A marijuana joint. Courtesy of Erik Fenderson.

When Virginia this year became the first Southern state to begin the process of legalizing recreational marijuana, social equity advocates and cannabis enthusiasts saw it as a big win.

But while some personal possession and home growing became legal as of July 1, one important detail might have gotten lost in the haze of celebration: The parts of the legislation that would create a full, legal cannabis marketplace by 2024 – and would promote racial and social equity – weren’t a done deal.

They must be reenacted by the 2022 General Assembly – which will look very different from last year’s version, at least in the House of Delegates, where Republicans this week regained the majority.

The legislation was broadly opposed by Republicans in both Democrat-controlled houses.

“I really think what you have to do is assume the whole thing is starting from a clean slate now,” said Greg Habeeb, a former Republican state delegate from Salem who now runs Gentry Locke Consulting in Richmond and has been working with companies that want to get into the cannabis business.

“Reenactment means that nothing is final, and that it takes another vote,” said Chelsea Higgs Wise, a Richmond-based social activist who co-founded the group Marijuana Justice, which advocates for racial equity in legalization and enforcement. “And now we have very different people taking that vote.”

Sen. Adam Ebbin, D-Alexandria, and House Majority Leader Charniele Herring, D-Alexandria, who were sponsors of the legislation and chair and vice-chair, respectively, of the Joint Commission on Cannabis Oversight, did not respond to calls or emails seeking comment this week.

But House Minority Leader Todd Gilbert, R-Shenandoah, on Thursday hinted to reporters that changes are coming.

House Minority Leader Todd Gilbert, R-Shenandoah County, soon to be in the majority.

“All they did was essentially create a black market for marijuana, or enhance the black market for marijuana that already existed by legalizing the possession and the growing of marijuana,” he said of the 2021 legislation, which sets retail sales to start Jan. 1, 2024. Between now and then, the Cannabis Control Authority Board is tasked with developing a regulatory framework for the marijuana marketplace.

“We are going to have to work with the Democratic Senate to fix all that,” said Gilbert, who this week announced his bid for Speaker of the House. “And I imagine that the roadmap that they laid out for that to occur, if they did in the future, is going to change dramatically. But obviously we have been left with that live grenade kind of rolling around and we need to fix it, or all we have is a black market.”

Much of the attention and excitement around the legislation has focused on the ability of adult Virginians to legally possess, grow and, at some point, buy marijuana. But a driving factor behind legalization among Democrats and social activists was the recognition that cannabis laws have been unequally enforced in Virginia.

A 2020 report by the Joint Legislative Audit and Review Commission found that the average arrest rate for marijuana possession for Black people was 3.5 times higher than for whites. Black defendants were also convicted at a rate 3.9 times higher than white defendants.

Legislation that decriminalized simple marijuana possession passed in 2020 with bipartisan support; the JLARC study predicted that it could reduce marijuana-related arrests by about 60%, based on the average decline in other states. Adding in legalization could reduce arrest by more than 80%, it found.

The legislation that cleared the General Assembly in February would have legalized simple possession on Jan. 1, 2024 – the same date that the legal marketplace is set to launch. Marijuana Justice was part of a coalition of advocacy groups that successfully pushed for legalization to be moved up to July 1, 2021, citing a need to put a stop to unequal prosecutions while the commercialization framework was being set up.

Under the new law, all records of arrests and convictions for misdemeanor possession with intent to distribute also have been automatically sealed.

Wise said she’s concerned that the forward momentum on marijuana-related criminal justice reform will be lost. She and other advocates are still pushing for the release of people who are incarcerated for marijuana convictions and for an end to the separation of families over marijuana issues.

The law also intended to create an inclusive cannabis marketplace, with the specific goal of opening it up to people who have been affected by drug laws.

Cannabis-related businesses are predominantly white-owned. A 2017 survey by Marijuana Business Daily, which covers the cannabis industry, found that 19% of respondents who started a cannabis business or have an ownership in a marijuana company were racial minorities.

The legislation created a category of “social equity” license applicants; included in this category are people who have been convicted of a misdemeanor related to cannabis, who live in an area that is “disproportionately policed” for marijuana crimes or is “economically distressed,” or who graduated from a historically Black college or university in Virginia.

The provision has been unpopular among some Republicans, including Del. Glenn Davis, R-Virginia Beach, who in February tweeted: “I never realized the way to get ahead in life was to break the law. Were you or a family member charged with marijuana possession in the past? Get ready to apply for your set-aside marijuana retail license and low-interest taxpayer-funded business loan. #CompaniesForConvictions.”

The law also earmarks 30% of tax revenue from marijuana sales for the Cannabis Equity Reinvestment Fund, which will be used to help communities that have been disproportionately affected by drug enforcement and economic disinvestment. It will be overseen by the Cannabis Equity Reinvestment Board.

Anthony West of Roanoke, a member of the board and the chief operations officer of Virginia CARES, urged the new administration to continue down the path toward social equity.

“I see a lot of communities with people that look like me who have been hugely, negatively impacted by legislation on marijuaa and drugs in general,” he said. “I think people who look like me should have an equitable opportunity to be involved in the legalization of marijuana, be involved in having dispensaries, be involved in the cannabis business as a whole.” 

Setting aside licenses for social equity applicants will ensure that small players will have an opportunity to participate in a marketplace that could otherwise be dominated by large companies, he said.

Habeeb predicts that differences over the social equity components of the 2021 legislation –  what kinds of social equity categories should be created, how they should be applied, if they should exist at all – will pose a significant hurdle to passing a new bill. 

Sen. David Sutterlein, R-Roanoke County, agreed. 

“If it’s believed that a product should be legal, a framework should be set up for that,” he said. “Preference should not be given to people simply because they previously engaged in then-criminal activities.

“I don’t think there’s a lot of support for a proposal like that,” he said. 

Democrats, in a rush to pass the 2021 legislation, made no effort to include Republicans in serious discussions, he said – even those, like himself, who had supported decriminalization just a year earlier.

Wise said she is concerned about how Republican lawmakers will approach the issue during the next session.

“At this point, we are a bit worried that the Republicans will stop the movement on commercialization, which will stop any licensing, the social equity portions, and it will stop the reinvestment,” Wise said.

Another unknown: what position the governor-elect might take. Glenn Youngkin’s campaign said that he would not seek to repeal legalization, but that’s not really the question, Habeeb said.

“Even the folks who may not be enthusiastic about marijuana legalization realize we’re not going backwards on that,” he said.

The bigger question: How much will Youngkin lean into advancing a new bill?

Habeeb doesn’t believe that will be a high priority for the new administration; don’t expect to see Youngkin sitting around a table with a bunch of legislators debating the final terms of a recreational market, he said.

“But I don’t think they are opposed in any way that would prevent him from signing a bill if the legislature develops one,” he said. “I do believe he’ll be supportive of a compromise bill if the House and Senate send him one.”

Youngkin was critical of cannabis use, and of the state’s legalization efforts, in comments he made at a number of campaign events over the past year.

“If there was a group of children that were sitting here and I was talking to them about marijuana I would tell them don’t use it,” Youngkin said at an April stop in Lynchburg, according to a report by WSET-TV. “I’ve never met anybody who habitually used marijuana and was successful and I would tell all of them the same thing.”

On a number of occasions during his campaign, Youngkin said other states have fallen short on revenue projections from marijuana sales. At one campaign stop, he said that cannabis sales had underperformed in “every state” in which they had been legalized; he also specifically has called out California, Oregon and Colorado. A Washington Post analysis following his remarks found that many states actually have exceeded their revenue projections.

But Habeeb believes that legislators will reach a compromise of some kind, based on his conversations with people on both sides of the aisle.

“Everybody I talk to says we need to pass a bill to create a commercial recreational market – that it’s not acceptable to have legalization and the black market but no regulated market,” he said.

Habeeb, whose clients include hemp processors who are looking to enter the cannabis market on a significant scale and people who want to get into the retail side of the business, said the uncertainty surrounding the future of commercialization could signal opportunity for some of them.

Some people who are now interested in getting into the Virginia market weren’t part of the legislative process and see a chance to have a voice in what the industry is going to look like, he said.

As the framework is currently written, the Cannabis Control Authority will be able to issue up to 400 licenses for retail stores, 25 for wholesalers, 60 for manufacturers and 450 for cultivation facilities. 

The law forbids any investor from holding a license in more than one category, with an exception: Medical marijuana processors and industrial hemp processors can apply for multiple licenses if they pay a $1 million fee.

Those provisions are now up for debate, Habeeb said, as is the idea of setting aside social equity licenses.

Staff writer Markus Schmidt contributed information to this report.

Megan Schnabel

Megan Schnabel is a reporter for Cardinal News. Reach her at megan@cardinalnews.org.