footage shots of the line outside a little this is a little tiny dispensary. And that's like a three-mile line,” said Mitch Trellis, founder and co-CEO of Remedy Maryland. I'm thinking, ‘I don't understand, didn't they have a year to prepare?'"
Cannabis growers need to be ready to produce the volume of marijuana the general public may demand and it must be grown and processed inside state lines. The issue is not always about capacity though.
In 2014, the roll out of Maryland’s medical marijuana program was “disastrous”, according to Hudak, the consultant. The state’s licensing program did not account for racial disparities and so licenses were not distributed equitably, leaving out many entrepreneurs of color.
“The state acknowledged that mistakes were made in that process,” Hudak said. “The problem is in the cannabis market, first mover advantages are important. Maryland can't afford to make that mistake again, with the adult use market. And so early on, they need to be serious about that type of inclusion.”
It will fall on regulators and the Maryland legislature to ensure this rollout goes smooth and legislators only have about seven months to do it.
