Eight takeaways from the Spotlight series on the state’s burgeoning marijuana industry
Here are eight takeaways from the Spotlight Team’s three-part series on the state’s new marijuana industry.
1) Massachusetts sought to create a marijuana industry with many local operators, but large national companies are dominating — and some appear to be skirting state limits on how many stores they can run.
The Globe found that two companies, TILT Holdings and Acreage Holdings, bragged to investors about plans to open as many as a dozen marijuana stores in Massachusetts through complex networks of corporations. But state law establishes a three-store limit: Firms cannot own or control more than three stores that sell medical marijuana and three that sell recreational pot, or three stores authorized to sell both. The Globe also found that a third company, Curaleaf, plans to have seven stores in Massachusetts after completing an acquisition. All three companies say, however, they are operating within the rules.
2) Massachusetts was the first state in the nation to make social justice a cornerstone of its pot legalization, yet few people of color are running marijuana stores.
The Globe report found that of the 15 recreational stores open as of early April in Massachusetts, not a single one had an owner who is a minority. And most had ties to large multistate companies or out-of-state investors. One state program designed to help those affected by the war on drugs has yet to officially launch, while a second program aimed at helping startups run by minorities or those from disadvantaged communities has gotten off to a sluggish start; out of more than 120 “economic empowerment applicants” approved for the latter program, not a single one had opened.
3) State regulators are investigating potential violations.
After the Spotlight series began, the Cannabis Control Commission, which regulates marijuana licenses in Massachusetts, publicly disclosed for the first time that it was investigating whether companies are complying with the ownership caps. It’s not clear when the inquiry began — or intensified. The Department of Public Health, which oversaw medical marijuana licenses until 2019, had conducted its own probe of this issue in response to earlier Globe inquiries and, according to records, last year told the commission it had concerns that TILT and Acreage were trying to sidestep ownership limits.
4) Some companies are also breaching limits in other states.
The Globe found large national marijuana companies are looking to get around ownership rules in other states, too. MedMen Enterprises, for instance, runs five stores in Los Angeles, where a local ordinance bars companies from owning more than three stores. MedMen says two of those stores are owned by an investment fund, MedMen Opportunity Fund II, which was started by the same people as MedMen Enterprises and is based at MedMen’s headquarters. And the company hopes to have eight stores in New York state after completing an acquisition, double the number allowed for a single entity. Regulators are reviewing the transaction. The Globe also found companies testing the limits in Colorado, Maryland, and Florida.
5) Former mayoral candidate Tito Jackson makes questionable ownership claims about a marijuana company he is running.
Jackson, an ex-Boston city councilor, is one of the highest-profile marijuana entrepreneurs in the city. He has told crowds that he will own 100 percent of a marijuana business, Verdant Medical, once it converts to a for-profit, and has called it a local, minority-controlled business. But Jackson acknowledged to the Globe that all the money for the business came from Sea Hunter Therapeutics, a unit of TILT started by heirs to the Lilly Pulitzer fortune of Florida.
6) Large marijuana firms, including Sea Hunter, have offered minority entrepreneurs some loans with onerous terms.
Several minority business people said Sea Hunter representatives, including Jackson, offered to help them launch marijuana businesses. But the help would come at a steep price. Some entrepreneurs complained the terms were so onerous that they would essentially become employees, turning over substantial control to the publicly traded firms. Some deals included loans with interest rates as high as 18 percent and requirements that operators purchase 85 percent of their product from the multistate vendors and give the lenders veto power over any sale of their business.
Some minority entrepreneurs also said they were approached by other national firms seeking substantial control of their businesses.
7) Pot companies are spending big bucks on lobbying, further tilting advantages to the larger firms.
Marijuana companies with big growth plans have hired an army of lobbyists and former politicians to help win licenses and influence regulations. Their efforts are particularly intense in cities and towns, where companies often face fierce local resistance. In Massachusetts, few municipalities require lobbyists to disclose their work at the local level; some argue that the lack of transparency is a recipe for political connections and big money to take over. Pot firms have hired scores of former government officials from the Department of Public Health to the state Senate, from the Boston City Council to the state House of Representatives.
Nationally, Acreage has also appointed well-known politicians, including former Massachusetts governor William F. Weld and former House speaker John Boehner, to its board.
8) Lobbyist Frank Perullo looms large in the state’s pot industry and has helped some companies pursue an expansion strategy that is testing state license cap limits.
Perullo may be one of the most influential people in Massachusetts marijuana. He estimates he has helped shepherd 40 to 50 pot shops through parts of the complicated licensing process. For one client, Sea Hunter Therapeutics, Perullo acknowledges he or his firm, Novus Group, had a hand in pursuing nine licenses. Perullo also has brought political talent into the marijuana industry, introducing former councilor Jackson to Sea Hunter and recruiting Andrea Cabral, former state secretary of public safety, to Ascend Massachusetts. Perullo is part owner of Ascend’s parent company.