Mississippi: After a Stumble, Medical Cannabis Looks Close to the Finish Line

After months of wrangling, Mississippi lawmakers have reached an agreement on creating a cannabis program in the wake of a state Supreme Court decision that struck down a voter-approved program. Lawmakers now need approval from Governor Tate Reeves to convene a special session and pass the legislation. Legislative leaders met with Reeves’ office to deliver the draft on Friday.

As Cannabis Wire previously reported, Initiative 65 was struck down in May, based on a constitutional technicality that invalidated the signature-gathering process for getting the measure on the ballot. The initiative passed in November 2020 with the approval of 74% of voters. Senator Kevin Blackwell—the prime architect of the new measure alongside Representative Lee Yancey—has said the governor is interested in calling a special session to re-establish a cannabis program, but only if lawmakers have fleshed out the legislation’s details. Lawmakers have spent the months since the Supreme Court’s decision attempting to do that.

“There were a lot of hours, a lot of input, a lot of meetings with different agencies,” Blackwell told Cannabis Wire. “We met with people from outside the state who are currently in the business. We talked to patients, talked to advocates for Initiative 65, as well as this social media group that sprung up afterward called ‘We are the 74.’ So we’ve reached a good number of people to get input to craft this, and that’s part of why it’s taken about four months for us to get to that point.”

Many of the details of the draft mirror Initiative 65. It allows patients with one of the twenty-two conditions listed in the initiative to legally buy cannabis, and adds four more qualifying conditions. It taxes cannabis at the state’s sales tax rate of 7%, like Initiative 65, but also adds an excise tax of $15 per ounce. The Department of Health is largely in charge of oversight, with some duties like tax collection doled out to the Department of Revenue and licensing cultivation facilities to the Department of Agriculture and Commerce.

Last month, the state Agriculture Commissioner, Andy Gipson, said he wouldn’t regulate the program because cannabis is still federally prohibited. The draft legislation sidesteps this, noting that his agency “may contract with other governmental agencies and public or private third parties” in order to assist the Department of Agriculture and Commerce with “carrying out any of its powers and duties under this chapter.”

Unlike the voter initiative, meanwhile, the draft legislation allows only indoor cannabis grows, outlawing outdoor and personal cultivation—a disappointment to some. “One of the things that got cut that I was hoping would make it was to allow patients who qualify for a card to home-grow up to six plants,” said Blackwell. 

But in an interview with Cannabis Wire, Ken Newberger, executive director for the Mississippi Medical Marijuana Association, called it a “great bill.” He said the draft captures a lot of what Initiative 65 would have done.

“From a business perspective, it outlines really well how people can become a business, open up and start growing, processing, and dispensing medical marijuana,” Newberger said. “On all the major points that we were hoping to see in the bill, they pretty much hit the nail on the head.”

During the 2021 legislative session, Blackwell introduced a measure to replace Initiative 65 if the Supreme Court struck it down. The bill didn’t pass, but a first draft proposed an upfront fee of $20,000 for dispensary licenses, with an annual renewal fee of $10,000. It also proposed a $200,000 license application fee for cultivation and processing facilities. Those costs came down in later drafts but raised concerns that small businesses might face an impossibly high financial barrier to getting into the industry.

The current draft reduces application fees based on the size of the operation. Growers would be divided into “micro-cultivators” and “cultivators,” and then broken down further into tiers. The smallest cultivators—with operations of 1,000 square feet or smaller, known as tier 1 micro-cultivators—would pay an upfront cost of $1,500 and $2,000 annually. The largest cultivators, or tier 5 cultivators—with canopies between 60,000 and 100,000 square feet—would pay $40,000 upfront and $100,000 annually. Operations would be capped at 100,000 square feet. Processors are similarly broken down into “micro-processors” and “processors.”

Blackwell said the tiered system aims to set up small operations akin to microbreweries. “It was just taking that concept and extending it. So how can we create a little boutique type of business and let residents of our state participate in that? Have some fees that are structurally lower to allow them to participate.”

At the program’s outset, only Mississippi residents will be able to hold micro-cultivator licenses. For larger operations, at least 35% of a company’s ownership would have to be state residents. However, these requirements could invite legal challenges. As Cannabis Wire previously reported, a lawsuit led Maine to drop its residency requirements for business licenses.

Blackwell believes the language in the draft skirts potential challenges, since the residency requirements are for micro-cultivators and processors, and out-of-state residents have the opportunity to participate in larger enterprises alongside Mississippians. “Also, that provision expires at the end of December 2022,” he said. “So because we put a moratorium on it, by the time anybody were to file a lawsuit it’s not going to exist anymore.” 

Under the draft, cities and counties would be allowed to opt out of cultivating, processing, sale, or distribution within the first 90 days of the program. But citizens could challenge the ban by collecting signatures—1,500 or 20% of voters, depending on which is smaller—for a referendum and vote to overturn it.

“Initially we didn’t really want to have an opt out provision because we see it as medicine and you shouldn’t really be able to opt out of medicine,” Newberger said. “But it still allows the people of those cities to have a referendum and vote on it. So that’s a fine solution.”

After the initial passage of Initiative 65 in 2020, businesses began laying the groundwork to enter the industry in the state. The Mississippi Cannabis Trade Association formed a few days after voters approved the measure. Jessica Rice, executive director of the organization, estimates that as many as half of her members had invested in the industry before the Supreme Court struck down the program.

“Whether that was starting up a testing facility or investing in a vertically integrated company or wanting to utilize some family land that they already owned to begin growing on and cultivating,” Rice told Cannabis Wire. But she said the Supreme Court decision left many in an uncertain position. “So we definitely had a lot of members be like, ‘Ok, I’ve already invested this money. What do we do next?’”

Rice said the Mississippi Cannabis Trade Association is pleased with what it’s seen of the new proposal so far. 

The decision to start a special session is now in the hands of Governor Reeves. Blackwell says negotiators of the bill have been in contact with his staff throughout the process, and so there shouldn’t be any surprises in the draft.

Thirty-four states and Washington, D.C. have approved medical cannabis programs, including Mississippi’s neighbor Alabama during this year’s legislative session.

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