Local Cannabis Businesses Are Coming to Help Delaware

An Economic Boom In A State Known for Out-of-State Business

As all eyes turn to Delaware’s new cannabis program and upcoming license applications, it’s not forgotten that the state is also known for housing significant amounts of out-of-state businesses. Home to over 65% of Fortune 500 companies and 80% of all publicly traded companies, the state has more companies than people. The “Delaware Loophole,” where intangible objects are not taxed, has made the state attractive for tax purposes to businesses across the country, which had made residents and small businesses owners nervous about what Delaware would do for its emerging cannabis market. 

Would the state become awash in multi-state cannabis operators? Would Delawareans even have a tangible shot of entering the cannabis space? Or would other neighboring states like New Jersey, Maryland, and in the future, Pennsylvania appear more exciting to a hopeful cannabis operation? Luckily, Delaware is looking to help the local economy through supporting local cannabis businesses. For multiple reasons, now has never been a greater time to live in Delaware if you have cannabis on the mind. 

Introducing Delaware’s New Cannabis Program

First some background. Earlier this year, HB1 and HB2 became law without Governor John Carney signature, which saw the creation of the Delaware Marijuana Control Act. This Act sees a 15% retail sales tax on cannabis and cannabis products and creates a framework for pursuing licensure. (If you want some more details on this, check out our other Delaware blog post!)

The newly created Delaware Marijuana Control Act Oversight Committee will coordinate the implementation of the Act with the Medical Marijuana Program, the Division of Public Health, the Division of Substance Abuse and Mental Health, and the general public with the Marijuana Commissioner being the one to issue licenses. The Commissioner will be issuing upwards of 60 cultivation licenses, 30 manufacturing licenses, 30 retail licenses, and five testing licenses, a significantly high number of licenses given the state’s relatively small population (just over 1 million) and size (1,982 square miles). 

The Push For Microbusiness and Social Equity Licenses

Most notably for the new adult-use program is the new provisions for social equity and microbusiness applications. One third of all cultivation and manufacturing licenses, half of all retail, and two-thirds of testing licenses will be reserved for social equity applicants. To qualify for this, 51% of the ownership of the business must be held by one or more people who have resided for at least five of the last ten years in a disproportionately impacted area or have been convicted of or adjudicated delinquent of a cannabis-related offense, with a few exceptions. Spouses or children of persons convicted of the qualifying cannabis-related offense can also be regarded as a social equity applicant. 

With these provisions, it’s easy to see that a significant investment is being made towards supporting Delaware residents and businesses, as opposed to catering to out-of-state interests. On top of this, there are the microbusiness licenses which will make up 20 cultivation and 10 manufacturing licenses. There will be no retail microbusinesses. But, given the size requirements (no more than 2,500 square feet of canopy) and employee count (no more than ten), we do not believe outside businesses will be too inclined to open up shop in Delaware for this license type. 

With all this in mind, half of all cultivation licenses and two-thirds of the manufacturing will be for either microbusinesses or social equity applicants which have a Delaware residency requirement, and half of the retail licenses will be for social equity applicants. These first few glimpses of Delaware’s cannabis program are commendable, and we appreciate their effort to support local businesses and incentivize a thriving cannabis marketplace, not hindered by a limited rollout (given its only six medical compassion centers operations presently) or one which will be overwhelmed by multi-state operators. 

It’s Time to Start Your Own Delaware Cannabis Business

If you’re interested in getting started on your Delaware cannabis business, there is no better time than now. Our team of seasoned East Coast consultants is keeping an active pulse on the developing market and offering program updates on our Delaware cannabis guide. However, it’s imperative that you start your business plan and financial model now to take advantage of these local opportunities and get a head start on outpacing the competition.

Contact our cannabis consultants today to begin discussing your vision and preparing a winning license application.

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