Hartford Business Journal

11 HARTFORDBUSINESS.COM | JULY 12, 2021 14 Bobala Road 3rd Floor Holyoke, MA 01040 Tel: 413.536.3970 Headquarters 280 Trumbull St 24th Floor Hartford, CT 06103 Tel: 860.522.3111 One Hamden Center 2319 Whitney Ave, Suite 2A Hamden, CT 06518 Tel: 203.397.2525 Largest Connecticut-Based Accounting Firm For over 60 years, Whittlesey's team of professionals has provided nonprofits with superior service and value-added advice, with specialization in the following areas: Assurance Advisory Tax Technology Learn more at WAdvising.com Y E A R S joint venture, including the amount of resources the non-equity partner brings to the table. Michael Cutler, a recently retired Massachusetts attorney who specializes in cannabis policy and campaigned for the Bay State's legalization efforts in 2016, said the equity components in Connecticut's law compare favorably to those in his state, which doesn't have social equity ventures. That Connecticut-specific policy could be a win-win for equity applicants and established companies, Cutler said. It gives entrepreneurs from underserved communities a chance to get into the market without necessarily having to raise funds. At the same time it allows the established medical producer or retailer to pay less money to enter the adult-use market. However, he added, the devil is in the details, and DCP still has to define what, specifically, it means for the social equity partner to "control" at least 50% of the business. "That's what to watch, how scrupulously the regulator monitors the equity joint ventures," Cutler said. New territory Some pro-legalization advocates in Connecticut have raised concerns over the potential for abuse of these partnerships. Jason Ortiz, executive director of Students for Sensible Drug Policy and immediate past president of the Minority Cannabis Business Association, said he thinks the setup gives too much power to the large companies involved in the partnerships. "What happens if [the established partner] doesn't hold up their end of the bargain?" Ortiz asked, pointing out the penalty for a company reneging on a venture it entered with an equity partner — it would have to pay the full $3 million or $1 million licensing fee instead of half — isn't very steep for large companies. "You cannot run your business assuming everyone has the best intentions." Attorney DeVaughn Ward, a senior legislative counsel for the Marijuana Policy Project in Connecticut, also sees potential for abuse of the equity joint venture system, but said right now that's hypothetical, and peoples' ability to improperly exploit the system will depend on how closely regulators monitor the ventures. "It's all really new territory, this is new policy space," said Ward, who is unaware of any other state with a similar program. However, Ian Butler, an attorney at the Glastonbury office of Brown Paindiris & Scott LLP, said the law, as written, prevents the larger partner from selling or transferring the business unless the social equity partner agrees. Additionally, Butler said, it's expensive to establish a cannabis business as an independent entrepreneur, and having a partner who can bring up-front capital to the table reduces financial risk for the social equity player. "From the [social equity applicants'] perspective, the benefit might be that you don't necessarily have the funds to put into the business," Butler said. "So your partner might put up money." Interested parties Daniel Glissman, an attorney with Hartford law firm MacDermid, Reynolds & Glissman PC, said his cannabis industry clients are expressing interest in equity joint ventures. We're hearing from our clients that they're interested in exploring what they have to do to create these social equity establishments," Glissman said. Tim Hawkins, vice president of retail field operations for Illinois- based Green Thumb Industries Inc., which owns Advanced Grow Labs in West Haven, said his company is "absolutely" considering establishing joint ventures with equity applicants. However, he's waiting for more clarity on regulations. "We'll watch and see how the regulations are actually written, how the rules come out, until we see that, it's hard to make plans," said Hawkins, who added Green Thumb hasn't yet decided whether it will convert its license to serve Connecticut's adult-use market — although it has done so in multiple states that legalized recreational cannabis. "I think the way [the equity joint partnerships component] is written is wonderful, and we agree with it." Daniel Glissman Ian C. Butler DeVaughn Ward

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