I am an attorney in Bozeman. I have been practicing law in Montana since 2014 when I decided I had had enough of the East Coast and came back home to where I was raised. After passing my third bar exam here in Montana, I began to cultivate (pun intended) a practice in medical marijuana compliance. I represent over 30 medical marijuana providers, helping them to comply with the law. The first two and a half years of my practice were under the Montana Marijuana Act, also known as SB 423, as enjoined by Judge Reynolds. If you are not up to speed on SB 423, it was passed in 2011 to rein in some of the excesses of an unregulated medical marijuana market, but it went too far. Its actual purpose was to eliminate the industry through provisions such as allowing providers to service only three patients and preventing providers from being paid for the marijuana they did provide. The first lawsuit against SB 423 was filed in 2011. It bounced between the District Court and the Supreme Court three times. Ultimately, in 2016, after five years of litigation, the Supreme Court held that almost all of SB 423 was constitutional and dissolved the injunction, except for one provision. Immediately following the Court’s decision, the people of Montana voted in favor of a ballot initiative that repealed most of SB 423 and established a reasonable scheme for regulating the medical marijuana industry. Taking its cue from the people, the legislature sought to improve the Montana Medical Marijuana Act through SB 333 in 2017 and SB 265 in 2019. These were both good, but not perfect, efforts at enhancing the availability and quality of medical marijuana and making it easier for the network of providers to operate.
We are on the cusp of a new market in the marijuana industry and I am concerned that the legislature will find itself headed back down the SB 423 rabbit hole again. That will lead to extensive litigation and perhaps another ballot initiative to undo what the legislature does. This is not productive.
I want to give you some of my thoughts and concerns with respect to each of the bills you are considering.
I testified in person on Monday, April 12, 2021 in favor of HB 670. This bill looks like it is trying to strike an appropriate balance. I like that the DPHHS remains in control of medical marijuana cardholders instead of lumping them in with everyone else. They have different needs than non-patients and should be treated differently. I have lived in three other states than Montana, all of which charged sales tax. None assessed tax on medicine. I believe that a 5% tax on medical marijuana is not appropriate. It should revert back to the 2% tax, or no tax at all.
The opt-out structure of this bill is far better than the opt-in structure of HB 701. Opt-out is critical to cannabis businesses. Many have spent hundreds of thousands of dollars establishing cultivation facilities, extraction labs, and dispensaries. They also employ thousands of people, many of whom would lose their jobs if opt-in were to be the law.
The transition from the current medical marijuana provider licenses to general licenses as called for in the bill makes good sense. It utilizes the current law and organizational structure, which all providers know and understand reasonably well, instead of turning things upside down, as HB 701 and HB 707 would do. It allows providers to continue to do business where they are currently operating and the opportunity to expand if they can manage it. Adding two additional tiers to cultivation licenses will be well received by the industry. By way of example, I have one client that has been trying to get the DPHHS to establish a tier 10 for over a year, to no avail.
It is my opinion that this bill is in the same vein as the 2011 SB 423. It imposes restrictions that not only would nip the adult use cannabis industry in the bud, but also severely and detrimentally affect current medical marijuana patients who depend on providers for medicine that works for them. There are two ways HB701 does this. First, it eliminates the medical marijuana distinction by phasing it out entirely. Second, it requires local governments to opt in to the adult use market rather than the current opt-out provision. This will harm current providers, especially where they have spent hundreds of thousands of dollars establishing and building their businesses. To have a county government pull the rug out from under them could cost many people their livelihoods. In addition, medical marijuana patients will have to drive long distances to a county that opts in if they happen to live in a county endorsing prohibition.
That said, some of the provisions relating to investments and selling businesses make sense and I would like to see them in a final bill. Just like any other business, a cannabis business needs to be able to attract capital and sell the business as needed. Under current law, licenses are not transferable, and the DPHHS is interpreting that to mean that if Person A is the owner of ABC Company and wants to sell to Person Z, Person A cannot sell 100% of the business; Person A must remain a “person of interest” on the license. In any new law, licenses must be transferrable, otherwise we will have people who want out of the business being forced to remain because their business will be worthless if they do not.
It makes no sense to insert a layer of “wholesalers” into an industry that has been required to be vertically integrated by the Montana Medical Marijuana Act. This would do nothing but drive up the cost in the legal market. If one of the goals here is to reduce or eliminate entirely the illicit market for marijuana, the wholesaling provisions in the bill will not accomplish this, and in fact will give the illegal providers even more room to undercut the legal market.
One other thing I would like to see addressed is that MCA §16-12-113 provides for expungement of records, but only if the person petitions for it, rather than it being automatic. I believe this will lead to many people continuing to have drug convictions on their records even though the offenses for which they were convicted are no longer criminal. Not everyone will be aware of the law and others will not be able to afford an attorney to help them navigate the expungement process. Because of this, I believe the expungement of criminal records should be automatic.
Thank you for your attention to this important matter. If the committee has any questions, I would be happy to answer them.