Two years after its launch, Vermont’s adult-use market is officially joining the ranks of larger, more mature markets by halting new retail and cultivator licenses.
The Cannabis Control Board voted to stop issuing new retail licenses and all but the smallest tier of cultivation licenses. The board came short of referring to the move as a “moratorium,” in favor of the term “pause.” They emphasized that it would be temporary and would likely last less than a year.
“This would be a dramatic shift in policy. But for those who have been watching our work and the experiences of the other adult-use states with uncapped licensing around the country, this shouldn’t be a terribly surprising development,” said CCB Chair James Pepper during the board’s Sept. 25 meeting.
State law requires the CCB to provide a 30-day notice before halting licensure, so Oct. 25 is the last day to submit applications for retail. Pepper warned that despite the 30-day lead time, he discouraged anyone from applying since there would not be enough time to complete the process before the final approval deadlines.
Retail applicants who have already submitted will have until Nov. 15 to complete the approval process. Cultivation applicants have until Oct. 25.
Vermont’s adult-use market launched on Oct. 1, 2022. Since then, 75 dispensaries have active licenses, supported by 380 cultivation sites, according to the CRB Monitor database.
Vermont allows for indoor, outdoor and mixed cultivation licenses. Outdoor is split into six tiers that range from 1,000 to 37,500 square feet of canopy, which the CCB estimates is roughly 125 to 4,687 plants. Indoor is also in six tiers, which range from 1,000 to 20,000 square feet. Mixed have five tiers with 1,000 to 2,500 square feet of indoor canopy, along with 1,000 to 20,000 square feet of outdoor canopy.
The CCB previously halted new licenses for indoor tiers three through five. Approvals for outdoor and mixed licenses have been on a seasonal pause since Apr. 1. Their application window will reopen for the season on Nov. 1.
One of the challenges in combating retail saturation is that when Vermont legalized adult-use cannabis, the legislature allowed cities and towns to proactively vote to opt-in to allowing cannabis retail. So far, only 78 municipalities out of the state’s 247 have moved to allow adult-use cannabis.
Of those 78, 46 currently have dispensaries in operation. Most of those municipalities only have one or two operating storefronts. But Burlington, in the northwest corner of the state, has become a retail hub with 13 shops.
One of those shops, Grass Queen, is reportedly closing already due to lack of business.
Rulemaking will try to establish equilibrium
The CCB is preparing to start a round of regulatory rulemaking, which would include new guidelines for dispensary locations to ensure there isn’t an oversaturation of smoke shops. Pepper said the CCB would also consider allowing direct sales from cultivators, similar to microbreweries with onsite sales, or allowing general stores to sell a small assortment of product, to better serve small towns that would be unable to financially support a large dispensary.
The rulemaking process often takes multiple months because it includes public input and feedback on initial drafts.
“Rulemaking is a long and public process,” said Pepper. “I’m concerned that once we start having realistic conversations about how we’re going to move forward and create this more geographic equilibrium, we’re going to see a rush towards these already saturated markets.”
At the same time, there are concerns about oversaturation of product in the state, which does not even include the upcoming annual October harvest for outdoor grows.
“If we continue to license cultivators with reckless abandon and supply and demand tilts way out of balance, we not only do real harm to smaller cultivators to the benefit of larger operators, we also create perverse incentives to divert legal cannabis to illicit markets,” said Pepper.
Geoffrey Pizzutillo, executive director of the Vermont Growers Association, was among the members of the public who commented prior to the board’s vote. Much like his fellow commenters, he was opposed to the halt in licensing.
“A moratorium, or even a momentary pause, does not provide solutions or address any of those issues. In fact, when we look at the states that impose moratoriums, they compound those issues,” he said. “This marks what I would characterize as a watershed moment for our marketplace. Do we want to have a unique marketplace that’s reflective of Vermont as a culture that’s successful, equitable and viable, or do we want to go down a tried and true path of a diminished market that we see in Oregon and elsewhere?”
Other states with license moratoriums
Vermont’s move gives the Green Mountain state something in common with several other states that have attempted to limit the number of available licenses.
Oregon recently passed a law that caps the number of available cultivation and dispensary licenses based on a ratio of the state’s population. These limits include one cultivation and retail license per 7,500 residents older than 21, while processor and wholesale licenses are limited to one per 12,500 residents.
Oregon had 1,374 active cultivation licenses, 806 retail licenses, 299 manufacturing licenses and 259 wholesale licenses as of Oct. 7, according to the CRB Monitor database. Oregon had more than 2.4 million residents who were 21 and older, according to the 2020 U.S. Census.
The current number of operational facilities exceeds these limits, meaning there is a de facto moratorium on licensing in the state.
Montana has an ongoing moratorium on new retail licenses. In recent months, the state has considered extending the moratorium into 2027. Montana had 320 active cultivation licenses and 467 retail, as of Oct. 7.
Oklahoma has a moratorium on new medical licenses that started on Aug. 26, 2022, and is supposed to last until 2026. This was done to combat the deluge of cultivation licenses that flooded the market in the first few years of legal medical. Oklahoma had 3,647 active cultivation licenses and 2,041 retail, as of Oct. 7.
Michigan considered a moratorium on grow licenses back in 2022 after its market became flooded with product leading to a price crash. No moratorium was officially put in place, but the state’s Cannabis Regulatory Agency recently considered not renewing annual licenses for dispensaries with outstanding debt. Michigan had 2,928 active cultivation licenses and 1,011 retail, as of Oct. 7.
