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Delaware Looks to New Jersey, New York, as Adult Use Push Advances

· Jan 24, 2023
New Jersey’s newly-launched adult use cannabis industry was on Delaware lawmakers’ minds on Tuesday as they came together for the state’s first legalization hearing of 2023, which took place in the House Revenue & Finance Committee. HB 2 is the regulation and taxation part of the canna

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Delaware lawmakers advanced a cannabis taxation and regulation bill on Tuesday, with another hearing on a separate simple legalization bill scheduled for the following day. 

New Jersey’s newly-launched adult use cannabis industry was on Delaware lawmakers’ minds on Tuesday as they came together for the state’s first legalization hearing of 2023, which took place in the House Revenue & Finance Committee. HB 2 is the regulation and taxation part of the cannabis law effort in Delaware, while HB 1, the legalization part, will be discussed in the health committee on Wednesday. HB 2 will only take effect if HB 1 is also passed.

This legislation has been several years in the making, bill sponsor Rep. Edward Osienski said, and HB 2 would “create well-paying jobs for Delawareans while striking a blow against the criminal element which profits from this ever-growing and thriving illegal market for marijuana in our state.” 

“Not to mention the activity that has been up and running in New Jersey,” Osienski said, citing the more than $100 million that has been “diverted from the criminal market” since adult use sales went live there last year.

Osienski said that the bill is expected to head to the full floor in March. Before then, Osienski is committed to amending the bill to mitigate areas of concern. 

Those concerns, which Osienski said could be addressed through amendments before the floor debate, were on full display on Tuesday as representatives from several state agencies and departments made their case for how legalization could – and would – affect how their offices operate. One concern that came up repeatedly was related to the timeline for implementation, which would create a crunch for already strapped agencies. 

Meanwhile, other neighboring states were on the minds of Delaware lawmakers on Tuesday. With HB 2, lawmakers are pitching a social equity license pool and a justice reinvestment fund, and for half of the first round of licenses to be allocated for equity applicants, similar to New York lawmakers’ goal. 

“The bill includes a handful of other provisions to give social equity applicants a leg up in competing with big multi-state operators, such as discount fee waivers and technical assistance with the Justice Reinvestment Fund,” which is a new fund, Osienski said, to be “used to ensure that the communities that were most negatively affected by prohibition will be beneficiaries of this.” 

The fund would receive 7% of cannabis tax revenue, which would go toward initiatives that focus on restorative justice, “jail diversion,” workplace development, and mentorship. 

Businesses that are at least 51% owned by Delaware residents could qualify for a microbusiness license, a pathway toward creating what could become the Dogfish Head beer of cannabis, Osienski said, referencing a popular beer that got its start in microbrewing. 

“Jersey created this microbusiness license category and I thought it was a very good idea to allow small, unique businesses to try different things,” Osienski said. 

The repeated references to nearby states added to a theme that’s emerged across states considering legalization: neighboring states that have legalized are creating a sort of peer pressure, and they’re contributing to policy discussions through lessons learned. 

Representative Sherry Dorsey Walker, chair of the Legislative Black Caucus, said that the Caucus had discussed quite a bit about HB 2 with Osienski, and the bill reflected that. She also asked Osienski to communicate for the hearing attendees the concerns that members of law enforcement had expressed, which mostly came down to fears over an uptick in impaired driving. 

Delaware currently has 52 Drug Recognition Experts, or members of law enforcement who have received extra training to detect cannabis impairment, and that number might need to change, or other trainings or resources might need to enter the picture, Osienski said. 

During a public comment period, a wide range of speakers gave their perspectives, including Olivia Naugle, a senior policy analyst for Marijuana Policy Project. Naugle spoke in support of the bill. 

“A strong majority of Delawareans recognize cannabis prohibition has failed and support legalizing and regulated cannabis for adults. But it’s up to the General Assembly to bring this important policy change to Delaware,” Naugle said. “It’s long past due.”

Marcia Scott, executive director of the Delaware League of Local Governments, said that the League opposes adult use cannabis legalization. 

“However, we think that if it is legalized, there should be a proper regulatory framework governing the implementation. We also agree that it should be taxed,” Scott said, asking that 3% of the sales tax revenue be “set aside” for municipalities and counties as they deal with things like the “complex and time consuming nature of law enforcement investigations and increased policing related to illicit sales of recreational marijuana.”

Joseph Taylor spoke to lawmakers about the 17 years that he spent incarcerated for cannabis-related convictions. 

“When you see a person like me that did 17 years for it, people have to understand the implications of not reversing what was wrong with weaponizing this plant,” Taylor said. 

George Class-Peters, deputy principal assistant with the Department of Agriculture, spoke about the state’s hemp program and “cross pollination effects that concern us greatly” with regard to introducing high-THC plants in areas with low-THC hemp crops planted. There’s also the concern about “safety” with regard to cultivators who grow outside, Class-Peters said. 

Finally, crafting rules around pesticides “would take a lot of additional time and effort,” Class-Peters said. 

“It’s not federally legalized. The EPA doesn’t have set tolerances yet. And so there would be a lot of research and time that would be put in that would fit in the 15 month time span that’s currently proposed,” Class-Peters said. 

Jamie Johnson, deputy director of revenue, said that the Department of Revenue “acknowledges the sponsor for addressing prior concerns,” but said that HB 2 still doesn’t address three “key” areas. 

Johnson said that it is “unclear” whether this bill “provides adequate time for the development of brand new systems for reporting, collecting and auditing a retail sales tax.” 

Finally, Johnson said, as long as cannabis is prohibited at the federal level, those banking and anti-money laundering laws will “continue to make banking difficult and costly.” The Department of Revenue is no different, he said, adding that he expects cash transactions to increase “more than 20 fold” with a full year of adult use sales.

“It is unlikely we see the SAFE Banking Act passed this Congress, thus all parts of the marijuana business are targets for theft. The state needs to provide further financial resources to mitigate those risks associated with regulating and administering this bill,” Johnson said. 

John Yeomans, director of the Division of Alcohol & Tobacco Enforcement, asked for more Drug Recognition Experts. 

Yeomans also said that the bill should include compounds like delta-8 and 10 in the definition of “marijuana,” and also asked that the bill include the requirement of a Responsible Service Training program, similar to what the state has for alcohol. 

 “We’re probably one of the few states in the nation,” Yeomans said, that “mandates that anyone that mixes, pours, stirs or serves alcohol goes through the training program. We believe that’s important in terms of compliance, and it gives us an opportunity to work with industry.”

Tyler Micik, director of public policy and government relations for the Delaware State Chamber of Commerce, said that the state Chamber of Commerce opposes HB 2 as written. 

The Chamber requests that language relating to the impact of legalization and regulation on employers and employees,” which was agreed upon last year, Micik said, be added to the bill. 

“Some companies have federal contracts, Micik said. “Similarly, companies, regardless of whether they are federal contracts, simply want the ability to maintain their own policies.”. 

Osienski said that he is “motivated” to “sit down with state agencies and try to see if we can address some of their concerns and make changes.” 

“I’m sure there’ll be amendments before the bill will be on the floor in March,” he said.