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Proposed rules to regulate management contracts in Arkansas’s medical marijuana industry will be revised and sent back out for public comment, the director of the Arkansas Alcoholic Beverage Control Division said Thursday.
The state Medical Marijuana Commission held a public hearing Thursday to conclude a 30-day public comment period on the proposed rules. No one showed up to speak at the hearing but commissioners received emailed comments from representatives of the industry.
The commission received comments from Good Day Farm, the Arkansas Cannabis Industry Association, an owner of Custom Cannabis dispensary in Alexander and the owner of Fiddler’s Green dispensary in Mountain View.
Alcoholic Beverage Control Division Director Christy Bjornson said the staff would try to have the modifications to the proposed rules complete by the commission’s next meeting on Dec. 12.
The proposed rules are an attempt to regulate the contracts that many Arkansas medical marijuana businesses enter into to run the businesses.
Good Day Farm, which owns a cultivation facility and owns or manages several Arkansas dispensaries, said the proposed rules were too broad and could apply to many contacts the businesses have. The new rules could apply to building contractors, security contractors and IT services providers among others.
Good Day also took issue with the requirement that at least 60% of the ownership interest in a management company must be held by individuals who have lived in Arkansas for at least seven years. Good Day predicted the rule would have “a chilling effect” on contractual relationships and interstate commerce.
The rule would exclude providers outside the state expertise in the industry and many businesses would likely be unwilling to disclose the required information, Good Day said.
Erika Gee, who submitted comments on behalf of the Arkansas Cannabis Industry Association, shared a similar opinion that the rules could apply to many types of companies that contract with medical marijuana businesses. Gee listed accountants, banks, IT services providers and payroll companies among others. Gee also said the residency requirement would make it difficult to do business with out-of-state companies.
Gee called the rule “onerous and unnecessary” and said the commission didn’t have the authority to the state constitution to impose residency requirements.
Gee also took issue with the rules requiring contracts to be “commercially reasonable,” saying that licensees should be able to determine for themselves if a contract is reasonable. This rule will “undoubtedly lead to significant litigation,” she said.
Gee also said that a rule limiting a contractor from working with more than five medical marijuana businesses would be a violation of the U.S. Constitution and said the commission does not have such authority. Many vendors contract with more than five businesses, she said, and those contracts would have to be terminated or renegotiated if the rule went into effect. The contracts would likely go to the five highest bidders, she said.
James Adametz, an owner of Custom Cannabis, said he is in favor of the rules.
“It was the intent of the amendment (that legalized medical marijuana in 2016) not to have power and control of the cannabis industry in Arkansas limited to a few people or businesses,” he wrote.
Murphy, the majority owner of Fiddler’s Green, said management contracts are used to “cloak de facto sales of dispensaries” and said the intent of the medical marijuana amendment was to prevent “national players” from consolidating the industry. Murphy said the rules should require the disclosure of options to purchase or split profits. This would allow the commission to determine if a management contract “is actually a disguised sale,” she said.
“}]] The proposed rules address management contracts but some industry representatives think they have other implications. Read More
