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May 22, 2024 Expert’s Corner

New CT cannabis laws will have major implications for businesses

HBJ PHOTO | STEVE LASCHEVER Shipman & Goodwin Partner Sarah Westby (left) and former Curaleaf regional director Patrik Jonsson speak at an HBJ cannabis event.

Major changes are in store for Connecticut cannabis and hemp businesses in 2024.  

Four bills passed both the House and Senate at the close of the legislative session on May 8, and three have been signed into law by the Governor. 

Here’s an overview of the major changes and their potential impact on businesses in the state.

New product categories and definitions

Connecticut continues to refine and restrict how CBD products containing THC are regulated, creating new product categories including “moderate-THC hemp” and “infused beverages,” which go into effect on October 1, 2024.

Moderate-THC hemp allows certain full-spectrum CBD products to be sold with a certificate of registration from the Department of Consumer Protection (DCP) beginning on Jan. 1, 2025, provided they meet specific THC limits. 

In order to obtain this certificate, businesses must demonstrate that it is reasonably likely that at least 85% of their average monthly gross revenue will be generated from the sale of moderate-THC hemp products going forward.  

This requirement will likely exclude many retailers like health food stores, large retail chains, and farmers markets from selling moderate-THC hemp products. 

This change may also shift manufacturing and sales of these products from local to out-of-state producers.

Infused beverages are non-alcoholic drinks with up to 3 mg of THC per 12-ounce container. They can only be manufactured and sold by licensed entities, with a significant regulatory and financial burden for compliance, including a $5,000 licensing fee and restrictions on distribution channels.

Of course, beverages with more than 3 mg of THC per container can only be manufactured and sold with a Connecticut cannabis license.  This change will likely lead existing beverage manufacturers to eliminate or substantially modify their product lines. 

Project labor agreements (PLAs)

Changes now mandate that labor unions be signatories to PLAs for the construction or renovation of a facility costing $5 million or more. 
This inclusion of affiliated entities may increase costs and complexity for cannabis operators, who must now assess whether affiliated entities are bound by this requirement and ensure compliance across all related entities.

Advertising restrictions

Cannabis businesses can no longer advertise discounts or promotional prices outside their own facilities or websites. This limits marketing strategies, potentially affecting competitive pricing and consumer outreach. The exception for websites provides some relief, but overall, the restrictions add to the already stringent advertising regulations in Connecticut.

Section 149 cultivators and micro-cultivators

Section 149 cultivators can now convert to micro-cultivators for a fee of $500,000 (instead of $3 million), with tighter deadlines and operational requirements. 

This aims to facilitate business operations and increase product supply but imposes new financial and administrative burdens.  On the plus side, converting micro-cultivators retain the ability to create one equity joint venture.

Synthetic cannabinoids ban

The 2024 cannabis amendments also require that synthetic cannabinoids be classified as Schedule I controlled substances, prohibiting their manufacture and sale by both cannabis and hemp producers. This regulation aims to control potentially harmful substances, but could limit product diversity and innovation.

The cumulative effect of these changes is a more heavily regulated environment that imposes significant compliance costs and operational challenges on cannabis and hemp businesses. 

While aiming to protect consumers and ensure product safety, these regulations may also drive smaller businesses out of the market or force them to relocate operations to states with less restrictive regulatory regimes, impacting local economies and job markets. 

Overall, businesses will need to navigate these regulations carefully to maintain compliance and viability in Connecticut's evolving cannabis industry.

Sarah A. Westby is the chair of law firm Shipman & Goodwin’s cannabis team, and a partner in the employment and labor practice group.

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