On August 8th, the Office of the Marijuana Commissioner (“OMC”) announced it would open the application window for cannabis business licenses two weeks ahead of schedule. This adjustment highlights the OMC’s commitment to meeting its projected program launch in March 2025. In addition to accelerating the timeline, Delaware’s passage of House Bills 334 and 408 demonstrates the state’s determination to ensure adult-use cannabis availability early next year, using all available resources to expedite the process.
Application Process
Starting on August 19, 2024, interested applicants will be able to submit their comprehensive applications in the hopes they are one of the lucky ones to be chosen in the lottery process. Under Delaware law, there are four (4) license types that can be applied for, (i) Cultivation Facility; (ii) Product Manufacturing Facility; (iii) Retail Marijuana Store; and (iv) Testing Facility. All license types have limits on the number of licenses available, specifically there are only 60 Cultivation Facility licenses, 30 Product Manufacturing Facility licenses, 30 Retail Marijuana Store licenses, and five Testing Facility licenses. Moreover, the licenses available are even further limited on the applicant category the individual or entity chooses to apply under. More specifically, applicants can apply as an open (i.e.) general applicant, a microbusiness applicant, or a social equity applicant.
Due to the passage of House Bill 334, applicants’ will no longer be required to secure a facility to apply. However, applicants must comply with the minimum requirements needed to be entered into the OMC’s lottery. Pursuant to the OMC’s Business Application Guide, applications must include: (i) a comprehensive business plan, including an annual budget and pro forma financial statement; (ii) plans for safety, security, and the prevention of product diversion; (iii) plans for operations, training, and staffing, including a social responsibility plan and safe work environment plan; (iv) disclosure of applicant or managing officers’ criminal, civil, or regulatory history, if applicable; and (v) a capitalization table. Further, for those interested in applying for a Cultivation Facility or Product Manufacturing Facility license, applicants must include an environment and sustainability plan as well as a quality assurance plan.
The OMC will no longer be using a merit-based scoring process as it was replaced with a lottery selection in House Bill 334. After the application window closes on September 30, 2024, the OMC will conduct a lottery to select the chosen applicants, so they can begin to issue licenses as follows: (i) issue Cultivation Facility licenses in November 2024; (ii) issue Product Manufacturing licenses in December 2024; and (iii) issue Retail Marijuana Store and Testing Facility licenses in March 2025.
Medical Cannabis Operators’ Advantage
Originally, Delaware’s laws and regulations did not provide for a conversion-like license for the state’s six (6) medical cannabis operators to enter into the adult-use market due to the pushback during drafting; however, that changed with the passage of House Bill 408. Current operators will have to pay a hefty fee of $100,000 to $200,000 to serve both the medical and adult-use program with such fees being vital to providing funds for the newly established social equity fund created by this bill. Although this provides a pathway to ensure adult-use dispensaries open by the March 2025 projected timeline, some prospective applicants are not ecstatic with the change. From shortage concerns from medical cannabis customers to providing a “leg-up” to the only cannabis operations permitted to be vertically integrated, opponents strongly disfavored this change to Delaware’s adult-use program. Whereas proponents for the measure believe this will not only ensure a 2025 adult-use market, but also allow new licensees to have the time needed to cultivate and process their products to ensure safe and high-quality products make it to the market without issue.
Conclusion
The Delaware Office of the Auditor of Accounts (“OAOA”) projects that the adult-use market will be valued at $215 million, while creating at least 1,400 jobs over the first five (5) years. With an expected $43 million in annual tax revenue, the state will see a boom in economic growth in development at both the state and local levels. As such, Delaware’s cannabis industry is poised at a pivotal moment of transformation for economic growth and development.