Delaware launched its first wave of recreational marijuana dispensaries on Aug. 1, giving the majority of existing medical marijuana centers the ability to begin recreational sales.
With conversion sales underway, 85 conditional licenses issued to the rest of marijuana businesses and 3 micro-cultivators reaching active licensure status, Delaware’s Marijuana Commissioner Josh Sanderlin says things are going smoother than anticipated.
“I – having been in industry for over a decade – was fully prepared for bumps in the road, and everything seemed to go pretty, pretty well,” Sanderlin said.
Delaware had its highest month in marijuana sales ever in August, almost doubling the state’s previous highest with $7.3 million in sales.
“It was a strong first month, hoping to capitalize on the momentum and keep pushing forward as we look to bring new licenses online as well.”
While medical dispensaries’ recreational sales are in full swing, it could still be some time before Delaware consumers can enter independent recreational stores.
“Not all businesses will be operating at the same speed. I would like to see some retail opening by the end of the year, if not sooner. But that really falls on the businesses to find a location, get into a lease, set up their process,”Delawar Marijuana Commissioner Josh Sanderlin
In 2024, the Office of the Marijuana Commissioner awarded just under 125 marijuana licenses to hopeful individuals, which included licenses for cultivators, manufacturing and testing facilities and retail dispensaries.
Getting these individuals their conditional licenses, which would allow them to begin engaging in business activities like growing product, purchasing real estate space and partnering with investors, has faced several hiccups over the past several months.
The state legislature had to pass two bills this year to ensure license holders could receive a federal background check, and county zoning decisions and municipality bans on marijuana dispensaries have caused their own rifts within the industry, particularly in Sussex County.
Sussex County opted only to allow marijuana retail stores to land on parcels zoned as C3 Heavy Commercial and also implemented a 3-mile buffer zone between dispensaries and sensitive locations such as schools and parks.
These combined ordinances, along with all but two municipalities banning dispensaries, have created a de facto ban on marijuana business in the county, leaving the ten Sussex County license holders at a loss for viable retail space.
These concerns prompted the legislature to introduce Senate Bill 75, which would limit countywide buffer zones to just 500 ft.
But this sparked debate over if state lawmakers should be intervening in decisions made by local governments, a recurring theme during Delaware’s legislative session this year.
Senate Bill 75 did ultimately pass in June, but Gov. Matt Meyer opted to veto the legislation in August, citing concerns of overriding local control.
Gov. Meyer also attached draft legislation to his veto statement that would give counties 4.5% of the total revenue brought in to the state via its 15% tax. Currently, counties and municipalities do not collect any revenue from marijuana sales.
“It's a tough balance to strike, right? So we want to make it easy for businesses. But also we want to allow local governments who have the responsibility of providing the local regulations, the local ordinances, the local control over it– bring them on board and not force the way through,” Sanderlin said.
The sponsors of Senate Bill 75 argue liquor stores do not share in alcohol sale revenue, but Sanderlin says it isn’t uncommon in other states to grant local governments some marijuana revenue-sharing capabilities.
“I think what the governor is looking for is not something novel. We see this in every other state – local governments do usually get a share of the revenue, considering that they have to provide the roads, security, the fire, all the things that are required to oversee businesses of this type,” Sanderlin explained.
State Sen. Trey Paradee (D-Dover), the prime sponsor of Senate Bill 75, expressed strong disapproval over the governor’s vetoing of the bill, arguing he had previously made a deal with Gov. Matt Meyer that if he allowed the bill to become law, Democratic senators would signal their support for some capability of county revenue sharing.
But Sen. Paradee told Delaware Public Media he was in favor of a smaller percentage of the revenue – around 2% to 3% – versus Gov. Meyer’s proposal of 4.5%.
The veto has put a wedge between Democratic senators and the governor, and with an attempt to override the veto not out of the question, there’s uncertainty around if the legislature would now even consider allowing the counties to have a piece of the pie.
“I think the governor's goal is to strike a balance between the two, to say, ‘Hey, let's give you a stake in the industry so that way you have a reason to not fight against it, which is what we're seeing, but to actually help us, facilitate the growth of the industry.’ And my hope is that the legislature and the governor can get on the same page and find a way to really thread this needle, which is a difficult one,” Sanderlin said.
While the fate of Senate Bill 75 and a county revenue-sharing bill remain up in the air, Sandelin says it is possible for Sussex County license holders to transfer their license to another county if they make a case for it.
“I have in fact permitted folks to move licenses of certain types, depending on what they're seeing, where they're proposed to go to. But, yeah, one of the upsides is this office does have a good bit of leeway in helping businesses get into the places they need to go and get up and running, and that's really what we're focused on. And you know, for any licensees out there who have conditional licenses are having trouble, please reach out to my office. We have the ability to do variances for a wide array of issues.”
Tracee Southerland currently holds two social equity licenses for a testing facility in New Castle and Sussex County. Testing facilities aren’t facing the same zoning restrictions as retail, but she says she’s looking into transferring one of her licenses because she’s been struggling to find investors.
Tracee says she’s found a real estate investor in Kent County who would be interested in helping her open a testing facility. The state handed out two testing facility licenses per county, but Tracee argues it doesn’t necessarily matter where those facilities are located throughout the state.
“And I'm just like, let it be six labs in the state, or five labs in the state. Like if it's statewide… it’s crazy because I would have never even thought of wanting that to be the case until I found an investor in Kent,” she said.
Finances have been a serious concern for Tracee throughout her process of trying to enter the marijuana space. She’s invested a lot of personal money, and her trucking and logistics company went under months ago.
“Until I get an investor, I'm just sitting on my hands even though the grant, I'll get $175,000 – that isn't even 10% of the full amount I would need to start a lab and secure real estate.”Tracee Southerland - holder of two social equity marijuana licenses
She says luckily, one of the current marijuana conversion operators hired her on as a cultivation technician, but she will have to resign from that position once her testing facilities become operational to avoid a conflict of interest.
She is poised to receive a grant from the state as a social equity license holder, but she’s worried that still won’t come close to the capital she needs to get the facility off the ground.
“Until I get an investor, I'm just sitting on my hands even though the grant, I'll get $175,000 – that isn't even 10% of the full amount I would need to start a lab and secure real estate.”
But some license holders have found success throughout the process.
Kirsten McGuigan and her husband Andrew Kleinstuber have faced their fair share of roadblocks in getting their micro-cultivation facility off the ground in Sussex County.
While they have had months of back-and-forth with the Office of the Marijuana Commissioner in trying to obtain their conditional license, the pair officially put seeds in the ground on Aug. 8.
Kirsten says they’re looking at anywhere from 70 to 100 days until their plants are mature in flower and ready to harvest, and after the testing process, they can begin selling their cannabis to dispensaries.
“So now that is something that we're basically in the middle of right now as we have these plants, we didn't want to do it too prematurely, so now that we have these plants that exist, and we have a pretty good idea of when it will be harvested, we are right in the middle of that process of reaching out to different dispensaries and forming connections,” Kirsten said.
Kirsten also hopes their organic, soil-based growing methods will provide a niche in the market that will help them stand out against traditional hydroponically grown marijuana plants.
“We are farmers ourselves of plants and animals, and we really love the idea of all the organic, regenerative farming, giving back to the land, all of that, keeping things as natural as possible. So we really want to bring that to the cannabis,” she said. “So we're using the living soil, which we mix and add all of our own organic amendments and all of that for the nutrients, sort of instead of the synthetic amendments that are sometimes commonplace in the industry. So we do hope that that sets us apart, and we're excited about that. The feedback we've heard, we feel like people are excited about that as well, and I think it's sort of what people are looking for.”
While some growers are up and running, Sanderlin says it’s really up to the license holders as to when the rest of the market will be open for business, largely depending upon their ability to find investors and viable real estate to reach active licensure status.
“Not all businesses will be operating at the same speed. I would like to see some retail opening by the end of the year, if not sooner. But that really falls on the businesses to find a location, get into a lease, set up their process,” Sanderlin said. “DATE [Delaware Alcohol and Tobacco Enforcement] has been working to schedule anybody who requests inspections or pre-inspections, which I think is very helpful. As a former business owner, having a pre-inspection really helps you to make sure that you know where all your problems lie, and it makes it more of a seamless process to come online. So as people let us know, we'll be on site and scheduling as fast as they can get open.”
Despite all the previous and continued hurdles in getting the market up and running, Sanderlin says he remains optimistic about what’s to come.
“It's a snowball rolling downhill. We're gaining speed. The first month went really well, now it's getting everybody else online now that they have a program they can join. One of the things I feared was giving all these active licenses, and then there's no program for them to join. So now we have a program, and it's functional. We're moving into a month where people are coming back into the state from vacations. So I'm hopeful for September numbers as well, and really providing a good landing spot for all these new licensees.”
