WARWICK – Two years after state lawmakers approved the expansion of Rhode Island’s medical marijuana dispensaries from three to nine, a lottery will be held on Oct. 29 to determine which of the more than two dozen applicants will receive five of those new licenses.
Matthew Santacroce, the chief of the state’s Office of Cannabis Regulation, said Friday that the awarding of one of the licenses for a zone that stretches from Pawtucket to Newport would be delayed because of a legal appeal by one of the applicants.
Santacroce said litigation with the applicant, Atlas Enterprises Inc., which had its application denied for zone six, continues. So the lottery will involve selecting five applicant companies for the other five zones in the state.
“We’re ready.” said Santacroce during a media briefing Friday in the OCR office in Warwick. “We’ve been ready since late April to do this. We’re moving forward.”
The R.I. Department of Business Regulation had initially sought to hire an independent entity to conduct the lottery in May in the hopes it would avoid the potential for favoritism and influence.
But it did not receive any bids, and now state officials have decided to press ahead so as not to keep the applicants waiting any longer. The state’s medical marijuana market serves 37,000 total registered patients, 19,000 of which reside in Rhode Island.
The lottery, which will be held at the R.I. Department of Administration in Providence, will be open to the public, said Santacroce.
The process will involve 17 balls being placed in a tumbler on loan from Bally’s Twin River Casino, with balls borrowed from the R.I. Lottery. Russ Griffiths, a former FBI agent in the state for 26 years, now serving as principal, economic and policy analyst at DBR, will put on a blindfold and make the five selections.
Santacroce emphasized that the process will be secure and transparent. The lottery balls are being kept locked away in preparation for the lottery.
“We’re taking this seriously,” he said.
Lottery winners will be granted a license to dispense medically prescribed marijuana and cultivate the product, as well.
“They have nine months to be operational,” said Santacroce, who noted that he expects a few dispensaries to be operating by Jan. 1.
Santacroce said that as part of licensing selected dispensaries will need to ensure compliance with security and other operational requirements. A dispensary’s license could be revoked if they are late in getting operational. At that point, lottery process for that zone might have to be redone.
As for the financials, dispensary license holders are required to pay an annual $500,000 fee to remain in good standing.
The additional licenses could mean more revenue for the state, which taxes and regulates medical marijuana. Between January and October 2020, Rhode Island saw $65 million in sales at its three marijuana dispensaries, according to DBR data.
A 4% surcharge is imposed upon the net patient revenue received each month by every compassion center. The sale of medical marijuana is subject to the state’s 7% retail sales tax.
State lawmakers also appear close to legalizing adult-use recreational marijuana, with General Assembly leadership calling it a legislative priority. Lawmakers have said the state will give the dispensaries preference when applying for legal retail sales licenses.
As for its crop of dispensary applicants, DBR performed a four-month review, selecting 41 applicants to be entered into the lottery out of 45 applications that were submitted by 28 applicants. The applicant companies were permitted to submit multiple applications, one per the six geographic zones, to increase their chances of being selected. Companies can only receive one license in total from the lottery system.
Now the applications have been narrowed to 37 total applications that will be vying for a license in one of five zones.
The zones were established to ensure that medical marijuana dispensaries are located throughout the state. Ten companies that applied for the lottery paid a $10,000 nonrefundable fee per application for submitting applications for more than one zone.
The lottery process had been delayed due to an appeal by Atlas. The company had applied for a zone location on the J.T. Connell Highway in Newport. Its denial notice noted that the company did not have zoning compliance for Newport, which has an ordinance that bans marijuana retail sales facilities.
The three existing medical marijuana dispensaries, or compassion centers, as they are also called, are: the Thomas C. Slater Compassion Center in Providence, Summit Medical Compassion Center in Warwick, and Greenleaf Compassion Care Center in Portsmouth.
The three operating dispensaries were approved in 2009 per an amendment to the Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act, which provides protections for the medical use of marijuana.
The six newly licensed dispensaries would expand the retail marketplace for the state’s 65 licensed cultivators that grow and distribute cannabis. The state’s licensed cultivators are required to only sell their product directly to the state’s licensed medical dispensaries.
Santacroce said no new cultivator licenses will be issued at this time.
Spencer Blier, owner of Mammoth, Inc., a Warwick-based cannabis grower, said expansion from three to nine medical dispensaries will alleviate the bottleneck created by the state’s cultivators only having three medical stores to purchase their products. Mammoth applied for a dispensary license in two zones in the state.
Rhode Island state law prohibits the companies in its medical marijuana industry from having a financial stake in two different state-licensed cannabis operations.
The applications that are submitted by companies participating in the lottery are available for public review and can be found at the DBR’s website.
UPDATED to change the percentage of taxes the state imposes on medical marijuana sales.
Cassius Shuman is a PBN staff writer. Contact him at Shuman@PBN.com. You may also follow him on Twitter @CassiusShuman.
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