Cannabis made a monumental impact on election day 2020 as five more states opted to legalize cannabis in either medical and/or recreational forms. Montana joined in on this historic occasion as voters approved Constitutional Initiative 118 and Initiative 190, making Montana the 14th state to legalize adult-use cannabis. Initiative 118 will amend the Montana Constitution to set the legal age for cannabis consumption to 21. Initiative 190 establishes a framework for licensing and regulating cannabis cultivation, manufacturing, and retail sales. Together these initiatives will allow individuals aged 21 and up to possess up to one ounce of cannabis or eight grams of cannabis concentrate. Under these regulations, individuals can grow up to four plants for personal use.
Although voters approved legalization, it will be several months before retail stores can begin serving recreational consumers. The Montana Department of Revenue is responsible for establishing the framework for licensing and regulating the cultivation, transportation, and sale of cannabis and cannabis-infused products. The department stated on November 9, 2020, that they anticipate addressing the new initiatives during the January 4th legislative sessions. Initiative 190 requires the department to have established rules and regulations and begin accepting license applications by October 1, 2021. There’s still much work to be done before issuing licenses and commencing production and adult-use cannabis sales. However, with deadlines set in place, these legislative sessions are expected to be constructive. In a recent interview with NBC Montana, Gene Walborn, Director of the Montana Department of Revenue, stated, “We look forward to working with the public and all interested parties as we develop guidelines around this new industry to move it forward, while also protecting public safety and raising revenue for the state of Montana.”
After establishing the rules, regulations, and overall industry framework, the state will begin accepting business license applications. However, they will be extremely limited. For the first twelve months, applications will only be open to existing licensed medical cannabis operators in good standing under the Montana Medical Marijuana Program. One year after the department accepts its first application, the department can begin accepting business license applications from the general public. Effectively giving current medical marijuana business operators a 12-month head start over. Despite the significant competitive advantage, worries about increased costs and the inability to maintain quality and supply to provide for existing medical patients are major concerns for some licensed medical dispensaries. In a recent interview with Bozeman Daily Chronicle, Mitchell Johnson, owner of Big Sky Buds, formerly Montana Cannaclub, stated, “The production is the main thing. If we can’t continue to provide for our medical patients, if we don’t see that happening, then we’ll probably stay away from the recreational.” There are growing concerns that the rules could substantially change during the upcoming legislative sessions, possibly allowing heavily funded corporations and experienced multi-state operators to enter Montana’s cannabis market.
Big Sky Country should expect a big cannabis market. A recent report conducted by the University of Montana Bureau of Business and Economic Research assessed the market and tax revenue potential of recreational cannabis in Montana and found that legalization could bring in approximately 43.4 million dollars in tax revenue during the first year and over $230 million over the next five years. In addition to tax revenue, legalization would create thousands of new essential jobs for Montanans and create new opportunities for interrelating businesses such as construction, security, transportation, and tourism.
As lawmakers enter into legislative sessions this January, we expect more details about the rules and application process to come soon. Program updates and details are available through the Montana Department of Revenue. Although the industry framework is still a work in progress, Montana is looking to be an appealing opportunity for existing and future cannabis operators. Now is the time to start forming your cannabis business and/or growth plan and securing needed capital. Raising capital and applying for a cannabis business license is a time-consuming process that requires a tremendous amount of planning, designing, and regulatory compliance preparations. Once you have finalized a design, the build-out process can take months to years, depending on the scale. Other considerations include site preparation and zoning, establishing community support, and developing procedures specific to local and state regulations.
It is time to start planning to win. From conception through execution, our team can provide market insight, strategic planning, financial pro forma modeling, grow room and facility design assist, equipment selection and integration, standard operating procedures, employee training, full-service project management, and data-driven cultivation and retail operational support to drive performance and ensure sustainability.
If you are interested in learning more about cannabis business opportunities in Montana, contact us today!
Andy is an Operations Advisor at Catalyst BC.
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