HB 408 – Allowing Medical Marijuana Compassion Centers to enter Recreational Market

Sponsored by Rep. Ed Osienski and Sen. Trey Paradee, House Bill 408 would create a pathway for currently existing medical marijuana retailers to obtain a temporary conversion license, enabling them to legally sell adult-use recreational marijuana while still maintaining their medical operations.

“As Delaware moves closer to the launch of recreational marijuana sales, it’s important that we continue exploring and implementing policies that will bolster the program’s success and support both new and existing retailers,” said Rep. Osienski. “Our experienced compassion centers are well-equipped to navigate this transition, and the funds generated from their conversion license fees will serve as a vital funding source for social equity applicants, empowering them to kickstart their ventures.”

While the Marijuana Control Act created four different license types, the measure did not provide an avenue for compassion centers to obtain a license to serve the recreational market.   HB 408 would allow existing medical marijuana compassion centers to apply for conversion licenses if they meet certain conditions. These conditions include:

• Eligibility for renewal in the Delaware Medical Marijuana Program.
• Documentation showing current ability to meet medical market demands, plans for continued service, and plans for supporting the social equity program
• A signed labor peace agreement with a legitimate labor organization.
• Submission of facility dimensions for cultivation facilities, if applicable.
• Payment of the conversion license fee.

The conversion license fee would be set at $100,000 for each license, with the proceeds earmarked to provide financial assistance to social equity applicants holding a conditional license. 

“For us, passing the Marijuana Control Act was always about our desire to replace an illegal market that has overwhelmed our court system and damaged lives with a legal, regulated and responsible industry that will create thousands of good-paying jobs in Delaware,” Sen. Paradee said.

“We also need to protect the jobs created by our compassion centers, who have already put in the hard work of standing up an industry and have the capacity and infrastructure to meet demand on Day 1,” he said.

“House Bill 408 will give Delaware’s existing marijuana-related business an avenue to enter Delaware’s new recreational market in a way that will also help the communities most harmed by the war on drugs take advantage of the startup opportunities created by Delaware’s new recreational marijuana law.”

HB 408 would set the application period for conversion licenses from August to November 2024.  Retail facilities holding this license would be required to receive approval from the commissioner before beginning recreational marijuana operations.

Additionally, conversion licenses would expire after 4 years, at which time the license may be renewed as an open license.

House Bill 408 – Allowing Medical Marijuana Compassion Centers to enter Recreational Market	Currrent Status – House Economic Everything 5/16/24
House Sponsors – Osienski	Senate Sponsors – Paradee
House Yes Votes –	Senate Yes Votes –
House No Votes –	Senate No Votes –
House Absents or Not Voting –	Senate Absent or Not Voting –

The Delaware Cannabis Action Network (Delaware CAN) has come out against this bill and issued the following statement on why:

“Delaware CAN opposes HB 408, a bill that grants existing medical dispensaries guaranteed licenses, special competive advantages and first mover access in the adult use market.

If you are a patient, consumer, or want a legal business in the new market, then you should be very concerned that they are trying to FASTTRACK this bad policy in the last few days of session. […]

We already fought this fight and won, but the dispensaries are well-funded and have high-paid, well-connected lobbiest, (paid for on the backs of patients who paid over-inflated cost for their medicine for the last decade).

The “conversion” bill rolls back the progress we already made, by allowing the existing medical dispensaries to skip the line to be AUTOMATICALLY grandfathered in, licensed before any other new market entrant, granted the 1st seed in the ground and the possibility to start earlier than any other new business. There are no guaranteed protections for patients with medical supply either.

HB 408 would:

• allow only 6 companies to have GUARANTEED *vertically integrated licenses in the adult use market, when everyone else will be forced to go through a lottery process where even the most skilled and knowledgeable applicants will not be guaranteed to win the lottery, let alone one in each category. (*vertically integrated means owning a license in each category of license types: cultivation, manufacturing and retail licenses)
• allow those 6 companies to begin cultivation and manufacturing before any other new market entrant. It also has the potential to allow the 6 companies to begin sales before anyone else.
• grant these 6 special companies special competitive advantages that will not be offered to any other new business
• potentially threaten patient supply and increase prices with a significant influx in demand
• Grant these companies the ability to outcompete new market participants, especially with the additional grandfather clauses added to Sussex co and municipality ordinances that ban or de facto ban all new cann-businesses
• undermine the intent of the original legislation and framework.
• Sell-out Delaware’s new industry to 6 hand-MMP-selected businesses that have been overcharging patients for years, lobbying for LESS competition in both the medical and adult-use markets and have not proven that they can even adequately accommodate the patients population.
• set the new adult-use industry up for failure

The intent seems to fast track this legislation in the 10 Legislative days left to session this year, after we waited years to even get where are now.