Increased Competition for Cannabis Licenses in Maryland

For competitive cannabis license applications, diversity- and socioeconomic-related scoring criteria play an increasingly important role in determining who wins a license. Grower and Processor licenses in Maryland are no exception to this trend. In fact, Maryland’s latest round of applications has perhaps the most complicated and tedious diversity criteria that the cannabis industry has seen to date. The requirements are so highly involved that we have developed a formula to calculate the application scoring points that our clients are eligible for on the basis of diversity and socioeconomic criteria. Don’t wait to contact our licensing experts now if you need help with a Maryland application!

The competition for license applications has become extremely strong over the past several years, with very narrow margins separating winners and losers. For example, in New Jersey’s Northern Region, 6% of application points were awarded based on diversity criteria, while winning scores were in a very tight range of 92.1–93.2%; in this case, diversity criteria could make or break a license application. In Maryland, diversity and socioeconomic criteria are even more heavily weighted, representing a full 15% of possible application points.

There are three distinct ways to capture diversity-related application scoring points:

• Narrative Diversity Plan
• Disadvantaged Equity Applicant/Members of the Most Disadvantaged Groups in the Medical Cannabis Industry
• Economically Disadvantaged Areas

Diversity Plan

Application Scoring: 5 Points

This is the only narrative-based diversity criteria in the application. Here, applicants have an opportunity to explain their team’s diversity, establish internal diversity goals, and outline a plan to achieve those goals. Applicants who have previously applied for licenses in other states will be familiar with these criteria, but Maryland goes one step further by asking specifically for proposed timelines and benchmarks for achieving the diversity goals outlined in the diversity plan, necessitating a level of detail that is not often required.

Disadvantaged Equity Applicant / Most Disadvantaged Groups

Application Scoring: 5 Points

This section is where Maryland begins to complicate the diversity criteria. The first concept to understand is that the diversity status of owners only earns application points if the owner has a net worth equal to or below $1,713,333, or is a disadvantaged owner of a certified minority business enterprise. That means it is theoretically possible to have a 100% minority-owned business that does not qualify for points in this application section due to the high net worth of the owners.
The second concept to understand is the division between Disadvantaged Equity Applicants and Most Disadvantaged Groups. As defined in COMAR 10.62.01.01B(10), Disadvantaged Equity Applicants include women and minorities, specifically African Americans, American Indians/Native Americans, Asians, and Hispanics. The Most Disadvantaged Groups include only African Americans and American Indians/Native Americans. This distinction is critical to understanding the points available to you:

• If at least 51% of your business’ ownership interest is held by Disadvantaged Equity Applicants, you are eligible for 3 points.
• If at least 51% of your business’ ownership interest is held by members of the Most Disadvantaged Groups, you are qualified for 2 (additional) points.
• If between 25% and 50% of your business’ ownership interest held by members of the Most Disadvantaged Groups, you are only qualified for 1 (additional) point. *

Further complicating matters, it is possible to capture the above-mentioned application points without meeting the diversity and equity requirements if you are able to document and demonstrate good-faith efforts to include minority and low-equity individuals in your ownership. These good-faith efforts include detailing the initial solicitation date and method used to make contact with prospective minority and low-equity owners, details for follow-up date and method used to make contact, and details of the proposed offer made to these individuals.

* Note: It is incumbent upon the applicant to prove the equity and diversity status of its ownership using the application attachments.

Economically Disadvantaged Areas

Application Scoring: 5 Points

The last of Maryland’s Diversity and Social and Economic Equity Factors is Economically Disadvantaged Areas. The name of this section is misleading; the question does not relate to the actual location of the business, but is judged on the following five criteria:

• Is at least 51% of ownership interest held by individuals living in economically disadvantaged areas for 5 of the preceding 10 years?
• Do the majority of current employees live in an economically disadvantaged area?
• Do the majority of current contractors live in an economically disadvantaged area?
• Is at least 51% of ownership interest held by individuals whose household earns no more than 80% of Maryland’s median income?
• Does the applicant have significant past experience in promoting economic development of economically disadvantaged areas?

You must answer “Yes” to at least three of the above five questions to qualify for any points whatsoever for Economically Disadvantaged Area considerations. **It is not clear, however, that there is a one-to-one relationship between each “Yes” response and one application point. For example, the Maryland Medical Cannabis Commission (“MMCC”) has not indicated that four “Yes” responses equal four points, while five “Yes” responses equal five points. In other words, it may be possible that you qualify for the full five points even with only three “Yes” responses, but this is not guaranteed.

** Note: Similar to the note above, please understand that in order to realize these points, you must provide documentation sufficient to prove that your team members qualify for the five categories listed above.

Ultimately, the work to capture full points for diversity and socioeconomic factors should begin as soon as possible, and each step along the way requires tedious documentation of your efforts. In order to fully understand what the Maryland Grower and Processor applications are calling for, you can read the MMCC’s Diversity and Socioeconomic Factors Guidance and Economically Disadvantaged Areas Guidance.

In the competitive landscape of cannabis license applications, you must work to capture every point possible if you hope to win; in Maryland, that requires an earnest effort to meet diversity and socioeconomic criteria.

Contact our experts today for help with Maryland’s second round of applications!