Connecticut’s Budding Business

On June 22, 2021, with one momentous signature, Governor Lemont welcomed Connecticut into the age of cannabis legalization. With the passage of Senate Bill 1201, Connecticut became the 19th state to legalize the recreational use of cannabis after years of failed attempts to gain bipartisan support. This was the third time Connecticut pushed for a cannabis bill, as the latest proposal was vetoed by the Governor for not containing sufficient social equity measures. Governor Lemont was adamant that this Bill include provisions mandating special access to the communities most severely impacted by the war on drugs.

The Connecticut Bill ushers in a new framework for a regulated cannabis marketplace, and is unique for its focus on social equity and criminal justice reform. The state watched as its neighboring states, New York and Massachusetts, implemented successful recreational use programs, and the Governor has maintained a strong desire to get Connecticut involved with the cannabis legalization movement. This new legislation went into effect on July 1, 2021, and permits adults over the age of 21 to consume cannabis legally. Commercial retail sales, however, will not be allowed until on or after July 1, 2022. The key elements of the legislation include a robust social equity component, a scaled tax structure, and the automatic expungement of certain prior cannabis-related convictions.

The Social Equity Landscape

The Connecticut Bill was deliberately designed to make the cannabis marketplace more equitable to all members of society. Specifically, Connecticut intends to allocate nearly half of all cannabis licenses to entrepreneurs from communities most affected by the war on drugs, which are disproportionately Black and Brown communities. The state implemented a model similar to New York, as New York allocates half of all licenses to minority applicants to promote racial and ethnic diversity among the pool of business owners. Massachusetts, however, did not implement such a program that emphasizes equitable allocation. Consequently, the state’s industry is dominated by white-owned recreational cannabis shops. Connecticut’s legislature has also recognized that Black and Brown communities have been disproportionately harmed by drug enforcement policies in the state, and intentionally sought a more diverse and equitable marketplace in an attempt to rectify some of that harm.

A Social Equity Council will also be established to evaluate applications for business licenses, and specifically what the Bill deems to be “social equity applicants,” in order to help foster a more inclusive cannabis market in Connecticut. The Bill explains that to be considered a social equity applicant, the applicant must have an average household income of less than 300% of the state’s median income ($78,444), and the applicant must have lived in a “disproportionately impacted area” for at least nine years during childhood or five years prior to filing an application. The Bill specifies that a disproportionately impacted area must have a historical drug-related conviction rate greater than 10% or an unemployment rate greater than 10%.

The Bill also allocates $50 million to support social equity applicants through providing start-up capital, a business accelerator course, and workforce training programs. Additionally, the Bill calls for the implementation of a lottery system, which will only apply to non-social equity applicants, to control the application and license-granting processes and ensure equal opportunity.

Tax Structure

Connecticut has watched as Massachusetts’ cannabis market has brought in over $1 billion dollars in tax revenue since 2018. The state will adopt a scaled tax system that is even lower than those in its neighboring states, however, and will implement similar adult use policies. Cannabis retailers, hybrid retailers (which sell recreational and medical cannabis), cultivators (those with a greater-than 15,000 square feet growing operations), and micro-cultivators (those with 2,000 square feet to 10,000 square feet growing operations) will be subject to a 3% municipal sales tax, a 6.35% state sales tax, and an additional scaled tax based on the THC (tetrahydrocannabinol—the main chemical compound in cannabis) content of the product being sold. Connecticut also intends to compete with its neighboring states by making its tax rate about 4% lower than New York’s, and a similar rate to that of Massachusetts. Recent projections show Connecticut generating $725 million in annual sales by 2025.

Criminal Justice Reform

Importantly, Connecticut is actively trying to rectify the harm caused by the war on drugs. Senate Bill 1201 will expunge the criminal records of individuals with certain cannabis-related convictions from January 1, 2000 to October 1, 2015. The Bill’s criminal justice reform provisions were motivated by years of failed cannabis criminalization policies that disproportionately affected Black and Brown communities in the state. As of 2020, Connecticut has a Black population of 12%, but 42.7% of individuals in federal and state prison combined identify as Black, with a majority of those convictions stemming from drug offenses. Meanwhile, white individuals make up 80% of the state’s total population, but only 30% of Connecticut’s federal and state prison population. Connecticut’s judicial branch estimated that from 2017 to 2019 alone, between 3,500 and 4,100 cases of small scale cannabis possession will be automatically erased, along with thousands of other records dating back to 2000. Convictions outside of 2000 to 2015 can be still erased, but will require individuals to file a petition with the state. This specific provision of the bill is a bit surprising, given that those most directly affected by the harmful policies of the war on drugs would have been convicted prior to 2000. Additionally, cannabis possession will generally no longer be grounds for revoking someone’s parole or probation; currently, there are 35,734 adults on probation and 1,558 on parole in the state. Finally, cannabis odor will no longer be considered grounds for probable cause or reasonable suspicion for stops or searches by police.

Conclusion

Connecticut has made social equity and criminal justice reform the focal points of its efforts to legalize the adult recreational use of cannabis. Senate Bill 1201 will also make the Connecticut cannabis industry competitive with its peer states, such as New York and Massachusetts, and should provide the state with a much-needed revenue stream, considering the state’s current $2.3 billion deficit. The only two states in New England that have yet to legalize adult recreational use are New Hampshire and Rhode Island, with both states making efforts to do so. Connecticut’s legislation might serve as a model for neighboring states like Rhode Island and New Hampshire as they develop their own laws surrounding adult cannabis use. It is exciting to witness what the future holds for the Nutmeg State.

Alexander McGrath is a J.D. Candidate at Northeastern University School of Law. Prior to law school, he graduated with a Bachelor of Arts in Political Science from Trinity College. In his spare time, he enjoys making cooking videos on Youtube, learning new languages, and traveling.

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