Worcester Business Journal

10 Worcester Business Journal | January 22, 2018 | wbjournal.com The U.S. attorney general's moves against legal marijuana have unsettled the growing industry in Massachusetts BY ZACHARY COMEAU Worcester Business Journal Staff Writer M arijuana companies can begin applying for Massachusetts recre- ational licenses in April and open stores in July, but federal changes this month indicating a shift toward a strict appli- cation of federal drug law law – which still hold the substance just as illegal and dangerous as heroin – are threaten- ing to derail the budding industry. That threat came on Jan. 4 when U.S. Attorney General Jeff Sessions rescind- ed a trio of memos from former Obama Administration Deputy Attorney General James Cole directing federal law enforcement not interfere with the marijuana industry in states where it has been legalized. That includes Massachusetts, where medical pot has been legal since 2012 and recreational pot since December 2016. At least 100 companies were expected to open up recreational stores this year once the application window opened, said Jim Borghesani, who led the legalization movement in 2016. "Everybody is nervous and anxious," Borghesani said. "I don't think anybody is panicking." So even as Massachusetts regulators finalize their work to legitimize the marijuana industry – which is expected to grow to more than $1.1 billion by 2020, according to Washington, D.C. analytics company New Frontier Data – players on the ground in the Bay State are anxious about running afoul of fed- eral drug enforcement officials. Rattled nerves Following Sessions' actions, the U.S. Attorney for Massachusetts, Andrew Lelling, did little to calm down the industry when he refused to say partici- pants in state-level marijuana trade wouldn't be charged with federal crimes. "Deciding, in advance, to immunize a certain category of actors from federal prosecution would be to effectively amend the laws Congress has already passed, and that I will not do," Lelling said in a prepared statement released on Jan. 8. "The kind of categorical relief sought by those engaged in state-level marijuana legalization efforts can only come from the legislative process." Since that statement was put out, nearly all of the marijuana businesses contacted for this story – with the exception of two facilities in Leicester and Worcester – refused to comment on the record, citing an unwillingness to challenge the federal government. Shortley after Lelling's statement, Florida-based Merchant Services Consulting Group, a credit and deibt card processing company, informed medical marijuana businesses it would cease working with dispensaries. This caused Massachusetts medical marijuana companies to switch to cash-only operations until Merchant Services Consulting Group resumed operations after less than a week of being offline. Banking has long been an issue in states with legal marijuana operations, as banks risk losing their federal insurance if they do business with companies the federal government considers illegal. Jon Barooshian, an attorney with law firm Bowditch & Dewey who repre- sents marijuana businesses in Massachusetts and elsewhere in the country, said these announcements have poured gasoline onto the smolder- ing anxieties of marijuana executives. "Everybody was always a little bit nervous," he said. "Now, I think every- body's a lot nervous." Pushing forward The state-run Cannabis Control Commission is promising to continue its work of developing regulations for the recreational industry. Sam Barber, president of Cultivate Holdings, which operates a medical marijuana dispensary in Leicester – the only in Worcester County – said the state's soon-to-be finalized regulations on recreational marijuana should help quell concerns in the industry. Barber and his company are taking a wait-and-see approach to the fledgling industry and he maintains he has not Bay State pot 1911: Massachusetts becomes the first state to restrict the sale of marijuana, banning it except when provided by a pharmacist with a doctor's prescription. 1970: The U.S. Controlled Substances Act placed marijuana in the Schedule 1 category – along with drugs like heroin – making it illegal federally. 2008: In a ballot question, Massachusetts voters decriminalize possession of small amounts of marijuana, replacing six months in jail with a $100 fine. 2012: In a ballot question, voters pass the Massachusetts Medical Marijuana Initiative, allowing for the possession of a 60-day supply of marijuana for those with a state-issued registration card. 2016: Recreational marijuana is approved by voters on a ballot question in November, and the drug became legal to use in mid-December. On Dec. 30, Gov. Charlie Baker would delay by six months the start date for sales to July 2018. April 2018: The application period will open for companies to receive licenses to sell recreational marijuana. The law allows for up to 20 percent in state and local taxes on the sale of marijuana. Sources: Medical Marijuana Handbook, 91st U.S. Congress, Massachusetts Sensible Marijuana Policy Initiative, WBJ news reports P H O T O / F I L E After they sent out notices on Jan. 10 about not being able to accept debit cards anymore, Massachusetts dispensaries like Cultivate Holdings and Garden Remedies published Facebook posts about bank cards working again. Cultivate Holdings in November opened the first – and currently only – Worcester County medical marijuana dispensary in Leicester.

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