Since the passing of the Rhode Island Cannabis Act in May 2022, the cannabis industry in the state has been set for a big shake-up.
As the laws and regulations continue to be formulated, we can only guess how the cannabis industry here will look a decade from now.
All will soon be revealed in terms of the regulations and compliance measures that businesses looking to enter the cannabis industry here will need to follow to secure and retain a cannabis business license.
The industry is set for a gradual ramping up of operations as, initially, medical cannabis cultivators will be able to cultivate and manufacture adult-use cannabis. Medical cannabis dispensaries (“compassion centers”) will also be able to convert to a hybrid license and begin adult-use sales from December 2022.
Rhode Island is also expected to issue 24 cannabis retail licenses to new applicants this year, which has created a buzz among new players wanting to enter the industry.
The cannabis business attorneys at Cannabis Law Solutions are keeping a close eye on developments and can provide informed advice on regulations and compliance if you are looking to set up a business in the state to take advantage of the opportunities available here.
Laws and regulations in Rhode Island
The finer details of how the cannabis industry in Rhode Island will be run have not yet been announced but we can all expect it to be tightly regulated.
The Rhode Island Cannabis Act is the key piece of legislation that guides the industry and it is a good idea to download and read the document if you are looking to enter the industry as a business owner. This will familiarize you with the main laws and regulations that govern cannabis businesses here.
The Office of Cannabis Regulation previously regulated the cannabis industry in the state, including the issuing of the two main types of cannabis licenses currently available here: the compassion center license and the cultivator’s license to supply the compassion centers.
The office, which is part of the Department of Business Regulation, was also responsible for the regulatory oversight of compassion centers, cultivators, and cooperative cultivations and the oversight of medical cannabis plant tagging requirements.
This is set to change under the new legislation…
Who will be responsible for the regulation of adult-use cannabis in Rhode Island?
As Rhode Island transitions from a state allowing only medical cannabis usage to one that has legalized adult-use/recreational cannabis, the governing bodies will also change.
Regulation and compliance matters will be enacted, monitored and enforced by the following three organizations:
Cannabis control commission: this is a three-person commission chosen by the governor to look after the regulation of the cannabis industry and provide licenses (it will also now be in charge of regulating the medical cannabis program).
Cannabis advisory board: this includes 11 voting members and eight non-voting members tasked with making recommendations to the state’s cannabis control commission. Five subcommittees within the board will include professionals in the fields of the cannabis industry, public health, public safety, minority and veteran-owned company involvement, social equity, local agriculture, and growing cooperatives.
Cannabis office: this will be the new name of the Office of Cannabis Regulation. The cannabis control commission will allocate its duties and tasks related to the daily monitoring and enforcement of operational, procedural, and administrative aspects of the cannabis industry.
The Rhode Island Cannabis Act
As mentioned, the Rhode Island Cannabis Act was signed into law in May 2022, legalizing and securely regulating adult recreational use of cannabis in the state.
In doing so, Rhode Island became the nineteenth state to legalize adult-use cannabis.
As well as providing guidelines for the regulation of Rhode Island’s cannabis industry to address health and safety concerns, the Act provides for the automatic expungement of any previous penalties related to cannabis possession.
As it stands, the Rhode Island Cannabis Act provides for a maximum of 33 retail licenses to be dispersed throughout six zones around the state. This includes the state’s three current medical cannabis dispensaries and the six recently awarded compassion centers at various stages of planning — so there will be 24 new retail dispensaries.
The Cannabis Control Commission will decide to who these additional licenses are awarded, based on the applications received.
If you are thinking of applying for a cannabis business license here in Rhode Island, therefore, it is essential to submit a flawless application — which probably means taking legal advice…
How can our Rhode Island cannabis business attorneys help?
Whether you want to grow, process, or retail cannabis in Rhode Island, getting set up without the right legal advice is inadvisable.
Our attorneys can provide the knowledge and support you need to plan, incorporate and grow your cannabis business — starting with your application for a cannabis business license.
Whether you are looking to form a limited liability company (LLC) or a corporation, our experienced business lawyers can discuss the pros and cons of both and help you incorporate your business with the optimal structure to achieve your goals.
Cannabis business licenses
If you want to run a cannabis business, you will need a valid business license issued by your state authority as well as local permits. Eligibility criteria are likely to be stringent and we can help you navigate the often-complex license application process.
Cannabis corporate documentation
Whether you need to prepare for a license application, transfer of business ownership, change of corporate structure, transfer business location, or another business process, we can help you identify and draft the documentation you need to operate legally in your state.
Cannabis administrative law
State authorities watch licensed and unlicensed cannabis businesses closely. If you violate regulations, you could face an administrative penalty. Our attorneys can provide representation or help you prepare for an administrative hearing, settlement conference or appeal.
Cannabis disputes and litigation
Whether you have a dispute with another business, a legal issue with one of your partners or a licensing or administrative issue, you may need legal assistance to help resolve it. We are adept at alternative dispute resolution methods as well as civil litigation.
As the cannabis industry emerges in states around the U.S., it is more heavily regulated than most other industries. We can help your business navigate the red tape and plan to stay on the right side of the regulatory authorities in whichever state you are based.
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Opening a successful and legal marijuana dispensary begins with hiring a knowledgeable cannabis attorney and learning all that you can about this industry and the applicable laws. The next step is to set up a corporate business structure and create a retail business plan, which an attorney can also help you with. You will also need to research potential locations for your business to find out where licensing is legal.
Next, obtain the necessary licensing to operate your cannabis business and ensure that your operational infrastructure follows all laws and regulations. If you are not growing or producing your products yourself, you will need to contract with cultivators and product manufacturers to supply your business.
Before you begin the process of applying for a cannabis license, you need to establish a business from which to apply. The state will not consider an application from an individual; instead, the applicant must be a business entity in good standing with the state.
Your business will begin when you choose a legal entity and file the appropriate paperwork with the Secretary of State. After that, you will file with the IRS and obtain a taxpayer identification number.
You would start with articles of incorporation and include other key corporate provisions in the bylaws that state how your company will be governed. If your business is a partnership or limited liability company, you will need an operating agreement. Depending on your line of business, you may also need other licenses to operate.
In addition, you will also need other corporate documents that the Department of Health will want to see when they are considering your cannabis application. Of importance here, your application would ask you to provide:
Your articles of incorporation
Certificate of good standing
An attorney can help you both choose the appropriate business entity and draft and file any necessary documentation. When you are seeking to enter the cannabis field, it is important to get your business formation process right to make the best possible impression on the Department of Health. Doing so will allow you to devote as much time as possible to your cannabis-related business arrangements.
As a precursor to even being able to apply for state approval of your cannabis business, you must have a properly formed business entity. As a result, the first documentation you must file is the documentation establishing your business.
Next, you will need to obtain a tax identification number by registering with the IRS. In addition, the licensing application also asks you to provide your current state business license registration.
Beyond your general business licenses, you would also need specific permission to operate a cannabis business. This involves a very strict registration process where the state will closely scrutinize your application. You can expect the state to review each of the licenses that they request since it wants to be sure that your business complies with laws before they are granted the right to operate in the cannabis industry.
Compliance means making sure that you follow the myriad of laws that apply to your state’s cannabis businesses. Further, the regulatory landscape is fast-changing as the state gains more experience overseeing the businesses.
What this means for you is that knowledge is one of the most important things that you can have. Not only do you need an expert in the current laws, but you also need to be able to anticipate future changes in the law. This means that each business needs an expert who understands the laws and can advise them as to the best means of following them.
Also, compliance also means that you have sound policies and procedures in place that govern your business. The Department of Health is already looking at your policies when they evaluate your initial application. However, they reserve the right to audit and inspect your business to verify that you are complying with the law. You should always be ready for an inspection by documenting how you are following the regulations.
The best way to show compliance is by keeping your paperwork organized and conducting your own internal audits. The Department is interested primarily in your safety procedures, so you should be ready to show how you are following your own procedures. Further, you should always reevaluate your own policies to see if there are any weaknesses or changes that can be made to strengthen them.
The major thing that the Department of Health is interested in is the safety of both the product and the operation. As a baseline, the state wants to know who all of the owners are and the people who will be working in the operation.
While there are common documents among all the application classes that the Department is seeking, there are also special requirements for each of the categories.
For example, when the Department is evaluating a manufacturing application, it will pay close attention to measures that your business takes to ensure proper hygiene and testing methods. The Department also will pay attention to the manufacturer’s procurement practice and the security of its inventory.
With regard to laboratory submissions, the focus is partially on the testing processes and equipment that the business will use. The Department wants technical, scientific details of the exact tests and the quality control that the laboratory will use for testing. The emphasis is on ensuring product safety.
For courier businesses, the Department will scrutinize the safety and security of the delivery process, including the vehicles and the delivery routes that are used. The emphasis is on the safety of qualified patients, primary caregivers, and courier staff in light of the product being delivered. In addition, since there is interaction with patients, the Department wants to see how the applicant plans on protecting patient privacy.
Cannabis legalization often works in a series of steps. Broadly speaking, cannabis policy reform occurs in the following stages:
Prohibition: Criminal penalties apply for the possession or use of cannabis.
Decriminalization: Low-level criminal penalties are removed for cannabis usage (e.g., personal possession) and criminal penalties may be replaced with civil fines.
Medical legalization: Full medical legalization with commercial licensing and testing may come straight away or in a series of stages.
Legalization: State laws are changed to make any cannabis activity a crime no longer. Cannabis must be removed from the Controlled Substances Act and new rules added for the legal commercial cultivation, distribution, testing, and sales of cannabis.