On August 11, 2022, then-Governor Charlie Baker signed Chapter 180 of the Acts of 2022, An Act Relative to Equity in the Cannabis Industry, into law. This new statute went into effect on November 9, 2022, and will significantly impact the cannabis industry across Massachusetts, particularly with respect to Host Community Agreements (HCAs) and municipal equity.

The Massachusetts Cannabis Control Commission (the “Commission”) is mandated by Chapter 180 of the Acts of 2022 to promulgate or amend its medical and adult-use cannabis regulations to implement the new statute. On July 28, 2023, the Commission voted to release its draft amended regulations. We expect the official version of the draft amended regulations to be published shortly.

Below is a high-level summary of the key provisions of the draft amended regulations related to Host Community Agreements, municipal equity, social consumption, and suitability standards for marijuana establishment agents.

Cannabis Host Community Agreements in Massachusetts

The amended regulations provide for considerable changes to HCAs entered into between license applicants or licensees and their host municipalities. Notable provisions in the draft amended regulations related to HCA standards and requirements include, but are not limited to, the following:

• The Commission will now have clear statutory authority and a mandate to review, regulate, enforce, and approve HCAs

• Beginning on May 1, 2024, a compliant HCA or HCA Waiver must be submitted as part of an initial license application and at each license renewal. Within 90 days of receiving an HCA, the Commission will review the HCA and send a determination notice to both the license applicant or licensee and host municipality. The HCA determination notice will address the HCA’s compliance with its regulations, and if the HCA is noncompliant, the parties’ options for resolving the noncompliance, discontinuing relations, and/or requesting equitable relief from the Commission

• An HCA may require a licensee to pay a Community Impact Fee (CIF), subject to the following requirements:

  • A CIF claimed by the host municipality must be “reasonably related” to the costs imposed on the host municipality by the licensee’s actual operations, and the CIF cannot be a percentage of the licensee’s sales or exceed 3% of the licensee’s gross sales

  • The host municipality must document and annually transmit to the licensee a detailed invoice of the host municipality’s claimed CIFs for the licensee’s preceding year of operations within one month of the anniversary date of the licensee’s receipt of a final license from the Commission

  • Within 30 days of receiving the invoice from the municipality, the licensee must provide the invoice and any supporting documentation, as well as documentation verifying the licensee’s gross annual sales, to the Commission for review and certification

  • Unless the CIFs are disputed by the licensee, the licensee must pay the CIFs certified by the Commission within eight months of receiving the host municipality’s invoice of claimed CIFs

  • A host municipality cannot attempt to collect CIFs from any licensee that has held a final license for more than nine years

  • A licensee may bring a breach of contract action against a host community to have a court independently review CIFs

• An HCA cannot require a license applicant or licensee to make additional payments (other than CIFs) or obligations, including future monetary payments, in-kind contributions, or charitable contributions to the host municipality or any other organization.

It is expected that some existing HCAs will not comply with the new standards and requirements for HCAs, and renegotiation with the host municipality will be required to bring the HCA into compliance.

Municipal Standards and Policies for Promoting Equity in Cannabis

The Commission’s draft amended regulations include the following provisions related to municipal standards and policies to promote equity:

• Host municipalities must publicize detailed information related to the host municipality’s local approval processes

• Host municipalities must develop and publicize a comprehensive equity plan to promote and encourage participation in the cannabis industry and applications by equity businesses

• Host Municipalities must prioritize negotiations of HCAs with equity applicants and are also permitted to waive or reduce fees for equity applicants

• If a municipality that has already reached its cap on the number of cannabis businesses permitted to operate decides to allow additional businesses, at least 50% (but no less than one) of any additional local approvals granted in the future must be reserved for equity businesses

• After May 1, 2025, the Commission will be able to levy fines against municipalities that do not comply with municipal equity requirements

• Host communities must donate at least 3% of each CIF they receive to the Cannabis Social Equity Trust Fund

• Licensees can fulfill a portion of their Positive Impact Plans by donating to the Social Equity Trust Fund

Social Consumption of Cannabis in Massachusetts

The Commission’s draft amended regulations eliminate the Social Consumption Pilot Program that initially limited social consumption municipalities to no more than 12 municipalities, and instead propose to allow any municipality in the Commonwealth to opt-in to hosting social consumption establishments. While amended regulations surrounding the Social Consumption Establishments are not subject to the same November 9, 2023 promulgation deadline, the Commission’s Social Consumption Regulatory Group is continuing to solicit input and feedback about this license type via public comment at public listening sessions and via email.

Suitability Standards

The Commission’s draft amended regulations revise some of the standards for determining whether an individual is suitable to be employed as a Registered Agent of most types of licensees by:

• Limiting presumptive negative suitability determinations related to open or unresolved criminal proceedings to an offense involving the distribution of a controlled substance to a minor

• Eliminating mandatory disqualifications for felony sex offenses and failure to register as a sex offender

• Eliminating mandatory disqualifications for felony convictions for trafficking of controlled substances

• Adding a provision to include the possibility of a negative suitability determination where the individual’s prior actions either posed a risk to public health, safety, or welfare or that the prior actions posed a risk to the operation of a Marijuana Establishment or Medical Marijuana Treatment Center

No changes were made to the suitability standards for Persons or Entities Having Direct or Indirect Control over any type of licensee or for Independent Testing Laboratory Agents.

Looking Forward: Make Your Voices Heard By Submitting Public Comments

The Commission’s draft amended regulations make substantial changes to the current regulatory framework related to HCAs, municipal equity, social consumption, and suitability and are a positive step towards building a strong, equitable cannabis industry in Massachusetts. The draft regulations will be filed with the Secretary of State’s Regulations Division, and once the public review and comment period begins, interested parties will be able to submit written comments to the Commission for consideration. A public hearing at which members of the public can provide comments via oral testimony is also planned for September 8, 2023.