Montana medical marijuana providers cautiously optimistic about legalization
Montanans voted to legalize recreational marijuana earlier this month, but there are still hurdles to overcome before people without medical marijuana cards can head to the pot shop.
I-190, one of the two initiatives that legalized recreational marijuana in the state, may still be changed by the Montana Legislature during the upcoming 2021 session, and a lawsuit has been filed in Helena District Court to challenge the constitutionality of the initiative.
But as it stands, marijuana is set to become legal in Montana on Jan. 1. Even though weed becomes legal to possess, use and grow for personal use on Jan. 1, it will be a while until recreational shops will open. The Montana Department of Revenue will begin accepting applications from existing medical dispensaries to open recreational dispensaries by Oct. 1, 2021, and those existing dispensaries will have 12 months to apply for licensing before it opens up to the general public.
That means that the first recreational dispensaries open in the state will likely be operated by medical dispensaries that are already around and part of Montana’s medical marijuana program. According to New Approach Montana, the group behind the initiative, those shops will probably begin opening in the spring of 2022.
It’s expected to be a boon for the state. A study from the Bureau of Business and Economic Research report predicted that the 20% tax on recreational marijuana will bring in over $200 million in tax revenue between 2022 and 2026. The tax on medical marijuana is now 4%.
And while that all looks good on paper, the reality is more complicated.
Small, local dispensary owners have concerns about the cost of licensing and ramping up production enough to serve a recreational market. They’re also concerned that the Montana Legislature could substantially change the rules during the upcoming session to let in big corporations and out-of-state money.
“We’re hoping the medical market stays alive, because you’re going to find a lot more craft flower and a lot better prices, better quality,” said Mitchell Johnson, who owns Big Sky Buds, formerly Montana Cannaclub, with his brother Alec Johnson. “The production is the main thing. If we can’t continue to provide for our medical patients, if we don’t see that happening, then we’ll probably stay away from the recreational.”
Mitchell and Alec opened the dispensary in May 2017 and serve about 150 customers per month, carving their niche in Bozeman’s saturated medical market by offering delivery services, which made them especially popular during COVID-19.
“Our biggest issue is we’re not sure we have the quality to supply (recreational),” Alec said. “We would love to be a part of it, but the medical market is definitely the number one priority still.”
The initiative doesn’t lay out specific fees for licensing. Instead, it says that those fees — which will be collected by the Montana Department of Revenue — and associated rules can’t be “unduly burdensome.”
But how that will be interpreted by Montana’s legislators is unclear. If licensing fees are in the hundreds of thousands of dollars, as they have been in some other states, “it just pushes out little guys like us,” Mitchell said.
Parts of I-190 are written with the intention of protecting existing medical providers, said New Approach Montana policy adviser Dave Lewis in an election night interview.
“This is going to be a very, very big business, and we wanted to give the folks who basically started it, the pioneers if you will, the opportunity to take advantage and grow, literally,” Lewis said. “They have built this industry over the years and there’ve been all kinds of legal challenges and everything else.”
Medical dispensaries have had a years-long history of bait-and-switches by the state Legislature, including a 2011 bill that kneecapped the market for years.
Marijuana was legalized for medical use with a doctor’s prescription in Montana in 2004, with almost 62% of the vote cast in favor of the initiative, I-148.
But in 2011, the Montana Legislature passed Senate Bill 423. That bill repealed I-148 and established a new program that required that the state investigate any doctors who prescribed marijuana more than 25 times per year and limited every dispensary to three patients, putting many out of business.
An attempt to repeal the bill the following year was unsuccessful, and the laws didn’t change in any major way until 2016, when voters approved I-184. That initiative repealed much of the 2011 bill and allowed doctors to prescribe marijuana as treatment to patients with chronic pain or some mental health diagnoses, like post-traumatic stress disorder.
And until earlier this year, dispensaries could only sell to patients who were “tethered” to them, meaning that a person with a medical card had to choose one dispensary and stick with it.
Untethering patients from dispensaries was a major boost to some, including Big Sky Buds. The Johnson brothers said the change tripled their customer base. But the rush also caused some dispensaries to sell out of product, a double-edged sword.
“It’s helped us a lot, but it’s definitely shown everyone how intense a recreational market could get,” said Alec.
“People are going to run out even more than they are now with the untethered market,” Mitchell said. “Keeping the quality up and upping the quantity is kind of a hard thing to balance for a lot of people.”
The untethering also boosted business at other local dispensaries, like Think Higher Caregiving in Four Corners.
“Since the untethering in June, it’s been only phenomenal for us,” said EJ Corriveau, the owner of Think Higher. “Last month was our largest month in history.”
Think Higher Caregiving specializes in marijuana concentrates and marijuana-infused fudges and serves about 1,000 patients per month, Corriveau said. It’s a sister business to Think Higher Caregiving in Maine, which is run by Corriveau’s business partner. The businesses are totally separate and each comply with state laws, but the branding is the same and the owners are able to share ideas and information.
Because of Think Higher’s location in Maine, Corriveau said he can see trends in the marijuana industry before they hit Montana.
“Every state, almost, is ahead of Montana when it comes to the cannabis industry,” he said. “Part of that reason is due to the vertical tiered setup that Montana has faced, due to not being able to have people focus on their true talents and passions.”
Under current laws, dispensaries can’t carry each others’ products. Everything that’s sold in a dispensary needs to be cultivated entirely by that dispensary, from putting a seed in the ground to putting the price sticker on the final product. Corriveau isn’t able to sell Think Higher concentrates to other dispensaries to sell on their shelves, nor is he able to buy products from other dispensaries to carry in his store.
But for recreational dispensaries under I-190, that could change.
I-190 allows dispensaries to sell other dispensaries’ products, as long as it doesn’t account for more than 50% of total annual sales. That means that dispensaries that focus on crafting top-tier edibles could buy vaporizer cartridges from another dispensary that specializes in that, instead of having to make everything in-house.
That will mean a higher product quality for everyone, Corriveau said, though it could also mean higher prices.
“That just allows the overall market, disregarding any specific company, to just propel at a faster rate,” Corriveau said. “You’re going to see some companies solely produce flower, you’ll see other companies solely produce concentrate, and (others) solely producing edibles or topicals.”
Corriveau said he’s also concerned about the licensing fees, especially as they could impact the cost of medical marijuana.
“If the cost of entry is very high, you’re going to see a lot of the small providers not be able to enter that recreational scene,” he said. “You’d also see that price go down to the customer, so that final product will be increased in addition to that 20% (tax).”
Some small providers, like Juniper Cannabis owner Adam Ryder, didn’t support the initiatives because of those uncertainties.
“There’s just so many big unknowns as to how this will play out,” Ryder said. “Ability to shift to a recreational business model is really going to depend on what the city allows, and then how that’s regulated by the state and what the fees are associated with it.”
Some regulations for where a recreational dispensary can be located were written into I-190. It can’t be within 500 feet of a building used exclusively as a school, church, synagogue, temple or other place of worship.
But cities could impose additional restrictions, change zoning to limit the number of dispensaries or even hold an election to outlaw recreational dispensaries inside city or county limits.
One of Ryder’s main concerns is the cost of the licensing, but he’s also worried that the Legislature make big changes. He is also concerned that the 20% tax could turn customers off from buying and boost the illegal market.
“Basically, it’s going to be really important for current providers to be involved in that legislative process,” he said. “I think that if we can develop a solid program that benefits the small businesses here in Montana and we can keep it local, it could be really successful.”
Ryder did say there were some highlights to the bill that could be beneficial to dispensaries like his. The ability to buy and sell other dispensaries products was one upside to the bill, he said, as was the 12-month head-start medical dispensaries have on the permitting process.
“Giving the current providers that leeway to apply before any other out-of-state interests can come in, it’s going to really help protect the industry and keep that to Montanans,” he said. “At least within my small circle, people are really concerned about out-of-state interests, corporations coming in and just kind of wrecking the scene for Montana.”
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