New 2024 Connecticut Cannabis Laws: Impacts on Disproportionately Impacted Area (DIA) Cultivators and Conversion to a Micro-Cultivator
Recent amendments to Connecticut’s cannabis and hemp laws are providing great relief to DIA (Section 149) cultivators who have struggled to operationalize their licenses. The new rules provide the opportunity to convert to a micro-cultivator and exceptions if a licensee opts to retain its current DIA Cultivator License. The impacts of the statutory changes are discussed in-depth below.
Conversion to a Micro-Cultivator:
Beginning July 1, 2024 and ending March 31, 2025, DIA cultivators can opt to convert to a micro-cultivator for a $500,000 fee by withdrawing the cultivator application and submitting a micro-cultivator application. A licensee opting to convert would need to apply for a micro-cultivator license before March 31, 2025 and would need to obtain a provisional micro-cultivator license by December 31, 2025. If this option is selected, only one equity joint venture (EJV) can be formed and the EJV cannot be applied for until after a final micro-cultivator license is obtained, cultivation has commenced, and all fees have been paid. The social equity partner for the EJV, who must own 50% of the EJV, can be the same person as used for the cultivator entity or another qualifying individual.
If a DIA cultivator opts to convert to a micro-cultivator, they would be permitted to expand and later convert to a full cultivator under the normal micro-cultivator procedures. Under these procedures, one must begin as a micro-cultivator with no less than 2,000 square feet of grow space and no more than 10,000 square feet of grow space. They can then apply for expansion of grow space (up to 25,000 sq. ft.) in increments of 5,000 square feet on an annual basis from the date of initial licensure if the entity is not subject to any pending or final administrative actions or judicial findings. If a micro-cultivator desires to expand beyond 25,000 square feet of grow space, the micro-cultivator licensee may apply for a cultivator license one year after its last expansion request. If this approach is elected, the applicant would need to meet all cultivator licensure requirements and would have to pay the applicable cultivator license fees.
In addition to growing, a micro-cultivator may label, manufacture, package and perform extractions on any cannabis cultivated, grown and propagated at its licensed establishment, provided it meets all licensure and application requirements for a food and beverage manufacturer, product manufacturer or product packager. A micro-cultivator may also sell, transfer or transport its cannabis to a dispensary facility, hybrid retailer, retailer, delivery service, food and beverage manufacturer, product manufacturer, research program, cannabis testing laboratory or product packager, provided the cannabis is transported utilizing the micro-cultivator's own employees or a transporter. A micro-cultivator can also sell its cannabis (including seedlings, subject to statutory requirements) to retail consumers (but not to qualified patients or caregivers) via a licensed delivery service. The language permitting micro-cultivators to deliver to consumers themselves was removed in this latest round of amendments.
New Exceptions for DIA Cultivators:
If a DIA cultivator wishes to retain its license, the new laws provide several exceptions to the previous rules. Regarding outdoor grow, the new laws provide exceptions to the original rule that a cultivator can only be located within a DIA. Now, cannabis can be grown exclusively outdoors in any municipality containing a DIA (but not within the DIA itself) if certain requirements are met, namely the land is zoned for farming or agriculture and the cultivation otherwise complies with all applicable regulations. DIA cultivators can also grow on a reservation of the Schaghticoke, Paucatuck Eastern Pequot or Golden Hill Paugussett tribes or on other land owned in fee simple by those tribes as long as the land or reservation includes at least ten acres of contiguous land. The new laws also remove the indefinite license of DIA Cultivators that has previously existed. Thus, if a DIA Cultivator elects to retain its license, it must obtain a provisional cultivation license by December 31, 2025.
DIA cultivators, whether located within a DIA or not, may start with smaller grow spaces of 5,000 square feet. Any cultivator opting to start with this lesser grow space must expand to 15,000 square feet by December 31, 2025, or face a penalty of $500 per day.
Conclusion:
The ability to convert to a micro-cultivator and the new exceptions should help many DIA cultivators who have struggled with obtaining suitable locations within a DIA or capital to begin their grow operations. Please contact our Cannabis practice attorneys at Pullman & Comley for a more detailed discussion on how the new rules provide relief to DIA cultivators and the micro-cultivator conversion process.