Massachusetts craft marijuana cooperative licenses are intended to provide local farmers access to the cannabis industry. Introduced as part of the Cannabis Control Commission’s (CCC) March 2018 adult use cannabis regulations, cooperative licenses allow growers to come together and produce up to 100,000 square feet of cannabis plants and to manufacture, transport, and process cannabis on-site.

However, in the five years since Massachusetts enacted regulations, cooperative licenses have failed to get off the ground. The obstacles include everything from local red-tape regulations to taxes.

With no farms gaining full licenses, alternative routes have been proposed as more realistic and beneficial options. Still, some don’t plan on giving up their co-op license dreams. They have compared the licenses’ potential to “a sleeping giant” about to be awakened.

A Promising Program

Aspiring cooperative operators say that the licenses would benefit both small businesses and consumers seeking an alternative to major brands.

Dave DeWitt, a Truro-based farmer with 37 years of experience growing various organic crops and cannabis, has joined three other members along the Outer Cape in an attempt to complete the licensing of their coop, High Dunes. DeWitt worked with a Provincetown-based cannabis advocate, the late Tim McCarthy, to ensure that craft co-ops were included in the 2018 regulations. DeWitt says that the bill helps give small farmers a “leg up” against multi-state operators, or MSOs. “It’s a great license, and it’s got the potential to be phenomenal,” he says.

Eric Schwartz, co-founder of Somerville’s Farm Bug Co-op, also feels that MSOs dominate the industry. He agrees that the cooperative license helps small farmers, adding that customers also win. “At the end of the day, I think the consumer wants to see more of a locally-owned product,” says Schwartz. Julie Beauchemin, founder and general manager of South Deerfield’s Green jeans Farms, adds that craft cooperative licenses offer existing Massachusetts farms cannabis opportunities. “I was born and raised in central Massachusetts, and my career has centered around clean energy and sustainability, which, in cannabis, translates to supporting outdoor-grown, sun and soil practices,” she says.

Lying dormant

Why has the craft co-op license program failed to launch successfully? It mainly comes down to regulations, taxes, and capital, according to CCC Commissioner Nurys Camargo.

In terms of regulations, he points to host community agreements (HCA), which often include a set of additional municipal parameters businesses must meet in order to operate in a town. Schwartz agrees that HCAs pose one of the most difficult challenges to licensing. “I think it’s a little bit backward here in Massachusetts in the sense that the local governments don’t seem to be giving a lot of opportunities to farmers,” he says. “They create a lot of local regulations.”

Other major hurdles are tax filing regulations and procuring the necessary operating capital.

Under the current rules, one member of an aspiring cooperative is required to file a Schedule F tax form within the past five years of their application. “When I first met with our cannabis co-op attorney, one of the first things he said to me was, ‘You need a million dollars to start a cannabis company in Massachusetts,’” says Beauchemin. “He was right.”

Beauchemin highlights other problems, such as infrastructure, security requirements, banking restrictions, and a lack of private equity, among the challenges facing these often asset-strapped cannabis startups.

DeWitt states that additional local hurdles present further problems for operators. In High Dunes’ case, it has received its HCA from Truro. However, additional local parameters now hold up the process. He notes that his site requires a special permit and a site review plan. He alleges that several neighboring properties are now holding up the process.

“I think this one is going to have to be a team effort because I think we’re going to have to think about how we pivot this license.”

—Cannabis Control Commission’s Nurys Camargo

“As soon as we go to attempt to get those two permits from the town of Truro, the abutters weigh in and then threaten to litigate if they put a pot farm next to their property,” says DeWitt. He adds that tracking down property owners who live mostly outside the region has been an additional stumbling block.

In addition to the high cost of litigation and local pushback, DeWitt believes additional burdens include outdoor testing protocols, which, until recently, prevented cultivators from using pesticides or herbicides permitted on hemp products. However, under the new governor, Maura Healey, the state Department of Agricultural Resources Commissioner, Ashley E. Randle, has taken action to approve their use.

Still, DeWitt says most would-be co-ops struggle between tracking down contesting neighbors, testing, and the high cost of operating and litigating. “We’re a bunch of broke farmers. It’s tough to fight.”

Workarounds, but not everyone is on board

Local rules and high cost of entry leave few small farmers able to receive their complete full cooperative license. With the current circumstances, CCC’s Camargo suggests that a microbusiness license may provide an entry point for would-be co-ops.

Camargo says that while she wants to see cooperative licenses be issued, current regulatory focuses suggest that other priorities will continue to overshadow co-ops, noting that social consumption and mandatory two-person home delivery regulations were next on tap for her.

Regarding co-ops, she says, “I think this one is going to have to be a team effort because I think we’re going to have to think about how we pivot this license.”

In response, Schwartz suggests that microbusiness licenses could be an alternative for aspiring co-ops. “I know there’s a lot of micros that are out there that seem to be operating pretty well,” he says. However, DeWitt disagrees with this workaround, noting that a co-op license grants 100,000 square feet of production compared with a microbusiness’ 5,000 square feet.

Still, Camargo says that while she thinks a microbusiness license is more likely to be achieved than a craft co-op license, the market could eventually change the licensing process. “Who knows what it looks like in the next seven to 10 years and what this license turns into later on,” she says, adding that she hopes to see co-op licenses becoming viable in time. But perhaps the greatest barrier to overcoming HCAs and other local regulations is the persisting negative perception of cannabis. “The plant should be viewed as an agricultural crop,” says Schwartz. “And right now, they’re sort of viewing it as if it’s plutonium.”