Montana recreational marijuana ballot measure would allow only local operators

Montana voters will decide in November if they want to join the growing list of states with adult-use marijuana, and if they do, the market will be one of a shrinking number of markets that allow only in-state residents to comprise the industry.

The ballot measure would also set the first 12 months of recreational sales aside for existing medical marijuana businesses, so any locals that are hoping to get in on the ground floor should apply for a provider license before Nov. 3.

Major changes would be in store for those existing MMJ companies, however, including:

  • The establishment of a new wholesale market.
  • A reduced vertical integration requirement for dispensaries, which would allow them to sell up to half the marijuana products they produce.

The result could take the Montana market to a whole new level, while also keeping it out of the hands of growing multistate operators, said Pepper Petersen, spokesman for New Approach Montana, the committee running the legalization campaign.

The residency requirement for Montanans was carefully considered, said Petersen, along with a host of other industry parameters spelled out in the 67-page Initiative 190 (I-190).

“We want to make sure the people who participate have already proven their worth in the Montana system,” Petersen said. “If you’re going to run a retail operation, or grow here, you’re going to be a resident, someone with roots here.

“It keeps things tighter, and a little more homegrown.”

Of the five states that will have marijuana legalization on the ballot this year – Arizona, Mississippi, New Jersey and South Dakota join Montana – only the latter has a residency requirement for MJ business ownership.

That reflects the sense of ownership local operators and advocates feel for the still-burgeoning Montana cannabis industry and the sweat equity they’ve put in over years of legal battles with cannabis opponents, Petersen said.

“No way we’re going to let some foreign corporation or out-of-state company get all the benefits of the hard work folks here have been doing,” he added.

A second measure, Constitutional Initiative 118, will also be on the ballot, and it would ensure that only consumers 21 and older can purchase cannabis.

Sales are expected to launch in late 2022 or early 2023 if the campaign is victorious.

Political outlook

The legalization campaign’s chances look favorable. As of February, a University of Montana poll found that 54% of participants said they agreed marijuana should be legal, while only 37% disagreed.

Petersen said the campaign’s internal polls have found even stronger support, across party lines, around mid-60%. And he predicted a solid win in November.

“We’re very confident. The numbers are phenomenal,” Petersen said.

There’s also little organized opposition, though a few groups have emerged in recent weeks to speak against legalization.

Those include the Montana Contractors Association and a group called Wrong for Montana, the Missoulian reported. The Montana State Chamber of Commerce is also opposed.

But Petersen dismissed both of those groups as token opposition and said legalization has bipartisan backing.

He also noted that both times marijuana was on the ballot statewide in Montana, it cruised to victory: Medical cannabis was legalized in 2004 with 61% support, and then dispensaries were fully legalized in 2016 with 58% support.

And according to Ballotpedia, New Approach has raised more than $5 million (though nearly all of it has already been spent), while Wrong for Montana’s political action committee has raised $0 to fund its opposition campaign.

Dramatic changes

Although the adult-use market would be off-limits to nonresidents, it would present a dramatic change for the Montana medical cannabis market.

I-190 would greatly expand business opportunities by creating a new wholesale market.

In particular, licensees would have to be vertically integrated. However, they would be allowed to sell up to 50% of the products they grow or manufacture on the wholesale market to other cannabis businesses.

That is in stark contrast to the current system, which is total vertical integration for dispensary owners – meaning that if a dispensary operator wants to carry edibles or vape cartridges, it must manufacture those products as well as grow the cannabis.

“Ultimately, there is going to be specialization” in product types, Petersen said, predicting further market evolution. “Everyone I’ve spoken to is really hungry for it.”

But, he noted, the requirement that all businesses produce at least half of what they sell will also protect the market from price fluctuation and gouging. Rather, that’s aimed at helping stabilize the entire market – and supply chain – for every licensee, while also allowing for more product development.

There are, however, licensed MMJ providers who already grow on a small scale for themselves and registered patients, who don’t run storefronts and won’t be forced to transition.

Petersen said he doesn’t expect every existing business to jump into the recreational market, largely because there are a lot of small operators who make a decent living and are content that way.

Possible shifts

The ballot measure would establish 11 license types that differ primarily in canopy size for cultivation and the number of facilities allowed, with the smallest allowing up to 250 square feet at a single location and the largest allowing up to 30,000 square feet at a maximum of seven locations.

That could change during the industry rulemaking process, which would need to be finished by October 2021 – per I-190’s requirements.

There would also likely be other systemic changes adopted by the state Department of Revenue, which would be in charge of overseeing the industry, instead of the current agency that runs the MMJ program, the Department of Public Health and Human Services.

For instance, I-190 has zero limits related to edibles potency per package, a common rule that’s been adopted by a lot of adult-use markets in the U.S.

Petersen said he wouldn’t be surprised if that’s a topic broached by regulators during rulemaking.

And local bans on the industry could be established by cities and counties, though not unilaterally.

New Approach learned from bans in states such as California and Colorado: The group wrote a requirement into I-190 that if a city wants to ban marijuana retailers, it would first have to go back to the voters for permission.

And under I-190, there would be no mechanism for locals to ban other types of cannabis businesses other than retailers.

“It’s particularly relevant for Billings,” Petersen said. “Their City Council has been really opposed to marijuana at every turn. They’ve gone against the will of the people repeatedly.”

One likely outcome of that, Petersen said, is that there will be even more local campaigns in 2021 if New Approach is victorious in November, such as anti-cannabis forces hoping to reinstate prohibition.

“2021 isn’t going to be a victory lap,” Petersen said. “It’s going to be a reckoning, about what Montanans really feel about marijuana.”

John Schroyer can be reached at [email protected]

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