Virginia Releases Draft Regulations for Launch of Adult-Use Marijuana Market

Virginia regulators have released draft regulations for the state’s forthcoming adult-use marijuana market, providing the first detailed regulatory framework ahead of legal sales scheduled to begin July 1, 2027.

The Virginia Cannabis Control Authority (CCA) posted the Draft Retail Marijuana Market in conjunction with its Board of Directors meeting held today, September 9.

The regulations begin the process of implementing the retail market authorized by lawmakers earlier this year, covering licensing, cultivation, processing, retail operations, delivery, product safety, testing, packaging, ownership and other requirements.

Virginia legalized possession and limited home cultivation in 2021, but the state has never established a licensed adult-use retail market. Under the implementation schedule published by the CCA, the newly released regulations will undergo further review before becoming final.

The Cannabis Public Health Advisory Council is expected to begin reviewing the regulations in October and complete its review in December. The CCA expects the regulations to be finalized in December and published and effective in January.

By February 1, 2027, conversion applications are scheduled to open for qualifying pharmaceutical processors and industrial hemp processors or growers, along with the application process for certain microbusiness licenses. The CCA is required to issue certain initial licenses by May 1, with retail sales beginning July 1.

The market will include licenses for cultivation facilities, processing facilities, testing laboratories, transporters, delivery operators, retail stores, dual-use businesses and microbusinesses.

Virginia law establishes five cultivation tiers based largely on the amount of canopy a business may operate.

Tier I cultivators may have up to 5,000 square feet of canopy, while Tier II facilities may have up to 10,000 square feet. Tier III cultivation facilities are limited to 15,000 square feet, Tier IV facilities to 25,000 square feet and Tier V facilities to 35,000 square feet.

Outdoor cultivation is available under the first two tiers, while Tier III through Tier V are limited to indoor cultivation.

The CCA may adjust cultivation canopy based on factors including market demand, utilization rates, sales, transfers, inventory and the number of licenses issued. The state is initially limited to five Tier V cultivation licenses before January 1, 2027.

For retail operations, state law establishes a maximum of 350 retail marijuana store licenses statewide. The CCA may determine how many licenses to issue in most other categories based on supply, demand, competition and market conditions.

Regulators are also authorized to limit retail marijuana stores to no more than 2,500 square feet of retail floor space and to establish geographic and market-concentration restrictions intended to prevent a small number of companies from dominating the industry.

Individual companies will face ownership restrictions as well. In general, a person may not hold an interest in more than five marijuana establishment licenses, excluding transporter licenses, and may not hold more than one Tier V cultivation license.

Testing laboratories are required to remain independent from other marijuana businesses, while microbusiness licensees cannot hold an interest in another marijuana establishment license.

Microbusinesses will provide a vertically integrated option for smaller operators. A microbusiness may be authorized to cultivate, process and sell marijuana directly to consumers, with cultivation generally limited to 5,000 square feet indoors or 10,000 square feet outdoors.

A microbusiness may conduct its authorized activities at as many as two locations if both are appropriately zoned, located within 20 miles of one another, operate under the same ownership and license, and do not duplicate the same license privilege at both locations.

The framework also establishes a preference system for what Virginia calls “impact licensees.”

To qualify, at least 51% of a business must be owned and directly controlled by people meeting geographic requirements related to communities disproportionately affected by marijuana enforcement or historically economically disadvantaged communities, along with at least one additional qualifying factor.

Those factors can include a previous marijuana conviction, having an immediate family member with such a conviction, attending school in a historically economically disadvantaged community, receiving a federal Pell Grant or attending certain colleges with high Pell Grant participation, being a military veteran or qualifying for certain U.S. Department of Agriculture assistance as a distressed farmer.

The CCA is required to establish preferences for impact applicants, including potential application or licensing fee reductions or waivers, access to grants or low-interest loans and exemptions from certain requirements involving proof of funds or possession of a proposed business location during the initial application stage.

When the number of qualified applicants exceeds the number of available licenses, Virginia law calls for licenses to be distributed through an impartial random lottery.

Impact applicants competing for reserved licenses receive their own lottery. Those who are not selected in that process can then be placed into the broader pool of applicants competing for licenses available to everyone.

Applicants selected for preliminary approval generally have 18 months to establish their location, receive necessary local approvals, update required operating and security information and complete applicable inspections. The CCA may grant a one-time extension of up to six months for applicants making a good-faith effort to become operational.

Virginia’s market will also allow marijuana delivery.

Retail marijuana stores and microbusinesses may deliver marijuana directly to consumers or transfer products to a separately licensed delivery operator. Deliveries must be made in person and regulators are required to establish rules governing age verification, recordkeeping, security and delivery radius.

Deliveries will not be allowed to locations including military bases, schools, child day centers, correctional facilities, the State Capitol, hospitals, Virginia Port Authority marine terminals or public gatherings such as concerts, festivals, fairs, sporting events and public transportation terminals.

Retail stores may also sell marijuana, marijuana products, immature plants and seeds to adults 21 and older.

Businesses will be prohibited from using vending machines or drive-through windows for marijuana sales. Retailers also cannot fulfill marijuana orders referred through third-party internet sales platforms.

A customer generally cannot purchase more than two ounces of marijuana, or the equivalent amount of marijuana products established by regulators, in a single transaction.

The product rules include specific limits for marijuana edibles.

Edibles cannot contain more than 10 milligrams of THC per serving or more than 100 milligrams per package. Regulators are also authorized to establish equivalent limits for other product categories and impose additional THC-related restrictions when appropriate.

Edible products must be manufactured so cannabinoids are distributed consistently throughout the product. They cannot contain alcohol, nicotine, additives specifically designed to increase addictiveness or ingredients intended to make the product particularly appealing to people younger than 21.

The law also prohibits manufacturers from simply adding marijuana to trademarked commercial food or beverage products and marketing the resulting item using that brand.

Marijuana sold to consumers will be subject to extensive labeling and packaging requirements.

Packages must generally be child-resistant, tamper-evident, resealable and opaque. Labels must identify the product type, cultivator and processor, net weight, ingredients, cannabinoid content, serving information and applicable allergens.

Packages must also include a state-approved warning, a universal marijuana symbol and a QR code or another method established by regulators that allows consumers to access the product’s laboratory certificate of analysis.

Products cannot be packaged or labeled in a manner designed to appeal particularly to people younger than 21, and packaging cannot model the shape of a human, animal, vehicle or fruit.

Cultivators, processors and microbusinesses will also be required to register marijuana products with the CCA. Product registration information will include THC and CBD content, the product name, proposed packaging and proposed labeling.

Testing requirements will apply throughout the regulated market, and batches that fail required health and safety testing will generally have to be destroyed unless they can be remediated into compliance.

The regulatory framework also requires seed-to-sale tracking. Marijuana must be tracked as it moves through cultivation, processing, transportation, retail sales and delivery, with businesses maintaining records available for regulatory inspection.

Retail stores and microbusinesses will be required to verify that customers are at least 21 years old, and the state is directed to establish escalating penalties for repeated failures to properly verify age or for sales to underage or intoxicated customers.

All marijuana establishment applicants and licensees are also required under the new state law to enter into and maintain a labor peace agreement with a qualifying labor organization. Failure to maintain such an agreement can result in denial, suspension or revocation of a license.

Local governments will retain some authority over how the market operates within their jurisdictions. Counties, cities and towns may establish restrictions on the hours marijuana can be sold, while businesses will also remain subject to applicable zoning and other local requirements.

Retail marijuana will be subject to a state marijuana tax of 6% until July 1, 2029, when the rate increases to 8%. That tax is imposed in addition to generally applicable sales taxes.

Localities must also impose an additional marijuana sales tax of at least 1% and no more than 3.5%.

The release of the regulations begins what will be a relatively compressed implementation period for the CCA. According to the agency’s retail marijuana market, final regulations are expected within roughly three months, with the first application processes opening early next year.

If the timeline remains on schedule, Virginia’s first licensed adult-use marijuana stores will be allowed to begin serving customers on July 1, 2027.