In May 2020, the Massachusetts Cannabis Control Commission (CCC) began moving forward on the new delivery-only licenses and microbusiness delivery endorsements that were added to the November 2019 revisions of the 935 CMR 500 adult-use regulations. Nevertheless, due to a summer 2020 rulemaking that included revised delivery and delivery endorsement requirements, and extensive stakeholder comments seeking additional changes, important questions remain about the nature and scope of the new license categories that enable delivery of cannabis and cannabis products directly to consumers.
Applications became available on the CCC website in May and by early July more than thirty-five delivery pre-certification applications had been submitted; one applicant submitted a provisional delivery license application. Cannabis delivery endorsements, which are available only to microbusinesses, permit a microbusiness to sell and deliver its own marijuana and marijuana products to consumers.
A set of frequently asked questions released by the CCC in early May notes delivery-only licenses and delivery endorsements are exclusively reserved for economic empowerment and social equity applicants for the first two years of the program, beginning on the date the first delivery-only licensee receives a notice to commence operations.
The regulations require that a marijuana establishment with a delivery-only license or a delivery endorsement may deliver only within:
- The municipality where it is licensed.
- Any municipality that allows for retail within its borders (regardless whether any marijuana establishment is operational).
- Any other municipality which, after receiving notice from the CCC, has notified the CCC that delivery may operate within its borders.
The CCC has stated a microbusiness cannot obtain a delivery endorsement if it is located in a municipality that does not permit retail sales and has not “opted in” to allow delivery operations.
Importantly, a delivery-only license applicant is considered a marijuana retailer for the purpose of counting toward the CCC’s three-license limit for marijuana retailers. Thus, a retailer with three Massachusetts stores would be precluded from obtaining its own delivery-only license.
Additionally, since microbusiness licensees are not permitted to hold other forms of licenses other than social-use establishment, a microbusiness endorsement holder would be required to obtain a delivery endorsement rather than a delivery-only license.
New process tees up important changes
In July, the CCC circulated for stakeholder comment proposed revisions to the adult-use regulations. The proposed modifications regarding delivery-only licenses and microbusiness endorsements included:
- Codifying in regulations the policy decision to treat a delivery license as a form of retailer license for purpose of determining the three-license cap statewide.
- Deleting existing text stating the delivery licensee must not “provide a retail location accessible to the public.”
- Including new language stating a delivery licensee may hold other marijuana establishment licenses except microbusiness licenses.
- Adding language detailing the process for expanding the current two-year exclusivity period for economic empowerment and social equity applications and/or considering expanding applicants eligible for seeking a delivery license or microbusiness endorsement to include worker cooperatives and state-certified minority business enterprises, women-owned business enterprises, and veteran-owned business enterprises.
The proposed regulations also include new requirements that marijuana establishment agents and management involved in delivery operations be trained.
Stakeholders responded to the proposed regulatory changes for delivery and microbusiness endorsements by raising a host of issues at CCC hearings and in written comments. The CCC discussed these issues during an August 28 regulatory policy hearing. Key issues that likely will play a major role in determining the success of the new delivery and microbusiness licenses include whether:
- A delivery license is economically viable and, if not, whether licensees should be allowed to operate as a wholesaler or entity that can warehouse product in addition to mere delivery.
- The current two-year exclusivity period should be extended.
- Microbusinesses should be eligible for delivery licenses.
- Delivery licenses should be considered retail licenses, subject to the three-license cap.
- Delivery licensees can deliver to any municipality.
- Security requirements should be relaxed for delivery licensees operating in the originally intended “courier” role.
Although the minutes of the August 28 CCC meeting have yet to be published, press accounts confirm the CCC appears likely to implement regulatory changes that allow delivery licensees to operate as wholesalers and extend the economic empowerment and social equity applicant exclusivity period for delivery licenses from two to three years. The agency is unlikely to allow microbusiness owners to have a controlling interest in delivery licenses.
Kevin J. Milton is a business attorney at the Boston law firm Davis Malm. He assists with general corporate law and finance matters, including mergers and acquisitions, corporate formation, commercial transactions, private equity and corporate governance. Milton also assists Massachusetts businesses operating in or seeking licensing in the medical-use and emerging adult-use cannabis industry.
Robert J. Munnelly, Jr. is a regulatory lawyer at the Boston law firm Davis Malm. He has extensive experience dealing with legal issues faced by clients in highly regulated industries such as electricity, communications, natural gas and water. His experience in these areas led him to representing existing businesses and those seeking to do business in the emerging Massachusetts cannabis market.
