Compromise Bill To Legalize Marijuana Sales In Virginia Passes Out Of House Committee

After a negotiations by stakeholders early Thursday morning, a Virginia House panel approved a revised, “compromise” version of legislation to legalize and regulate retail marijuana sales in the commonwealth. Supporters now hope to push the bill through both chambers of the legislature and deliver it to Gov. Glenn Youngkin (R), though he has said he is not interested in signing cannabis commerce legislation.

The House General Laws Committee passed the amended bill, SB 448, on a 12–10 vote. Members first adopted substitute language that attempted to bridge remaining gaps between the bill, originally introduced by Sen. Aaron Rouse (D), and a separate House measure sponsored by Del. Paul Krizek (D).

“After these bills passed their respective bodies,” Krizek told the House General Laws Committee on Thursday, “Sen. Rouse and I went to work immediately with stakeholders to harmonize them. Fortunately, there was already many areas of agreement, such as public safety, public health, enforcement, local land use referendum and regulatory oversight.”

“We took up three policy areas where the bills differed,” Krizek continued. “Thanks to creative and diligent efforts, the bills are now aligned with respect to those issues, which were: one, timing for market for the market; two, the canopy size and how it’s characterized; and three, what we kind of call equity.”

The Senate Rehabilitation and Social Services Committee is expected to take up the House bill, HB 698, on Friday morning, with members expected to bring that measure into alignment with the new compromise.

Regarding timing, retail stores under the new compromise bill would open no earlier than May 1, 2025, although the licensing process would begin in September of this year.

And unlike Krizek’s own House proposal, which would allow certain businesses to begin retail sales ahead of others, the new May 2025 start date “will be the same for everyone,” the lawmaker said.

Krizek’s proposal would have allowed existing medical marijuana businesses, some hemp businesses and up to 60 equity-focused microbusinesses to begin legal sales on January 1, 2025, with licensing opening up to other businesses later that year. Critics, however, said that approach would allow some businesses to unfairly dominate the market.

Retail sales of cannabis would be taxed at about 9 percent under the amended bill, including a 4.5 percent state tax and up to a 4.5 percent tax that local governments could optionally impose. The earlier Senate bill would have taxed products at up to 17.5 percent.

The compromise also regulates commercial marijuana cultivators by size, measuring scale by square footage rather than individual plant count, as the Senate bill originally provided. And unlike the House bill, which would have banned outdoor grows entirely, the compromise proposal allows outdoor cultivation by smaller-scale growers. Larger operators would be restricted to growing indoors.

As for equity, the proposal would set up a microbusiness program that would award licenses based in part on applicants’ personal histories, an effort to redress drug war harm.

Entities at least two-thirds owned and directly controlled by eligible applicants, which include people with past cannabis misdemeanors, family members of people with past convictions, military veterans, individuals who’ve lived at least three of the past five years in a “historically economically disadvantaged community,” people who’ve attended schools in those areas and individuals who received a federal Pell grant or attended a college or university where at least 30 percent of students are eligible for Pell grants.

Microbusinesses would also qualify for additional support, including a partial waiver of application and licensing fees as well as technical and administrative assistance.

Though the substitute amended Rouse’s bill, the senator himself did not appear at the House committee hearing. His office has also not responded to multiple requests for comment by Marijuana Moment in recent weeks.

“Sen. Rouse and I are happy to report that the Senate and House are on the cusp of sending the governor legislation which will create a retail marijuana market in a very responsible and thoughtful way,” Krizek said before the committee vote. “And we have to do this, because we’ve got to do something about that $3 billion illicit market. It’s time to give Virginians access to a safe, tested and taxed product.”

Representatives of at least two groups that have sometimes butted heads in recent months spoke in support of the compromise bill.

Greg Habeeb, a former legislator who is now a lobbyist on behalf of the Virginia Cannabis Association (VCA), which represents a number of small businesses and hemp operators, described the compromise approach as “the fair way to do it.”

“There’s equal access,” he said. “This takes care of small businesses, it takes care of Virginia farmers, it makes sure that the protections are in place in the market so that it’s properly regulated.”

Chelsea Higgs Wise, executive director of the advocacy group Marijuana Justice, said the organization is in support of the revised bill “because it directly supports those that have been impacted by marijuana enforcement in the past.”

“We’re really excited to be able to come to a consensus,” Wise said, “and I thank all the parties for their hard work on this.”

Not everyone, however, is keen on the compromise bill. JM Pedini, development director for the advocacy organization NORML and executive director of the group’s Virginia chapter, did not speak at the hearing but separately told Marijuana Moment they’re disappointed that the latest bill pushes the opening of legal sales further down the road.

Even a day earlier, Krizek was telling reporters that the compromise bill would open stores in March. That has now been pushed back by another two months.

“It’s unfortunate that once again Virginians are being told to wait another year for retail sales to begin,” Pedini said. “There is no industry without consumers, yet consumers are being told to get in the back of the line while business interests are prioritized over theirs—businesses that purportedly need more time to better position themselves to capitalize off of those very consumers.”

“I agree with Del. Krizek,” they added. “It is time to ensure Virginians have legal access to cannabis that is regulated for consumer safety. But that time ought to be in 2024, not delayed until 2025.”

Pedini did note that some of NORML’s suggested fixes to earlier versions of the legislation were included in the latest bill, including amendments to remove penalties for homemade edibles and lawful public possession.

Here’s what the latest version of SB 448 would do, according to a draft obtained by Marijuana Moment:

  • Retail sales would not begin until May 1, 2025—later than what proponents said would likely be a March start date in the revised bill and later still than the January 1 date in the measures the House and Senate separately passed earlier this session.
  • Adults would be able to purchase up to 2.5 ounces of marijuana in a single transaction, or up to an equivalent amount of other cannabis products as determined by regulators.
  • A state tax of 4.5 percent would apply to the retail sale of any cannabis product, and local governments could levy an additional tax of up to 4.5 percent.
  • The Virginia Cannabis Control Authority would oversee licensing and regulation of the new industry. Its board of directors would have the authority to control possession, sale, transportation, distribution, delivery and testing of marijuana.
  • Local governments could ban marijuana establishments, but only if voters first approve an opt-out referendum.
  • Locations of retail outlets could not be within 1,000 feet of another marijuana retailer.
  • Cultivators would be regulated by space devoted to marijuana cultivation, known as canopy size, rather than by the actual number of plants they grow.
  • Both indoor and outdoor marijuana cultivation would be allowed, though only growers in lower tiers—with lower limits on canopy size—could grow plants outside. Larger growers would need to cultivate plants indoors. Secure greenhouses would qualify as indoor cultivation.
  • Only direct, face-to-face transactions would be permitted. The bill would prohibit the use of other avenues, such as vending machines, drive-through windows, internet-based sales platforms and delivery services.
  • Existing medical marijuana providers that enter the adult-use market could apply to open up to five additional retail establishments.
  • Serving sizes would be capped at 10 milligrams THC, with no more than 100 mg THC per package.
  • No person could be granted or hold an interest in more than five total licenses, not including transporter licenses.
  • People with convictions for felonies or crimes involving moral turpitude within the past seven years would be ineligible to apply for licensing, as would employees of police or sheriff’s departments if they’re responsible for enforcement of the penal, traffic or motor vehicle laws of the commonwealth.
  • An equity-focused microbusiness program would grant licenses to entities at least two-thirds owned and directly controlled by eligible applicants, which include people with past cannabis misdemeanors, family members of people with past convictions, military veterans, individuals who’ve lived at least three of the past five years in a “historically economically disadvantaged community,” people who’ve attended schools in those areas and individuals who received a federal Pell grant or attended a college or university where at least 30 percent of students are eligible for Pell grants.
  • “Historically economically disadvantaged community” is an area that has recorded marijuana possession offenses at or above 150 percent of the statewide average between 2009 and 2019.
  • Tax revenue from the program would first cover the costs of administering and enforcing the state’s cannabis system. After that, 60 percent of remaining funds would go toward supporting the microbusinesses program, 25 percent would fund substance use disorder treatment and prevention, 10 percent would go to pre-K programs for at-risk children and 5 percent would fund a public health and awareness campaign.
  • Adults could also share up to 2.5 ounces with other adults without financial remuneration, though gray-market “gifting” of marijuana as part of another transaction would be punishable as a Class 2 misdemeanor and a Class 1 misdemeanor on second and subsequent offenses.
  • A number of other new criminal penalties would be created. Knowingly selling or giving marijuana or marijuana paraphernalia to someone under 21, for example, would be a Class 1 misdemeanor, punishable by up to a year in jail and a maximum $2,500 fine, as would knowingly selling cannabis to someone reasonably believed to be intoxicated. It would also be a Class 1 misdemeanor to advertise the sale of marijuana paraphernalia to people under 21.
  • Knowingly obtaining marijuana on behalf of someone under 21 would be a Class 1 misdemeanor.
  • People under 21 who possess or use marijuana, or attempt to obtain it, would be subject to a civil penalty of no more than $25 and ordered to enter a substance use disorder treatment and/or education program.
  • Illegal cultivation or manufacture of marijuana, not including legal homegrow, would be a Class 6 felony, punishable by up to five years imprisonment and a $2,500 fine.
  • People could process homegrown marijuana into products such as edibles, but butane extraction or the use of other volatile solvents would be punishable as a Class 1 misdemeanor.

Supporters have an incentive to shepherd the consensus bill forward in both chambers. If the opposite houses pass differing legal sales bills, the issue would go to a bicameral conference committee—a process that’s often hurried and even less transparent than typical lawmaking.

“We’ve all had the situation where a massive conference report—that never went through committees, that the public never saw—shows up on the floor on the last day of session, and you have to vote on that,” Habeeb, the lawmaker-turned-lobbyist said at Thursday’s hearing. “This is the most transparent way possible to pass a bill like this.”

VCA President Jason Blanchette told Marijuana Moment that the group is “extremely proud to have been able to come to consensus, prior to conference, on such an impactful piece of legislation.”

“Survive and advance is the name of the game, and we live to fight another day,” he said.

Even if the legislature does pass a consensus legalization bill this session, it will still have to get past the governor, who has sent mixed messages around legalization. While the governor has not explicitly said he’ll veto a retail marijuana bill, he signaled last month that he doesn’t have “any interest” in legalizing sales under the Democrat-led plans.

When he was first elected, however, Youngkin said he was “not against” allowing commercial sales categorically.

Use, possession and limited cultivation of cannabis by adults is already legal in Virginia, the result of a Democrat-led proposal approved by lawmakers in 2021. But Republicans, after winning control of the House and governor’s office later that year, subsequently blocked the required reenactment of a regulatory framework for retail sales. Since then, illicit stores have sprung up to meet consumer demand.

Following last year’s elections, Democrats are now back in charge of both chambers of the legislature.

A sales bill did advance through the Democratic-controlled Senate last session, but it stalled in committee in the House, which at the time had a GOP majority.

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