Delaware is moving forward with the first round of lotteries for adult-use cultivation and manufacturing licenses on Oct. 24 after being inundated with applications.
Between Aug. 19 and Sept. 30, the state’s Office of the Marijuana Commissioner received 1,269 applications from both general and social equity applicants who hope to secure one of just 125 total available licenses. More than 800 of them seek retail licenses, despite only 30 being available.
OMC is expected to issue the first cultivation licenses by Nov. 1, the first manufacturing licenses by Dec. 1 and retail by March 1. Existing medical operators will also get a chance to enter the adult-use market through conversion licensing, but hybrid retailers will have to wait for an order from the state to avoid unfair competition for new applicants.
In total, the state collected over $4 million in application fees. Fees for cultivation and manufacturing are $5,000 for general licenses, $3,000 for micro and $1,000 for social equity. General retail licenses carry a $5,000 application fee, while social equity applications cost $1,000.
Less than 4% of retail applicants will receive a license
The state plans to issue a total of 125 licenses across the cannabis supply chain. Almost half of the available licenses will be reserved for social equity applicants who either have a past cannabis conviction, are immediately related to someone with a conviction, or is a resident of a neighborhood heavily affected by past cannabis enforcement. These applicants also have reduced application fees.
In total, 242 applied for cultivation and 179 applied for manufacturing. Of those vying for retail, 519 seek a general license and 325 applied for a social equity license. OMC is vetting the applicants to ensure they qualify for their respective lotteries.
The state will hold a series of lotteries to award the licenses, with the available license types split between the state’s counties. The applicants were somewhat evenly spread between the counties except for micro cultivation in New Castle County, micro manufacturing in Sussex County and testing labs, which drew fewer applicants than available licenses. Every other license type will have a lottery.
The Oct. 24 lottery will be live-streamed on OMC’s Facebook page. The retail lotteries will tentatively take place in late November or early December, along with any county-wide manufacturing and cultivation lotteries that had applicants who were not properly vetted in time for the first lotteries this month.
Cultivation licenses to be awarded are divided based on applicant type and operation size with 20 general licenses and 10 social equity. There are an additional 20 general and 10 social equity micro cultivation licenses. A micro business, whether it be cultivation or manufacturing, must have no more than 10 employees, and micro cultivation sites are limited to 2,500 square feet of canopy.
Manufacturing licenses will be evenly split with 10 general, 10 social equity and 10 micro manufacturing licenses. Retail is split between 15 general and 15 social equity retail licenses, meaning less than 4% of retail applicants will get a license. The state will also issue five testing lab licenses, with two of them reserved for social equity applicants.
Applicants are not required to secure a location for their business when they apply, but they must provide a business plan with an annual budget and plans for training and hiring, safety and security, and operations.
Delaware latest eastern state to legalize adult use
With the exception of 12-miles that border Pennsylvania, Delaware is almost entirely enclosed by Maryland and New Jersey, which already allow legal cannabis. Aside from its northern neighbor, Delaware is the latest state in its region to legalize adult use, which could explain the apparent eagerness from its prospective legal weed operators.
Delaware Gov. John Carney allowed adult-use cannabis when he declined to veto a pair of bills, HB 1 and HB 2, that legalized possession and use and also allowed the state to regulate and tax sales. At the time, Carney said that he was not in support of adult-use, but he would also not stand in its way.
The state’s medical market has six vertically integrated companies that control 13 medical licenses. The Cannabist Company Holdings Inc. (CBSTF), which appears to be the state’s sole multi-state operator, holds three licenses under its old Columbia Care corporate name. Despite being left out of the original adult-use legislation, a subsequent bill signed in July, HB 408, created a pathway for them to convert to hybrid models that can also sell to non-patients.
Conversion applicants must show how they plan to continue serving the medical population, how they plan to support the state’s social equity program, and a signed labor peace agreement with a bona fide labor organization. All conversion licenses must be issued by Nov. 1, 2024, per state law. They will be good for two years before they must be renewed.
Cultivation, manufacturing or testing facilities can begin operating in the non-medical market once they receive conversion licenses. Retail operations must wait for a commence operation order from the commission after they are licensed. The law states that before issuing commence operation orders, the commission must consider the retailer’s ability to continue serving the medical market, as well as the number of social equity retailers that are also ready to open.
