Rhode Island Marijuana Regulators Propose Business License Lottery For Applicants Who Pass Initial Screening

“If you take one thing away from my feelings about this, it is to avoid further delay for the industry.”

By Christopher Shea, Rhode Island Current

Since recreational cannabis was legalized in Rhode Island two years ago, potential retailers have wondered how they can get one of the two dozen pending licenses up for grabs.

Would it be through a merit-based system like Maine and Vermont? Or a random lottery like when medical licenses were expanded in 2021?

State regulators want to do both.

The three-member Rhode Island Cannabis Control Commission on Friday unanimously gave preliminary approval to a hybrid selection process once it approves the final regulations governing the state’s fledgling cannabis sector.

The proposal was presented by the commission’s chief legal counsel, Mariana Ormonde, who said it avoids some of the legal and economic challenges that have plagued states that followed a strictly merit-based system, such as Illinois, New Jersey and New York.

“If you take one thing away from my feelings about this, it is to avoid further delay for the industry,” Commission Chair Kimberly Ahern said during Friday’s meeting. “It is what I have heard over and over and over again.”

Under the plan, applicants would first be screened based on qualifications such as “ability and readiness for licensure,” according to the presentation given to commissioners. There would then be a lottery to choose the license winners—but only in zones where the demand for retail licenses outweighs the available supply.

Under the Rhode Island Cannabis Act, retail licenses must be spread throughout six geographic zones, with a maximum of four stores per zone. Of those four, two are reserved for a social equity applicant and a workers’ cooperative.

A map of the state’s six cannabis regulatory zones. Screenshot from September 6 Cannabis Control Commission presentation / via Rhode Island Current

It’s been a slow road for the state to establish its recreational cannabis market. The three-member commission was established in June 2023—just a little over a year after the Rhode Island Cannabis Act was passed. Commissioners spent last summer on a listening tour, hearing the concerns of community members and cannabis workers, which include ensuring the commission prioritizes social equity measures.

Over the summer, draft regulations were adopted in a piecemeal fashion, including the recent adoption of new packaging and labeling rules.

But until new rules are finalized, the state’s 24 additional retail licenses can’t be awarded—which has left many cultivators waiting for new places to sell their products. State cannabis regulators used a lottery system in 2021 to award six new medical marijuana dispensary licenses, which in turn were allowed to start recreational sales the following year.

That lottery wasn’t without its critics.

“That last round, there were people who were probably not the most ready who were able to get licenses,” Andre Dev, a founding member of the cooperative PVD Flowers, said in an interview Monday.

PVD Flower registered with the Secretary of State’s office in February 2023.

Rhode Island would not be alone in operating in having a hybrid application process, as Connecticut has done so since it legalized recreational cannabis in 2021. In neighboring Massachusetts, which has no cap on retail licenses, prospective businesses are required to get local planning and zoning approval before they go before the state’s Cannabis Control Commission.

“It’s basically apply, and you get it,” Chris Fevry, a Massachusetts Cannabis Social Equity Advisory Board member, said in an interview Monday. Such a practice has made the cannabis market in Massachusetts oversaturated.

Keeping a random lottery is meant to eliminate “the appearance of favoritism, outside influence, inside advantage, bias and corruption,” according to the presentation given to commissioners.

Fevry, who is looking to open his own retail business in Rhode Island, said he would prefer if new retailers were chosen strictly on merit.

“The purpose should be to create an industry with the best operators,” he said.

What does merit actually look like?

Friday’s presentation did not offer details on what readiness qualifications would be part of the initial screening of license applicants—though there were offhand references to local approvals and access to capital.

United Food and Commercial Workers Local 238 organizer Emma Karnes told Rhode Island Current she thinks those standards are fine for a typical business, but that it could exclude a lot of social equity and worker cooperative applicants.

“Only people with deep pockets will be able to enter that lottery,” she said.

Friday’s presentation did not include an estimate of the fee to enter the license lottery.

Under the Rhode Island Cannabis Act, retail operations must pay a fee of $125,000 to the Department of Business Regulation (DBR) in order to sell adult-use recreational marijuana, along with paying a yearly $30,000 licensing fee (the initial fee was $500,000).

The statute on social equity includes many definitions on what constitutes a disproportionately impacted area. Under the Rhode Island cannabis act, it can be determined by federal poverty level, unemployment rate, how many kids in a free lunch program, and historic arrest rates.

But that definition has been open to interpretation, as many activists say it’s filled with loopholes that can be exploited by those who don’t need the help.

Karnes said if the state truly values social equity, then it should create separate and higher standards for those limited licenses. But that also requires a more narrow definition of what it means to be a social equity applicant.

“As of now it’s a little too broad,” said Dev, who is of South Asian ancestry. “I’m a medical doctor who lives on the East Side of Providence—technically, I can count as a social equity applicant, and that’s not fair.”

Once language is clarified, Fevry suggested the commission alternate approving social equity and standard retail licenses—similar to what’s done in Boston.

“As soon as they set something up like that, it slows the market rollout, which is in the best interest for everyone,” Fevry said.

The commission’s 18-member Cannabis Advisory Board is expected to discuss social equity criteria at its next meeting scheduled for 2 p.m. Thursday.

This story was first published by Rhode Island Currant.

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Photo courtesy of Chris Wallis // Side Pocket Images.