A Baltimore County company that grows medical cannabis is attempting to stop Maryland regulators from trying to award four new marijuana cultivation licenses as part of an expansion effort that state lawmakers hoped would lead to more minority participation in the industry.
Curio Wellness filed a lawsuit Monday in Baltimore County Circuit Court alleging that the Maryland Medical Cannabis Commission is violating its own regulations by soliciting applications for more growing licenses without completing a supply and demand analysis.
Regulations governing the state’s medical cannabis industry say the commission may seek to license more marijuana growing companies than the original 15 that were approved “to meet the demand for medical cannabis by qualifying patients in an affordable, accessible, secure and efficient manner.”
Curio, which is owned by prominent Democratic supporter Michael Bronfein, states in the lawsuit that it has spent more than $10 million to build its cannabis growing business based on regulations that promised a “strictly limited number” of licenses. To award more licenses would jeopardize the investments of Curio and 13 other companies that have licenses.
“Curio was compelled to file this action to protect their business investments and rights and to enforce the promises made by the state of Maryland and the Maryland Medical Cannabis Commission to induce private sector growers to invest and operate in this important public health program,” said David Nevins, a Curio spokesman. “Those promises include the state not expanding the number of cultivator licenses without first conducting a demand study to determine if additional supply is necessary to meet the demand for this newly established public health program.”
Del. Cheryl Glenn, an advocate for minority participation in the industry, said the state’s medical cannabis law has always given the commission the right to award new licenses as needed. The Baltimore Democrat said a “disparity study” conducted by the state to assess the industry and minority participation is enough to warrant an expansion of licenses considering that African American-firms were cut out of the awards in Maryland.
Minority firms lost out in the first round of bidding for 15 medical marijuana growing licenses.
Based on the disparity study’s findings showing minorities are disadvantaged, the General Assembly passed compromise legislation in 2018 to expand the marijuana growing operations to try to give minorities an ownership role.
Glenn said she was disappointed that Curio would attempt to block the state’s efforts to expand diversity given that the company achieved the desired “vertical integration” by landing growing, processing and dispensary licenses. That allows companies to grow their own cannabis, make their own products and sell them at dispensaries.
“It’s just unfortunate that Curio would take a position like this when they were awarded three licenses from the beginning,” Glenn said. “I would be ashamed to file such a lawsuit. It’s saying that you want to maintain the lack of diversity like we have in the rest of the country in this industry.”
She said African American and Native American citizens have “suffered disproportionately” from criminal marijuana laws yet have won only about 1 percent of all the medical cannabis licenses awarded nationwide.
The commission has been working for months to extend outreach to minority businesses across Maryland to encourage them to participate in the new application process, said Joy Strand, the state cannabis commission’s executive director.
“It is counterproductive to have to defend this lawsuit, when our efforts and attention should be focused on the new application process,” Strand said.
The 2018 law states that the commission may award no more than 22 grower licenses and must submit a report to the legislature about the potential for more licenses based on patient demand by Dec. 1, 2024.
The Maryland Wholesale Medical Cannabis Trade Association, which represents growers and processors, said it “rejects the lawsuit” and that “the current application process should continue.” One grower, the group said, “does not reflect the desire of the majority of companies in the industry” to support more diversity.
Curio’s lawsuit makes no mention of the effort to diversify the industry and it does not dispute the commission’s ability to seek more applicants. But the complaint contends the state must first conduct the study about how many more licenses are needed to address demand and how more cannabis products will impact pricing and diversion of medical products into black markets.
The commission “unilaterally decided to issue applications for additional licenses without having determined the demand or the impact of additional supply on its existing facilities,” Nevins said.
The lawsuit states that “there currently exists a sufficient supply of medical cannabis and the current production and production capacity is more than sufficient to meet current and all reasonably projected or anticipated needs for medical cannabis.”
In early December, Maryland’s medical cannabis industry ended its first year with $96.3 million in sales driven by nearly 52,000 patients who purchased about 730,000 individual products such as vape pens.
“Because cannabis is a substance for which there are significant medical benefits but the potential for abuse, the public has a significant interest in making sure that there is neither an oversupply nor undersupply in the market,” the lawsuit states. Such a study would likely show “ample supply.”
Commission Chairman Brian Lopez, who is named as a defendant, said the new application process will proceed.
“We have worked in collaboration with the General Assembly, the Black Caucus and Industry Stakeholders for over 10 months,” Lopez said in a statement. “It is imperative for the new licensees to enter this industry as soon as possible.”