Recreational Marijuana in Virginia

electricity cost is a major factor in the location of indoor grow houses, in states where recreational marijuana is legal
electricity cost is a major factor in the location of indoor grow houses, in states where recreational marijuana is legal
Source: State of Colorado, Energy Use in the Colorado Cannabis Industry (p.8)

The Virginia General Assembly legalized use of marijuana for medical purposes in 1979, and expanded such use in 2015 and 2018. The laws protected patients from prosecution if they had a recommendation from a doctor that marijuana was medically advised. By the end of 2018, some form of medical marijuana use was legal in 46 states, and broad access to the drug under a doctor's guidance was available in 33 states.

In 2017, a Quinnipiac poll indicated that the 59% of the people in Virginia supported legalizing recreational use, while 35% percent were opposed. After the November, 2018 elections, recreational use had been legalized in the District of Columbia and 10 states, but at that time recreational use was allowed in no state closer to Virginia than Massachusetts.

Decriminalization of possession of up to one ounce in Virginia occurred in 2020. The possession of up to an ounce could be punished only as a civil penalty, similar to a traffic ticket. An ounce could be used to create about 50 joints for smoking.

Actual legalization of marijuana possession for recreational use occurred in 2021, in a compromise that did not authorize sale for recreational use. Possession of up to one ounce was legalized, while a civil penalty could be imposed for possession between one ounce and up to a pound. Possession of over a pound, which indicated a person had stockpiled marijuana for dealing rather than using, remained a felony crime.

In 2022, the legislature backtracked and lowered the threshold for non-criminal possession. Possession of an amount between four ounces and one pound was redefined as a misdemeanor crime, not a civil offense.

The General Assembly did set a schedule in 2021 for authorizing a full-scale commercial system for growing and selling marijuana by the start of 2024. Since sale was not legalized, the legislature approved the right to grow four plants in each house. The Joint Legislative Audit and Review Commission calculated in 2020 that just two plants could accommodate the desires of moderately heavy users for tetrahydrocannabinol (THC):1

Two plants grown at home can typically yield eight to 16 ounces of marijuana per year (though some growers can yield significantly more), which would be enough for a moderately heavy user. Extending the limit to four to six plants per person would give home cultivators a buffer against crop failures and also account for any male plants that may need to be removed. (Male plants are often disposed of because they do not produce THC-rich flower buds.)

In the 2018 legislative session, a bill to decriminalize possession of small amounts of marijuana for recreational use was killed in the Senate Courts of Justice Committee. The vote was clearly partisan. All six Democrats voted in favor, while all nine Republicans opposed decriminalization.2

The political divide reflected the urban-rural divide of Republican and Democratic elected officials, and the different socio-economic character of urban districts represented by Democrats vs. rural districts represented by Republicans. Urban districts had higher percentages of minority voters, and they were arrested for marijuana possession at significantly higher rates than whites.

Virginia has no mechanism for a citizen-initiated referendum, so legalization for recreational use required approval by the General Assembly. Legalization proposals had to be approved first in the Courts of Justice committee of the House of Delegates and the State Senate. Recreational use proposals were blocked in the 2020 session of the General Assembly, which chose to focus instead on decriminalization bills.

In 2020, the legislature ultimately decriminalized possession of up to one ounce of marijuana, hash, or oil concentrates. Those convicted of possession of marijuana had been at risk of 30 days in jail and a $500 fine, while possession of hash or other concentrates was a felony. Efforts by local prosecutors to dismiss all possession cases had been blocked by Virginia judges, who determined such an approach would be an abuse of prosecutorial discretion.

Though recreational marijuana use was not legalized, possession became a civil offense equivalent to a minor traffic violation, with just a $25 penalty. The new law did not eliminate the threat of selective enforcement against minorities based on a law enforcement officer's claim of smelling marijuana before initiating a search, but did eliminate the risk of going to jail for possession of small amounts of marijuana for personal use. In 2018, there had been 29,000 arrests, up from 20,000 in 2008.

In addition to many of the 2018 arrests, charges filed in previous years were also resolved in court cases that year. In 2018, more than 46,000 cases involving marijuana possession were prosecuted in General District Courts across Virginia. In the court system that year, only traffic-related cases exceeded the number of marijuana cases handled.

Some of those cases were not resolved that year, but of the nearly 35,000 cases completed nearly 20,000 people were convicted. African-Americans constituted 19% of the state's population in 2018, but were charged in 49% of the marijuana possession cases and convicted in 51%.

prosecutions and convictions for marijuana  possession had a disproportionate impact on the African-American population in 2018
prosecutions and convictions for marijuana possession had a disproportionate impact on the African-American population in 2018
Source: VCU Capital News Service and WWBT, Virginia prosecuted 46,000+ marijuana cases in 2018 (December 12, 2019)

The 2020 legislation was bipartisan. Decriminalization passed in the House of Delegates by 56-36 vote, and in the Senate by 27-12.

One side effect of decriminalization is that K-9 dogs trained to sniff out marijuana became surplus. The dogs had been imprinted to find that one drug, and could not be retrained. If K-9 signaled a law enforcement officer that a car had marijuana but the officer then found guns or other evidence of a felony, then a search based on just a civil crime might be invalidated and the case dismissed. The Virginia State Police retired 13 dogs, and trained new ones to detect Ecstasy (MDMA) cocaine, heroine and methamphetamines.

In Tazewell County, the two trained K-9's were sold to another state where possession had not been decriminalized. Two new dogs were purchased and trained to detect narcotics, and also to track and apprehend people. Cumberland County disbanded its K-9 unit, rather than spend up to $15,000 to acquire and train a new dog.

The sheriff elected in Prince Edward County in 2019 had emphasized in his campaign how he planned to restart the county's K-9 program. The county retired one of its two trained dogs, but donated the other to the Piedmont Regional Jail. Inmates were not allowed to possess cannabis, so searches by trained dogs were still appropriate there.

Though new dogs could be acquired which were not trained to signal their handler when smelling marijuana, early retirement took a toll on the old dogs. One handler who adopted his K-9 described him as suffering initially:3

I definitely noticed a change in his behavior. You could almost say that he was depressed... He would see me come downstairs, and I would be in my uniform, and he'd start getting excited, spinning around. He knew it was time to work. I'd come downstairs and go out the back door, and he wouldn't get to go with me. It kind of wore on him, but he's starting to come around more now.

after decriminalization of marijuana in 2020, K-9's trained to spot the drug became surplus
after decriminalization of marijuana in 2020, K-9's trained to spot the drug became surplus
Source: US Marine Corps, PMO K9 division maintains readiness with night training

Decriminalization was expected reduce the racial bias of law enforcement in Virginia. Though the percentage of whites and blacks using marijuana were close, in Virginia between 2010-2019 the arrest rate for possession was 3.5 times higher for blacks.

The Drug Policy Alliance concluded, after examining marijuana-related arrest between 2003-2013, that racial disparity was increasing:4

Police throughout Virginia have been enforcing marijuana laws in racially disparate ways that have steadily increased the arrest of black people much more so than the arrests of white people...

... In 2003 black Virginians comprised 39% of marijuana possession arrests but only 20% of the state population. In 2013 black Virginians accounted for nearly half (47%) of possession arrests but remained only 20% of the state population.

Statistics on marijuana-related arrests between 2010-2016 revealed a clear distinction based on race. Law enforcement personnel evidently targeted 20% of the state's population more intensely.

There were dramatic differences in the average overall arrest rates between localities. Emporia and Colonial Heights made over 1,500 arrests per 1,000 people living within those jurisdictions, while police in Charlottesville made only 25 arrests/1,000 people. There were 589 arrests/1,000 residents in the City of Fairfax, but the similar City of Falls Church had only 51 arrests/1,000.5

arrest rates vary dramatically by race and by jurisdiction
arrest rates vary dramatically by race and by jurisdiction
Source: Blue Virginia blog, New Study: Marijuana Arrests, Racial Disparity in Those Arrests, Increase Sharply in Virginia

The opportunities to create jobs by legalizing recreational marijuana was another incentive for legislative action. Commercial marijuana growing and processing grew rapidly in other states after legalization for recreational use. Virginia legislators saw new tax revenues grow in states that legalized recreational use.

By 2019, there was a widespread assumption that Virginia would be legalizing full recreational use of marijuana soon. In the 2020 election, four more states legalized recreational use, bringing the national total to 15. Members of the General Assembly predicted that the 2021 House of Delegates would authorize recreational use, but passage in the State Senate was not assured. The voting was expected to be bi-partisan, with members of both parties lined up as opponents vs. supporters of legalization.

Governor Northam announced his support for legalizing recreational use two months before the 2021 General Assembly opened. Previously, he had only advocated for decriminalization. He spoke out after release of a report from the Joint Legislative Audit and Review Commission (JLARC) suggested that legalization could generate $300 million in annual sales tax revenue, if the total tax on marijuana (including sales tax) was between 25%-30%.

after the Joint Legislative Audit and Review Commission (JLARC) reported on possible tax revenues, Gov. Northam endorsed legalization of recreational use in November 2020
after the Joint Legislative Audit and Review Commission (JLARC) reported on possible tax revenues, Gov. Northam endorsed legalization of recreational use in November 2020
Source: Joint Legislative Audit and Review Commission (JLARC), Key Considerations for Marijuana Legalization

One commentator noted in 2019 that delay in legalization would handicap the future marijuana growers within the state:6

This is starting to look like the days of banking deregulation. While Virginia's hapless state government slept North Carolina's did not. The result? A whole lot of banks in Charlotte rather than Richmond. Virginia needs to accept that states like Colorado have made legal marijuana a success and move on. One possibility would be to restrict Virginia's approved grow sites to impoverished rural areas. Implement an excise tax and spend that tax on education in those impoverished rural areas. Otherwise, when the inevitable legalization happens in Virginia, the stoners in NoVa and hipsters in Richmond will be vapeing Colorado grass instead of Virginia weed.

After Federal legalization, many states will try to develop "grow houses," growing and processing marijuana to meet projected demand. Grow houses are energy intensive, requiring 10 times the energy per square foot compared to a typical office building. Two or three grow houses can create the demand equivalent to a data center. Locating a grow house in an existing developed area may require that the electrical grid be modified to accommodate the increased demand, including upgrades to transformers.

Successful grow houses may have to produce cannabis at $300/pound. Energy efficiency could be the factor that determines where the lowest-cost marijuana can be produced. A grow house is an artificial environment, and they may end up being where electrical costs are lowest and not where day length is longest or soil is best.7

Colorado businesses benefitted from "green tourism" after the state legalized recreational use in 2014. State law required growing, processing, and sale within the state's boundaries, but customers could cross state lines and come to Colorado to purchase and use marijuana. In 2017, revenue from cannabis sales exceeded alcohol sales in Aspen. After legalization in California, companies advertised California, "wine and weed" tours.8

Because the Federal government did not legalize recreational use, each state operated as a separate market, an island of opportunity. So many growers in Oregon started legalized businesses that the state ended up with an excess supply. Retail prices dropped 50%, from $14/gram in 2015 to $7/gram in 2017.

The Craft Cannabis Alliance pushed the Oregon legislature to authorize wholesale shipments to other states where marijuana use had been legalized. Oregon growers would benefit from access to a wider market, expanding their customer base. The executive director of the business association complained:9

There are plenty of markets that would be thrilled to have world-class cannabis... But prohibition keeps us from sending it into those markets.

The Craft Cannabis Alliance in Oregon was anticipating that the US Congress would change Federal law.

So long as marijuana was listed under the Controlled Substances Act as a Schedule I drug, with "high potential for abuse and the potential to create severe psychological and/or physical dependence," growing, processing, selling, and using marijuana was a Federal crime.10

If the US Congress changed the law, however, the state-based barriers to doing business would drop. The competitive position of growers in Colorado, Oregon, and California would be enhanced by expanding the market.

the products from cannabis flowers attract tourists to Colorado
the products from cannabis flowers attract tourists to Colorado
Source: Colorado Department of Agriculture, Industrial Hemp

Because Virginia was not one of the first states to legalize recreational marijuana, growers remained underground and sellers operated in a black market. No Virginia-based strains developed a broad, brand name recognition and no Virginia-based growers developed a broad reputation for a quality product. Virginia ceded the business growth opportunity, because it was "late to market" compared to other states.

The Virginia wine industry has demonstrated the time and effort required to create a market for a locally-grown and locally-processed agricultural product in Virginia. The wine industry required decades to overcome the general public's perception that good wine came from California and Europe, and to get customers to say "make mine Virginia wine."11

cannabis buds produce the oils, terpenes and other flavoring agents that define the commercially-valuable differences between different strains
cannabis buds produce the oils, terpenes and other flavoring agents that define the commercially-valuable differences between different strains
Source: State of Colorado, Energy Use in the Colorado Cannabis Industry (p.10)

The banking industry has demonstrated the impact on Virginia corporations when state barriers to commerce are loosened by changes in Federal law. During the deregulation initiatives of the 1980's, Virginia was slow to allow banks to expand with branches, protecting small-town banks from competition with bigger banks based in the urban areas.

North Carolina provided easier opportunities for its banks to expand. They gained experience acquiring and integrating smaller banks into larger corporations. When a 1985 Supreme Court decision liberalized interstate banking, North Carolina banks were better prepared for competition. Virginia banks were swallowed up, and corporate headquarters were moved to Charlotte.12

If the Federal government legalizes recreational marijuana use, then a few large growers are likely to dominate the wholesale market. Just as a few bourbon distilleries are concentrated near the clean water of limestone formations in Kentucky and Tennessee, one region could become the primary center of marijuana production.

Though Colorado legalized recreational use first, the Emerald Triangle of Northern California and Southern Oregon is a top contender for primacy in the marijuana business. Individuals operating outdoor farms and indoor "grow houses" there have learned from decades of experience how to breed specific strains and extract preferred oils from cannabis plants.

growing industrial hemp outdoors in Colorado includes acquiring water rights for irrigation
growing industrial hemp outdoors in Colorado includes acquiring water rights for irrigation
Source: Colorado Department of Agriculture, Industrial Hemp

In addition to being a center of practical experience, the Northern California and Southern Oregon region also offers low electricity costs and a mild climate that reduces heating/cooling costs. Grow houses there can be "mixed," with windows opened at suitable times to allow air circulation.

Federal legalization could create a shift in marijuana production that mimics the shift in computer storage and processing to the cloud. When companies first automated their operations in the 1980's and 1990's, they built small computer centers in their local offices. Later, even small companies shifted their data storage and processing to a relatively few data centers, shutting down the small computer centers within the company-owned buildings.

Marijuana growing also started in the 1960's with small, decentralized operations. Fragmenting the farming and processing operations minimized the risk of discovery by law enforcement officials, and minimized the initial investment required by marijuana capitalists to initiate their start-ups.

If legalized, larger and more cost-effective grow houses are likely to replace most of the black market indoor growing operations scattered in garages, basements, barns, and warehouses. Illegal and small facilities may disappear as investors finance larger facilities that benefit from economies of scale.

Legal grow houses will also require extra capital to meet regulatory requirements such as monitoring of pesticide applications, product testing, and security. Since each plant is worth thousands of dollars, theft is a constant risk for marijuana-producing operations. To reassure investors that product will not be diverted, grow operations may implement security that exceeds the requirements established by official laws and regulations.

outdoor grow operations require security to prevent theft, and simple screening/fencing is not adequate
outdoor grow operations require security to prevent theft, and simple screening/fencing is not adequate
Source: San Bernardino Sheriff's Department, Search Warrants - Outdoor Marijuana Grow (Phelan/Pinon Hills, June 21, 2018)

Acreage and electricity requirements of grow houses resemble those of data centers filled with computer servers. Just a few processing plants near centralized grow houses could create the majority of the tetrahydrocannabinol (THC), the primary psychoactive ingredient in marijuana that produces the "high," and the non-psychoactive cannabidiol (CBD) thought to provide health benefits, needed to meet demand of a national and even international market.

Assuming Federal legalization, grow houses that produce the least expensive cannabis-related materials will capture a substantial part of the market. There will be a substantial demand from processors for low-cost cannabis-derived oils that can be infused in edibles and other items. Generic products sold in stores will compete primarily on cost, in contrast to brand name products.

Even branded marijuana products may seek the lowest-cost raw material. Packaging, advertising, celebrity endorsements, and other branding efforts can entice customers to purchase marijuana products without evaluating the source of the marijuana. The marketing of liquor may serve as a model, where companies price and advertise products based on aspects other than the source of the alcohol.

Advertising the health effects of various cannabis-derived products can be done without highlighting the source of the cannabidiol (CBD). For users seeking psychoactive effects, customers may not discriminate based on the specific strain from which the material was produced so long as the percentage of tetrahydrocannabinol (THC) is adequate enough to stimulate the CB1 receptors in the brains.

If Federal law changes and recreational marijuana is treated like alcohol, Virginia growers and processors would still have difficulty competing with Colorado or the Northern California/Southern Oregon region for production within indoor grow houses. Virginia facilities could be located in low-cost areas such as Mecklenburg County, which has already attracted a Microsoft data center. There is less probability of placing grow houses near the data centers in the "Internet Alley" of Loudoun County, due to the high cost of land near the fast internet connections there.

Virginia has a better opportunity to compete in the outdoor grow market for producing items with tetrahydrocannabinol (THC) that will be smoked or incorporated into "gummies." Marijuana plants are affected by the combination of soil, slope, aspect, elevation, and climate, just as grapes for wines are shaped by the terroir in which they grow.

plants from outdoor grow operations are affected more by local soil and climate than plants from indoor grow houses
plants from outdoor grow operations are affected more by local soil and climate than plants from indoor grow houses
Source: State of Colorado, Energy Use in the Colorado Cannabis Industry (p.25)

There may be a niche market for marijuana affected by specific geographic factors. Indoor grow operations are affected by location, especially mixed grow houses that open windows and allow local microorganisms to circulate in the air, but site-specific "terroir" factors will have the greatest impact on outdoor marijuana farms.

Genetics is also a key factor. In the 1980's, marijuana had roughly 1.5% THC. Today, there are strains with 30% THC.

Tourists might be enticed to visit places where Virginia-grown products are grown and processed, comparable to wineries. "Cannacultural areas" could be defined, comparable to the viticultural areas created for marketing Virginia wines. If the cannabis equivalent of wine snobs is large enough, Virginia farmers could develop outdoor grow operations and retail outlets despite the competition from outside the state.

Creating what could become a $1.8 billion industry created new economic opportunities. In other states, the business owners in the marijuana industry were 80% white, so Virginia legislators explored how to provide capital or incentives to expand diversity together with legalization. Elected officials also considered the impacts of expunging previous convictions for simple possession, since blacks had 350% greater risk to be convicted that whites.

The 2021 legalization debate in the General Assembly focused on three issues:13

How the state should address past criminal convictions, what steps the state should take to make sure Black entrepreneurs have a chance to make money in the legal marketplace and how the state should spend the estimated $300 million in annual new tax revenue that market is expected to generate.

One force driving the legislature to legalization was the availability of recreational marijuana in the District of Columbia, and perhaps soon in Maryland and possibly West Virginia. For decades residents of Virginia had purchased alcohol in the District, where prices were lower, and brought bottles back across the Potomac River. Possession of marijuana without medical authorization remained illegal in Virginia at the start of the 2021 General Assembly, but there would be minimal impacts if a customer brought marijuana from DC into Virginia. In 2020, the legislature had decriminalized possession; those caught would pay just a $25 fine.

As the 2021 General Assembly considered legalization, a commentator noted that the loss of tax revenue would affect their decision:14

...lots of Virginians use marijuana today and many of those Virginians are likely to go to D.C., Maryland or even West Virginia to buy their pot once those jurisdictions legalize recreational use and establish retail operations. No tax revenue will accrue to Virginia, it will all go to the neighboring jurisdictions.

The legislators struggled to pass the legalization, including proposals to expunge old criminal records for marijuana possession and to ensure some form of equity in the issuance of licenses. The legislation included a priority for issuing licenses to those who had a conviction for a marijuana-related crime, to people who had graduated from a Historically Black College and University (HBCU) in Virginia.

The General Assembly made a clear commitment to authorize sale of marijuana for recreational use starting in 2024, and the new Virginia Cannabis Control Authority will regulate the new retail marketplace. Fundamental decisions on how to license manufacture and distribution of recreational marijuana were postponed until a future session of the General Assembly. In addition, possession was not legalized. The $25 fine was retained to deter creation of a wide-open market with no oversight for the three years required to establish state-enforced rules.

The delay between legalizing recreational use and establishing legal recreational sales reflected the difficulty in identifying how to prioritizing licenses. In Illinois, the legislature created a lottery system with preferences designed so members of minority communities, women and veterans would win a high percentage of the 500 licenses to be awarded.

Lawsuits delayed the awards in Illinois for two years. While non-traditional applicants had to wait for the lottery process, the state allowed medical marijuana businesses to expand into retail recreational sales. The medical marijuana businesses were primarily white-owned companies, so the social equity goals of the Illinois legislature were not met initially.15

the Northern Virginia growing, processing, and sale facility for medical marijuana in 2021
the Northern Virginia growing, processing, and sale facility for medical marijuana in 2021

Delay in full legalization of marijuana for recreational use created opportunities for entrepreneurs willing to exploit regulatory confusion and gaps. The 2018 Farm Bill authorized use of hemp byproducts, limiting use only of hemp products which contained Delta-9-THC. Delta-9 is one of 100 or so cannabinoid compounds produced naturally by the Cannabis sativa plant. The interaction of Delta-9 with chemicals in the human brain is responsible for most of the consciousness-altering "high" effect of marijuana.

Virginia lawmakers omitted limits on use of products with Delta-8-THC, which has a psychoactive effect but was less intoxicating than Delta-9-THC:16

The chemical difference between delta-8, delta-9 and delta-10 THC is the position of a double bond on the chain of carbon atoms they structurally share. Delta-8 has this double bond on the eighth carbon atom of the chain, delta-9 on the ninth carbon atom, and delta-10 on the 10th carbon atom. These minor differences cause them to exert different levels of psychoactive effects.

Sellers of the synthetic marijuana exploited the legal loophole, mimicking how "K2" and "spice" were sold until banned by the 2012 Synthetic Drug Abuse Prevention Act.

By 2021, it was common to see shelves at gas stations and various stores selling not just cannabidiol (CBD), but also other marijuana-related products suggesting they would offer a psychoactive effect. Standard hemp buds with less than 0.3% tetrahydrocannabinol (THC) were sprayed with Delta-8-THC, and that byproduct was manufactured into edibles such as gummies and cartridges for vaping.

The Delta-8-THC sprayed on the hemp was not extracted from the plant; natural concentrations were too low. Instead, the chemical was synthesized in a laboratory from cannabidiol (CBD) in an unregulated process. There was no safety data regarding possible byproducts for customers to consider before purchase. A Virginia Commonwealth University professor noted the lack of basic consumer health and safety data for a product that would be taken internally:17

You cannot trust the label... It can also contain all of these other chemicals like solvents and acids that would be dangerous for the consumer to take. So these Delta-8 products are not quality tested... You're trusting the shop who manufacturer the product to tell you what is in the product. That is the fox watching the hen house.

One consumer of a Delta-8 product was surprised by the effect:18

I ate a whole gummy... And I was like, "Whoa, it just feels like the real thing."

Unlike Virginia, many states which had legalized marijuana for recreational use allowed no loophole for Delta-8-THC products to be sold without state taxation or regulation for quality control, including unsafe additives. A lawyer for the industry claimed they were all byproducts authorized under the 2018 Farm Bill, and were legal even in states which did not allow recreational marijuana sales:19

Delta 8, if it is derived from hemp, or extracted from hemp, that is considered hemp... Adding another wrinkle, a lot of labs do not have the capability of delineating between Delta 8 and Delta 9.

sales outlets and advertising for Delta-8 products were a common sight in Virginia in 2021
sales outlets and advertising for Delta-8 products were a common sight in Virginia in 2021

That claim ignored the 2020 decision by the Drug Enforcement Administration that synthetically-derived tetrahydrocannabinols were not legalized by the 2018 Farm Bill which authorized production of industrial hemp products. Manufacturing Delta-8-THC required chemical synthesis of cannabidiol (CBD) in a laboratory, so the Federal agency ruling made Delta-8-THC a Schedule I controlled substance. In addition, the Federal Analog Act could also be interpreted to make Delta-8-THC illegal.

By 2021, at least 18 states had banned chemically synthesizing Delta-8-THC products. The authorization was under review in four states, while Delta-8-THC products remained legal in 28 states and the District of Columbia.

Because Virginia failed to clearly ban Delta-8-THC products, they remained readily available in retail stores. Customers could not find a reliable Certificate of Analysis documenting the quality and purity of a CBD product; sales were on a "buyer beware" basis. Because there were no regulations regarding the quality or materials within Delta-8 products, and little understanding of whether synthesis created toxic or harmful byproducts, hospitals struggled to understand how to respond when children ingested Delta-8-THC by accident and suffered negative reactions.

In October 2021, the Attorney General issued a warning about:20

...the dangers of cannabis edibles and hemp derivatives in packaging designed to look like well-known snack foods and candy, which are marketed towards children. These products are unregulated, illegal, and may be extremely dangerous, especially if they are ingested by children.

unregulated marijuana was packaged to resemble standard commercial products
unregulated marijuana was packaged to resemble standard commercial products
Source: Virginia Attorney General, Attorney General Herring Warns Against Unregulated, Illegal Cannabis Products Sold In Look-Alike Packaging

The 2021 debate in the General Assembly to completely legalize marijuana for recreational use was complex. The legislature ultimately legalized possession of no more than one ounce, and retained the low $25 civil penalty for possession of more than an ounce but less than a pound. Up to four marijuana plants could be grown inside a house, but no mechanism was authorized for purchase of marijuana seeds or seedlings or for purchase of up to an ounce of processed marijuana.

Legislators struggled to how the Virginia Cannabis Control Authority should consider social equity when deciding which licenses to grant, and to use licenses to facilitate economic development in areas disproportionately policed for marijuana crimes. Debates concentrated on making it a priority to grant licenses to communities affected by drug crime enforcement, using profits for reparations, exempting cannabis businesses from right-to-work laws, repealing mandatory minimum sentences, and expunging records for past drug convictions. Proposals to schedule resentencing hearings for people already incarcerated on certain marijuana charges were not included in the 2021 legislation.

The final legislation authorized the Virginia Cannabis Control Authority to issue licenses for:
- 400 retail marijuana stores
- 25 marijuana wholesalers
- 60 marijuana manufacturing facilities
- 450 marijuana cultivation facilities

The legislators sought to limit vertical integration to small businesses, in response to concerns that existing industrial hemp processors and medical marijuana growers would have an unfair advantage. Companies licensed by the Board of Pharmacy to grow, process, and sell medical marijuana were authorized to obtain one license to sell marijuana for recreational purposes and to then sell that product at all authorized dispensaries, but only after paying a $1 million fee and submitting a diversity, equity, and inclusion plan to the Cannabis Business Equity and Diversity Support Team.

Key legislators viewed the enforcement of marijuana laws and the "War of Drugs" initiated by President Nixon as a vehicle to punish anti-Vietnam War leftists and people of color. They searched for agreement among a majority of legislators on how to to direct benefits from legalization to areas and groups of people which had been disadvantaged by selective law enforcement.

between 2003 - 2014, marijuana possession arrests increased 76% in Virginia while decreasing overall at the national level
between 2003 - 2014, marijuana possession arrests increased 76% in Virginia while decreasing overall at the national level
Source: Drug Policy Alliance, Racial Disparities in Marijuana Arrests in Virginia (2003-2013) (Figure 1, p.3)

No consensus on the sales process was reached, leading to creation of the Virginia Cannabis Control Authority, Cannabis Public Health Advisory Council and the Cannabis Equity Reinvestment Board to "complete regulations, implement a social equity program, and issue business licenses." The Cannabis Equity Reinvestment Board was given responsibility to manage the Cannabis Equity Reinvestment Fund, using marijuana tax revenues to enhance communities that were disproportionately affected by drug law enforcement.

The disagreements among legislators also led to delay of full legalization until 2024. One legislator concerned about how social equity would be considered when issuing licenses said:21

I don't know if I'd call it an equity program... I'd call it a give-a-criminal-a-company program.

A Republican legislator from a Southside district flipped the equity argument, which traditionally was advanced by Democratic legislators representing urban areas. He proposed that people living in economically distressed areas be designated as "social equity" applicants. Since most of the economically distressed areas in Virginia were rural counties, that approach would have prioritized a different set of applicants. A story in Cardinal News said:22

Think of it as rural affirmative action.

if living in an economically distressed area qualified somone as a social equity applicant, then rural areas would have been prioritized for recreational marijuana licenses
if living in an economically distressed area qualified somone as a social equity applicant, then rural areas would have been prioritized for recreational marijuana licenses
Source: Virginia Economic Development Partnership (VEDP), Virginia Investment Performance Grant (VIP)

Delay gave Virginia officials time to evaluate the different approaches used by Colorado, Washington, California, and other states. The "lessons learned" could help in designing a sales program which met different goals, including addressing the inequities of past enforcement of marijuana laws. The delay also provided time to establish procedures for ensuring market competitiveness for new licensees. If companies with existing licenses to sell medical marijuana were allowed to retail marijuana for recreational use, then the incumbents would have a "head start."

California offered one example of limiting the opportunities to sell legally. The state imposed tight regulations limiting chemical residues in legal marijuana, established high tax rates, and allowed local jurisdictions to block the opening of dispensaries within their city/county boundaries. California ended up with a very small number of legal outlets, selling recreational marijuana at a price so high that the illegal market continued to thrive. Unlicensed outlets openly sold cheaper products, because no cultivation or excise taxes had been paid and state-mandated quality control measures were ignored.

legislators in 2021 delayed full legalization of recreational marijuana, and tasked the Virginia Cannabis Control Authority to propose regulations for commercial sales that would address social equity
legislators in 2021 delayed full legalization of recreational marijuana, and tasked the Virginia Cannabis Control Authority to propose regulations for commercial sales that would address social equity
Source: Commonwealth of Virginia, Cannabis in Virginia: Frequently Asked Questions (FAQ)

The bill initially approved by the legislators did not authorize possession for recreational use until 2024, so there was the potential for 30 months of arrests for acquiring a product that the state planned to legalize for sale. The governor amended the initial bill to accelerate the legalization date to July 1, 2021, largely in response to concerns about inequity in policing:23

...from 2010 to 2019 the average arrest rate of Black Virginians for marijuana possession was more than three times higher than that of white residents for the same crime—6.3 per 1,000 Black individuals and 1.8 per white people. This is despite the fact that Black Virginians use marijuana at similar rates as white residents. The conviction rate was also higher for Black individuals.

Getting the legalization language adopted involved multiple compromises within the House of Delegates and State Senate. Both houses passed a bill that they recognized as seriously flawed in order to give Governor Northam an opportunity to propose amendments which would resolve remaining differences. Two Republicans in the State Senate dropped their support when hey saw the amendments.

The governor's amendments were adopted on a partisan vote; no Republicans voted in favor. Because one Democrat in the State Senate voted against the governor's proposed changes, the Lieutenant Governor cast a rare tie-breaking vote to adopt the amendments on a 21-20 decision.24

legalization of marijuana possession for recreational use was a major news story in April, 2021
legalization of marijuana possession for recreational use was a major news story in April, 2021

One man invited to witness Governor Northam signing the bill to legalize recreational use was a "marijuana martyr." Back in 1974, Roger Trenton Davis had been sentenced to 40 years for possession of nine ounces of marijuana by a jury in Wythe County Circuit Court. Rolling Stone magazine highlighted his sentence as an example of excessive punishment, noting that the maximum sentence at the time on a conviction for child molestation was just five years. The U.S. Supreme Court upheld the 40-year sentence, but Davis was released on parole in 1984.

Governor Northam's actions and the General Assembly's legislation included provisions for reducing the impact of arrest and conviction for possession and sale of marijuana in the past. Charges for possession were sealed in 2020, reducing the potential for employers to discriminate in hiring. Charges for misdemeanor possession with intent to distribute were sealed in 2021, and the state established a process to petition a court to seal felony records related to marijuana.

The 2021 law still allowed employers to test for marijuana use and discriminate against hiring users, including punishment for those who tested positive. Some companies such as the Virginia Commonwealth University (VCU) Health System dropped their pre-hire drug screening process, but continued to prohibit being under the influence while at work. Tests were likely to reveal tetrahydrocannabinol (THC) even weeks after use, but a positive result could affect job prospects - particularly in businesses with Federal contracts, since the Federal restrictions were not affected by changes in Virginia law. Amazon continued pre-screening for marijuana use only for positions involving the US Department of Transportation, such as delivery drivers.

Chesterfield County decided that even medical marijuana use by employees would remain prohibited, and continued its random drug testing program. When Green Leaf Medical planned in 2022 to remodel a former T-Mobile store and open a dispensary near near Chesterfield Towne Center, the county rejected the building permit because medical marijuana use was was still illegal on the federal level.

Dominion Resources announced and HCA Healthcare that they planned to maintain their zero-tolerance policy regarding substances banned by the Federal government in the Drug Free Workforce Act, with no exception for marijuana. Even after Altria Group Inc. purchased a company which sold medicinal and recreational cannabis in Canada, it planned to continue post-accident screening of hourly manufacturing employees to help assess if marijuana use was a factor.

Colleges in Virginia continued to ban use of marijuana, fearing that authorization would lead to cuts in Federal funding for violating the Drug-Free Schools and Communities Act. Students could smoke a joint at an off-campus apartment, but not in an on-campus dormitory.

College disciplinary action was legitimate for using marijuana only on college property. Colleges advertising themselves as a drug-free campus could not punish students for possession on a city-owned sidewalk outside a college-owned residence hall. Possession in a city sidewalk was legal, but public use was still illegal. City police could punish students for smoking marijuana on a city sidewalk, since recreational use was legal only in a private setting.

College athletes faced even tighter restrictions. The National Collegiate Athletic Association (NCAA) still arranged for random drug tests, and athletes testing positive for cannabinoids or narcotics lost the right to play for 50% of the season.

In addition, authorization to grow up to four marijuana plants at home did not extend to people living in Federally-subsidized housing. They were still prohibited from growing marijuana, since state legalization had no impact on Federal government regulations. A high percentage of residents in subsidized housing were people of color, so racial discrimination related to marijuana use still continued.25

in 2021, the General Assembly legalized growing marijuana at home
in 2021, the General Assembly legalized growing marijuana at home
Source: Commonwealth of Virginia, Cannabis in Virginia: Frequently Asked Questions (FAQ)

Though sale of marijuana for recreational use would not be legalized until 2024, one business in Winchester planned ahead. Celebrity's Hemp Dispensary opened on June 26, 2021 as a store selling hemp and cannabidiol (CBD) products that were legal. The owner was a state-certified hemp producer and processor, and intended to get licensed to produce products with tetrahydrocannabinol (THC). She was building the business in anticipation of being able to sell recreational marijuana as soon as possible.26

Stores opened across the state to educate and supply home growers. Though the sales of seeds, plants, and marijuana products for recreational use remained banned until 2024, there was a market for hydroponic equipment, grow lights, potting mix, and "how to" guidance. Chains quickly emerged; for example, Happy Trees opened stores in Petersburg, Fredericksburg, and Richmond.27

Violators of the relaxed constraints on possession were still arrested after July 1. A Chesterfield man was charged with felonies in August, 2021, after the person sharing his house reported he was growing too much marijuana. Police found over 50 marijuana plants plus 1.5 pounds of bagged material that they suspected to be processed marijuana. The grow operation far exceeded the legal number of plants, and possession of a pound or more was still a felony.

Eliminating penalties for possession of one ounce or less of marijuana in 2020 did not reduce the racial disparity in arrests. In the first six months after decriminalization, 4,500 people were charged with possession. Though blacks made up about 20% of the state population, 52% of those arrested during those six months were black.28

The 2021 legislation included a "reenactment clause" requiring a future General Assembly to re-affirm legalization of retail sales of marijuana for recreational use. In the November 2021 elections, the political composition of the legislature changed.

Between 2021-2022, partisan control of the House of Delegates had shifted to the Republican Party. New committee chairs were responsible for guiding legislation that largely mirrored proposals which Democrats had sponsored the previous year except for one key issue. In 2022, proposals to ensure equity blocked full legalization from being enacted. Advocates such as the organization Marijuana Justice sought to shape the new licensing process so members of minority communities, with less access to capital, could compete against the medical marijuana businesses and industrial hemp processors seeking to gain early dominance in the market.

In a House of Delegates subcommittee, the one bill that would have created a retail sales program died on a party-line vote. Advocates noted that illicit sales networks would expand unless a regulated market was established. However, a Republican leader claimed the issues were too complicated to resolve in the 60-day legislative session:29

It was kind of like buying a really old car... You knew it had some problems, but then the more you get under the hood, the worse and worse it gets. And it's just going to take more work than what we can do in one session to fix this thing.

Democratic delegates who supported legalization in 2022 responded that the 5-3 partisan vote killing the bill would increase illegal sales in school yards and gas stations, rather than advance law and order. By one estimate, Virginia had the fourth-largest illicit market in the United States. One delegate disappointed by the delay commented:30

We are basically providing a year for the growth and strengthening of the illicit market.

stores to support growing four marijuana plants at home opened in 2021 across Virginia
stores to support growing four marijuana plants at home opened in 2021 across Virginia
Source: Happy Trees, About

Both the 2022 and 2023 General Assemblies failed to pass re-enactment legislation that would lead to a legal marketplace for sale of marijuana for recreational use in 2024.

The 2022 General Assembly sought to close the Delta-8-THC loophole created when the US Congress passed the 2018 Farm Bill. The legislature approved SB 591, which redefined "marijuana" to include:31

...any substance containing a total tetrahydrocannabinol concentration that exceeds 0.3 percent or more than 0.25 milligram of tetrahydrocannabinol per serving or more than one milligram per package... The bill defines "tetrahydrocannabinol" to include any naturally occurring or synthetic tetrahydrocannabinol, including its salts, isomers, or salts of isomers.

The 2022 General Assembly did manage to pass a bill to regulate Delta-8 and other synthetic marijuana products. It authorized all synthetic THC products for sale with some regulations and lab-testing requirements, but continued to restrict sale of natural marijuana products not modified in a laboratory. One opponent commented:32

We are legalizing retail marijuana. Straight up. It's just that we're going to call it hemp.

However, the Virginia Department of Agriculture and Consumer Services (VDACS) issued a press release on June 30, 2022 - the day before the new law was to go into effect - announcing that the state agency considered synthetic cannabinoids to be illegal food adulterants, and the Attorney General would require compliance with the Virginia Food and Drink Law. That announcement did not affect sale of smokeable and vapeable versions of Delta-8 and similar synthetic cannabinoids, but threatened all manufacturers of industrial hemp extract with more than 0.3 percent tetrahydrocannabinol (THC) that was intended for human consumption (such as edible gummies):33

...all products intended for human consumption are considered food or drink and must meet the requirements of the Virginia Food and Drink Law. Any chemically-synthesized cannabinoid is considered a food adulterant and any person who manufactures, sells, or offers for sale a chemically-synthesized cannabinoid as a food or beverage is in violation of the Virginia Food and Drink Law.

The Food and Drug Administration (FDA) disappointed manufacturers of CBD-infused products in 2023 and failed to declare that any would be "generally recognized as safe." The Federal agency announced that it would not approve any products with CBD:34

Given the available evidence, it is not apparent how CBD products could meet safety standards for dietary supplements or food additives. For example, we have not found adequate evidence to determine how much CBD can be consumed, and for how long, before causing harm. Therefore, we do not intend to pursue rulemaking allowing the use of CBD in dietary supplements or conventional foods.

...Because it is not apparent how CBD products could meet the safety standard for substances in animal food, we also do not intend to pursue rulemaking allowing the use of CBD in animal food.

The legislature also altered recreational marijuana use, acting through the budget process after legislation failed to get approval. Over 90% of the members of the State Senate and 75% of the members of the House of Delegates had supported a ban on making marijuana products as "copycat" edibles which resembled popular snacks. Those products, designed in the shapes of a human, animal, vehicle, or fruit to be attractive to children, were creating a spike in calls to poison response centers. Children who ingested excessive amounts of Delta-8 experienced tachycardia, an excessively rapid heart rate.

However, the governor returned the bill with a proposal to make possession of two ounces up to one pound of marijuana a misdemeanor. This was similar to what the Joint Legislative Audit and Review Commission (JLARC) had recommended in its 2020 study of marijuana legalization. The legislators initially refused to make possession of less than a pound a criminal offense again. The two houses rejected the governor's proposal and killed the popular legislation.

The governor then cut a deal with the three legislators who negotiated with him on reconciling state budget proposals, which were $3 billion apart. The governor amended the budget to re-criminalize possession of four or more ounces up to a pound, making that a Class 3 misdemeanor with a $500 fine. A second conviction would be a Class 2 misdemeanor with a penalty of up to $1,000 fine and possible jail time.

Perhaps an even greater punishment was that a person convicted of a misdemeanor for possessing more than four ounces would have a criminal record. That record would limit their ability to get a job or affordable housing. /p>

The results surprised the other 97 legislators, who were forced to approve the new criminal provision for possession rather than reject the entire budget. Time pressure was tight; the deal was announced just 30 days before the start of the next fiscal year.35

Since four plants could produce as much as a pound of marijuana, the 2022 change in the law created a risk that someone legally growing four plants at home could be arrested and convicted of a misdemeanor. One solution for home growers would be to put seeds into pots at different times and harvest one plant every three months, so the product would be used up before the next harvest.

The failure to establish a legal framework for sale of recreational marijuana resulted in a marketplace where entrepreneurs took risks to sell the product through various mechanisms that may, or may not, have qualified as legal. Some cannabis companies represented themselves as private social clubs and sold buds and rosin, while other entrepreneurs opened businesses that sold grow lights, training, and perhaps other items not fully advertised. As one businessman willing to test the boundaries of Virginia law commented:36

Scared money don't make no money.

While Virginia postponed legitimizing the sale of recreational marijuana, companies struggled to make a profit in other states where such sales were already legal. Federal tax law blocked the companies from deducting business expenses, while other Federal laws increased production costs by banning the transport of recreational marijuana across state lines. Limits on access to financial services made it hard to borrow money needed to build growhouses, distribution networks, and retail outlets.

If the US Congress legalized recreational marijuana, companies that had invested in expensive indoor growhouses in order to provide an in-state source of marijuana may find those facilities to be stranded assets. Warm-weather states offer lower-cost options for growing marijuana outdoors, without expensive electricity for grow lights. In 2021, nearly 90% of legal marijuana was grown exclusively or partially indoors.

However, quality and security could be controlled more closely with indoor operations. Pests could be managed and thieves deterred by indoor farming.

One entrepreneur emphasized in 2022:37

One of the hardest things about doing business in a business that's federally illegal is the difficulty of dealing with the state-by-state regulations... If I could wave my magic wand and make one thing easier and smoother, it would be the state-by-state regulatory process.

By the end of 2022, 19 states were taxing cannabis sales. The law of supply and demand was affecting tax revenue generated from cannabis sales in states where recreational sales were established first. A surplus of marijuana forced 30-50% declines in the price in some states. In California, Nevada, Oregon, Washington and California, tax revenues dropped between 3-14% after rising steadily since the first legalization in 2015.38

As a result of the partial legalization in Virginia, arrests for recreational marijuana dropped 90% between 2019-2022. However, the traditional racial disparity remained for those arrested for the still-illegal sale of recreational marijuana. In a state in which only 20% of the population was black, 60% of the marijuana-related arrests were black adults.

The Washington Post noted that while the ratio of white/black arrests remained unbalanced, but the total had dropped dramatically:39

The commonwealth decriminalized marijuana possession in 2020, leading to the first major dip in enforcement. In 2019, the state reported more than 26,000 marijuana-related adult arrests. That figure dropped to more than 13,000 in 2020. And for all of 2021 - which included the six months after legalization went into effect on July 1 - there were just over 2,000 marijuana-related arrests.

The number of vape shops expanded after 2021, and stores selling CBD-related items become a common feature in shopping strips. Some stores reportedly were also selling recreational marijuana, creating a public but illicit market. Other stores suggested that customers already had traditional supply networks or grew plants at home, and did not need to purchase "weed."

The ready availability of marijuana and vaping technology may have been a factor in the decline of smoking tobacco. Cigarette smoking in the United States dropped from 21% in 2005 to 11.5% in 2023.40

The failure of the Virginia General Assembly to create an effective, consumer-focused legal marketplace for buying marijuana for recreational use left the state at risk of repeating the experience in California and New York. In both states, legalization did not disrupt the illegal market. Anticipated benefits, including increased tax revenue and healthier products, did not materialize because state regulations did not create a legal process for buying marijuana that was better for customers.

In 2023, the California Department of Cannabis Control identified 354 legal retail shops in Los Angeles but estimated there were 700-1,000 additional unlicensed shops and delivery services. Delivery services were in demand in local jurisdictions which had prohibited retail marijuana sales outlets.

High taxes incentivized continued illicit distribution. Local prohibition of retail sales outlets in over 60% of California's cities and counties maintained market demand for illegal marijuana in those areas. As described by the Wall Street Journal:41

The persistence of the illegal pot business in the face of state legalization reflects a variety of forces. Slow rollouts of dispensary licenses leave unmet demand that unlicensed outlets are happy to serve. Police and prosecutors, facing pressing problems such as violent crime, give little priority to stopping illegal pot. And high taxes on legal sales fan the embers of illicit ones.

The challenge of legally purchasing seeds to grow four plants per household was addressed by a nursery in Culpeper County. The Culpeper Hemp Company concluded that the seeds tested under the 0.3% THC threshold, and therefore could be sold legally as a hemp product.

As an indicator how public attitudes had changed regarding recreational marijuana use, the Culpeper Chamber of Commerce held a ribbon cutting for the new business when it opened in June, 2023.42

By 2023, even though marijuana was still on the Federal list of Schedule I banned substances along with heroin and peyote, 11 states were collecting $3 billion annually in taxes from the sale of marijuana for recreational use. Virginia and four other states had passed legislation authorizing a tax on cannabis, but had not established a retail sales program which would enable collection of the tax.

In the vacuum, illegal marijuana delivery services sold marijuana openly. One company that analyzed cannabis consumption estimated that total sales of marijuana in Virginia would be $2.4 billion in 2023, and 99% would be for recreational use by unlicensed, untaxed, and unregulated entrepreneurs. Customers could use an encrypted app and an Instagram account to place an order, paying in cash or via online tools such as CashApp.

As described by the Richmond Times-Dispatch:43

An hour or two later, a car will appear at the curb, ready to exchange marijuana flower, pre-rolled blunts and edibles for cash. It is like Uber Eats for weed, and it has become a primary method of obtaining cannabis in Richmond and throughout the country.

A study by the Joint Legislative Audit & Review Commission (JLARC) in 2020 had projected that Virginia could generate up to $300 million annually from taxes, once sale of marijuana for recreational use was legalized. The recreational market could generate as much as $2.4 billion in sales. By the end of 2023, however, the state had generated zero revenue because no legal framework for such sales had been created by the General Assembly.

In the 2023 General Assembly, the Republican-controlled House of Delegates blocked legalizing sales and cut funding for the Cannabis Control Authority by $2.9 million to $5.3 million.

After the 2024 elections, Democrats controlled both houses of the General Assembly. The Governor was still a Republican who had said he was "not interested" in legalizing sale of marijuana for recreational use. In the words of a former Republican member of the House of Delegates who became a a lobbyist for the Virginia Cannabis Association:44

Virginia has sort of a weird status quo... You can grow it, consume it, possess it - but you just can't sell it.

none of the projected tax revenue from taxing sales of recreational marijuana was actually realized by the end of 2023
none of the projected tax revenue from taxing sales of recreational marijuana was actually realized by the end of 2023
Source: Joint Legislative Audit and Review Commission (JLARC), Key Considerations for Marijuana Legalization (2020, p.v)

The state of Maryland quickly took advantage of Virginia's inability to create a legal market for the production and sale of recreational marijuana. Maryland's legislature authorized adult-use cannabis sales in April 2023. State officials estimated that Maryland would collect $54 million in revenue from the first year of licensing fees and taxes.

Maryland agencies had the regulatory framework in place for the first legal sales at the 100 existing medical marijuana outlets on July 1, 2023. To meet expected demand, 300 dispensaries would need to be licensed. Maryland officials planned to start issuing new licenses for the recreational market in January 2024. The sequence gave the medical marijuana industry a commercial head start, but the fast authorization of legal sale outlets was intended to minimize any surge of illicit sellers.

An official at one of the licensed medical marijuana companies noted the advantage of being first to market:45

It is one of the most important things in terms of your long-term success... The brands that are able to come out early... are going to be the brands that stays around. It's just not as easy for new brands to come into this market.

The medical marijuana companies faced unusual business risks. As the licensed provider in Northern Virginia, Jushi controlled all medical marijuana sales in that wealthy, heavily-populated region from its six legal dispensaries. The upside potential was high, so Jushi invested in a major expansion in anticipation of legal marijuana sales. It spent $22 million to buy land to expand its grow/process/sell facility near Manassas with a 65,000 square foot addition.

However, investors decided in 2023 that the company was not likely to be very profitable in the short run. Federal legalization for recreational use appeared unlikely, Virginia officials had failed to define a path for state-authorized recreational sales - and after July 1, 2023, Virginia buyers could drive to nearby Maryland as well as to the District of Columbia for legal purchases.

Jushi stock, sold over the counter n he United States and on the Canadian Securities Exchange, lost 80% of its value and dropped to $0.49/share. Subcontractors expanding the Manassas facility filed mechanics liens after Jushi failed to make payments.46

the Culpeper Hemp Company priced seeds to grow four plants per household between $35-70 in 2023
the Culpeper Hemp Company priced seeds to grow four plants per household between $35-70 in 2023
Source: Culpeper Hemp Company, Shop

The company anticipated that its $100 million investment in the Northern Virgnia facility would justify a $50 million expansion once the General Assembly authorized sales for recreational use. By 2024 Jushi was already seeing 300-500 medical customers daily, generating $50,000 in revenue. By getting county permits to add a 65,000 square foot expansion to the existing 96,000 square foot facility, Jushi was betting that recreational sales would reward investors.

The Chief Strategy Director said:47

We're dealing with an agricultural crop, so, you don't just flip the switch on overnight... You have to plan for the future. There's some risk but we'll continue to push the industry forward in the right manner. We'd pull the trigger once we have comfort that a commercial adult use program is put into place.

The 2024 General Assembly resolved multiple policy issues, such as the tax rate for cannabis products, as it developed legislation to create a regulated market for the commercial sale of marijuana for recreational use. One decision was to drop proposals to authorize medical marijuana producers to sell for recreational use six months before anyone else. To address equity concerns, the Cannabis Control Authority was directed to use a new Virginia Cannabis Equity Business Loan Fund, financed by taxes on sales of recreational cannabis products. The fund would support creation of small businesses in minority communities historically impacted by enforcement of laws against marijuana use.

The House General Laws Committee passed a compromise on February 22, 2024. The 12-10 vote was a partisan decision, with all Republicans opposing the bill and all Democrats voting in favor. A lobbyist supporting the legislation, a former Republican member of the House of Delegates, urged his colleagues to support the compromise that he had helped to draft:48

Let's be clear with what this bill does not do. This bill doesn't legalize marijuana in Virginia, that's already happened... This bill does not create a market for cannabis in Virginia. It regulates the existing market to ensure that all sellers are licensed, all products are tested and all sales are taxed. If you don't like marijuana, you shouldn't want drug dealers on the street selling unlicensed and untested products.

Governor Youngkin vetoed the bill that would have legalized retail sale of marijuana for recreational use, saying:49

The proposed legalization of retail marijuana in the Commonwealth endangers Virginians' health and safety. States following this path have seen adverse effects on children’s and adolescent's health and safety, increased gang activity and violent crime, significant deterioration in mental health, decreased road safety, and significant costs associated with retail marijuana that far exceed tax revenue. It also does not eliminate the illegal black-market sale of cannabis, nor guarantee product safety. Addressing the inconsistencies in enforcement and regulation in Virginia’s current laws does not justify expanding access to cannabis, following the failed paths of other states and endangering Virginians' health and safety.

Legalization of a retail market was viewed as inevitable, but timing mattered. The founder of Purely Appalachia, which hoped to develop business opportunities related to agricultural hemp and recreational marijuana, commented in 2024 after the veto:50

If recreational marijuana opens up in the rest of the country, we lose our advantage. Virginia is a great market right now because no Southern state surrounding us has recreational cannabis... I don't know if it will be as lucrative an investment in two years.

Virginia laws regarding gifting/sharing were vague enough for retail stores to claim they were not selling marijuana
Virginia laws regarding "gifting/sharing" were vague enough for retail stores to claim they were not "selling" marijuana
Source: Virginia Cannabis Control Authority, Adul Sharing vs. Illegal Exchanges: What's the Difference?

By comparison, Maryland took a different approach than Virginia. Maryland's General Assembly authorized sale of recreational marijuana by all existing medical marijuana dispensaries, creating a legal market with a large number of sales outlets starting July 1, 2023. The first month showed almost a 100% increase in legal cannabis sales, from $43 million in July 2022 to $84 million in July 2023.51

The confusion regarding what was legal and the low priority placed on enforcement enabled entrepreneurs to open stores where marijuana was distributed as rolled cigarettes and in other forms, with transactions represented as "sharing" or "gifting" rather than as "purchasing." By September 2023, there were 10 The Good Vibes "pop up" shops in Abingdon, Blacksburg, Bluefield, Bristol, Marion, Radford, Roanoke County and Wytheville.

According to the law, it was legal for adults at least 21 years old to share one ounce or less of marijuana, so long as the transfer was done privately. In the pop up marijuana shops, legal sales of different commodities were followed by, according to the participants, a "sharing" done voluntarily between two adults.

Law enforcement officials in 2023 described the marijuana distribution process as a "Wild West" of unregulated behavior. A drug bust in Russell County was a rare event. Three people were arrested at the "Let's Grow" store in Lebanon. Action by the county sheriff and Virginia State Police may have been triggered because the store was close to Lebanon High School, and the transaction process was blatant selling of marijuana.

A representative of the Virginia Cannabis Association said:52

There are so many gray areas that it's just become impossible to enforce... So, a lot of law enforcement just aren't enforcing it. They feel like their hands are tied...

...the current situation is causing a proliferation of marijuana. And I know it sounds ironic or backwards to say the way you control the product is by allowing its sale, but that's the reality and as long as it's unregulated, unlicensed, untaxed, it's just going to proliferate in the black market.

Agricultural Hemp in Virginia

Cannabidiol (CBD) in Virginia

Medical Marijuana in Virginia

Links

References

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30. "House Republicans kill legislation to kick start legal sales of marijuana in Virginia," Richmond Times-Dispatch, March 1, 2022, https://richmond.com/news/state-and-regional/govt-and-politics/house-republicans-kill-legislation-to-kick-start-legal-sales-of-marijuana-in-virginia/article_e86a78f1-1b53-558c-8a4f-8425a401fa3d.html (last checked March 1, 2022)
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