Cannabis rules draw fire

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Guam’s recreational cannabis industry could lose to the black market unless the government allows residents to own more than one type of cannabis business, a prospective business owner told lawmakers Thursday morning.

At the very least, businesses should be allowed to grow and also manufacture cannabis products, Mike Mateo said during a public hearing on the rules and regulations for the island’s recreational cannabis industry.

That’s how the cannabis black market operates — by controlling cultivation, manufacturing and sale — and legal cannabis businesses need to do the same to compete on price, Mateo said.

“It makes it nearly impossible for me as an entrepreneur to enter the market and sustain reasonable profits.” Mateo said, adding the prohibition is a “major deal-breaker.”

As currently written, the rules and regulations prohibit owning or having a financial interest in more than one type of cannabis business at the same time. Businesses must be at least 51% owned by a legal resident of Guam, who has lived here at least three years.

Vertical integration

Cannabis Control Board Chairwoman Vanessa Williams said vertical integration — owning more than one type of cannabis business — was one of the main issues considered by the board as it drafted the rules and regulations.

She said the board decided that allowing vertical integration could put smaller business owners at a competitive disadvantage and discourage them from participating in the cannabis industry. That could benefit the black market, she said, adding the situation will be clearer once cannabis businesses start operating.

“We committed to revisit the issue, in terms of permitting vertical integration, once the industry starts,” Williams said.

The Legislature’s Committee on Economic Development and Agriculture held a public hearing for the proposed rules and regulations Thursday, which is one of the final steps before the rules are final and the government can begin issuing licenses to cannabis businesses.

Committee Chairman Sen. Clynt Ridgell said the rules and regulations, after the public hearing, must be considered by lawmakers during legislative session.

Recreational cannabis has been legal in Guam since April 2019. Eligible adults can possess limited amounts of marijuana in public and grow and consume it at home, but it still is illegal to sell or trade marijuana for anything of value until the rules and regulations are in place and the government issues licenses to cultivators, manufacturers, testing facilities and retail stores. No cannabis products can be sold unless they are tested by a lab.

Organic issues

Farmer Ernie Wusstig told senators he considered growing cannabis to supplement the income from his farm, but decided against it because of the effort it would require.

Wusstig said he objects to the rules and regulations which allow cannabis growers to use only organically produced nutrients.

“I don’t think that’s necessary,” Wusstig said.

“I’ve been farming for about 50 years, and I see that commercial fertilizer is very helpful to the farmers. … There’s nothing wrong, so why does the (cannabis) board want to regulate how to grow the crop?”

“To make it organically grown is just an added cost,” Wusstig said.

“It’s another hurdle.”

Nathan Bell told lawmakers he is interested in cannabis genetics and seeds, not selling cannabis. The rules and regulations don’t fully address that issue, he said, noting the section on cannabis seed selection is only three sentences long. The rules state federal law prohibits cannabis seeds and material from being imported, so seeds and tissue cultures may be “locally sourced.”

“As someone who locally is working on that just as a hobby, it seems like maybe we should have put a little more thought into that,” Bell said.

“Seeds are a difficult issue,” said Ridgell, who wrote the recreational cannabis law.

“According to federal law, you can’t import any cannabis products from off-island. … Because of that, the idea was to allow it so that whatever (cannabis) is already here, you can cultivate whatever seeds are here, whatever genetics are here.”

Banking problem

One unresolved issue, unrelated to the rules and regulations, is how to handle the money generated by Guam’s cannabis businesses.

At this time, no local bank is willing to accept cannabis-related money, which means the government of Guam can’t deposit the fees and taxes collected from cannabis businesses, Williams said.

The 15% excise tax on cannabis sales is supposed to be GovGuam’s primary funding source to pay for industry monitoring and regulation.

Williams said the Cannabis Board can’t require banks to accept cannabis-related money, but banks might be willing to do so “if the market is sufficiently regulated” and the banks have access to licensee information.

She said the Department of Public Health and Social Services, which is in charge of the “seed-to-sale” tracking system for the cannabis industry, has been giving presentations to banks about how the system will operate.

“This is ongoing,” Williams said.

“We’re continuing the address the issues. The director of the Department of Administration is well aware and is working diligently with the Department of Rev and Tax and the board. We’re trying to keep this paramount and a priority issue for all decision-makers.”

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