Connecticut to Become 18th State to Legalize Recreational Cannabis

On June 17, 2021, the Connecticut General Assembly voted to approve the Responsible & Equitable Regulation of Adult-Use Cannabis Act (the “Act”). With Governor Ned Lamont’s signature expected today, Connecticut will become the 18th U.S. state — and the fourth state this year — to legalize the recreational use of cannabis by individuals 21 and older.

Under the anticipated new law, beginning July 1, 2021¹, i.e., almost immediately, all adults 21 and over will be permitted to possess up to one and one-half ounces of cannabis. Personal cultivation rights will be available to medical marijuana patients as soon as October 1, 2021 and later to adult-use consumers on July 1, 2023. Like the state’s existing Medical Marijuana Program, the Commissioner and Department of Consumer Protection (respectively, the “Commissioner” and the “Department”) will promulgate rules to implement the Act and regulate the new cannabis retail market. The Act contemplates yet-to-be-determined limits on the number of recreational-use cannabis producers and dispensaries, as well as limits on the number of applications to be considered for related licenses. The Act also sets forth a tax structure which includes the state’s general sales tax rate of 6.25%, excise taxes ranging from 0.625% to 2.75% per milligram of total THC, and a 3% tax on gross sales receipts. In addition to legalizing the recreational use and sale of cannabis, the Act contains a number of social equity initiatives and criminal justice reforms for the benefit of individuals and communities in the state that have historically been adversely affected by the state’s prosecution of cannabis-related crimes. 

The New Regulatory Framework

The Act tasks the Commissioner and the Department with developing, administering and regulating the state’s new legalized adult-use cannabis program. Pursuant to the Act, the Commissioner must issue interim policies and procedures related to, among other things, dosing parameters, serving size limits, product packaging and labeling requirements, and laboratory testing standards. The Commissioner will also set the maximum number of dispensary facilities and producers that may be licensed in the state. As the adult-use program develops, the Commissioner will consult with other state agencies to promulgate rules, create support programs such as a business accelerator program and workforce training program, and recommend legislation for related services, including banking, mental health and insurance. 

Licensing

The Act categorizes licenses as follows: (1) cannabis establishment licenses, (2) key employee licenses, (3) backer licenses, and (4) laboratory or research program licenses. Cannabis establishment licenses further include the following types: retailer, hybrid retailer, cultivator, micro-cultivator, product manufacturer, food and beverage manufacturer, product packager, delivery service, and transporter. For more information on license types and associated fees, see table below.² 

For each license-type, the Department will establish not only the maximum number of licenses to be issued, but also the maximum number of applications to be considered. One-half of the maximum number of applications for consideration will be reserved for “Social Equity Applicants” and selected through a social equity lottery. “Social Equity Applicants” are defined under the Act as applicants who are at least 65% owned and controlled by an individual who (i) had an average household income of less than 300% of the state median household income over the three years prior to such application, and (ii) was a resident of a disproportionately impacted area for at least five of the ten years prior to the application or was a resident of a disproportionately impacted area for not less than nine years prior to attaining the age of 18. 

If the Department receives more applications for any license type than the maximum number to be considered, a lottery shall be conducted to identify the applications for review, albeit with half of the slots for consideration reserved for Social Equity Applicants. Consideration of applications, and the granting of licenses shall not begin until the Department promulgates the rules and regulations necessary to implement the Act.

Non-social equity applicants³ must pay fees for the issuance or renewal of all licenses and registrations in accordance with the following table:

Taxation

Social Equity Program and Criminal Justice Reform