Virginia Compromise Bill To Legalize Retail Marijuana Sales Clears Senate Panel, One Day After Advancing In House

A day after a Virginia House panel approved a new compromise bill to legalize retail marijuana sales, a Senate committee has also advanced the deal. Supporters hope both chambers can now pass identical legislation and send the consensus proposal to Gov. Glenn Youngkin (R), though he’s indicated he has no interest in signing either of the Democrat-led bills.

On Friday morning, members of the Senate Rehabilitation and Social Services Committee voted 9–5 in favor of the latest version of the sales legislation, HB 698. While votes on cannabis sales bills so far have fallen generally along party lines, two Republican members of the panel cast votes in favor of the measure.

The bill next proceeds to the Senate Finance and Appropriation Committee, which is expected to consider it on Tuesday.

Ahead of Friday’s vote, the body first adopted substitute language to bridge gaps between the House bill, sponsored by Del. Paul Krizek (D), and a competing measure from Sen. Aaron Rouse (D).

“Ultimately, there’s peace in the valley on this,” said Rouse, whose own bill, SB 448, received similar amendments before passing a House panel on Thursday. “What I’m most proud of is the way that we’ve been transparent along the way and getting this bill in the place where we can get broad support.”

Krizek, who also spoke at Friday’s hearing, thanked Rouse “for his hard work with me to bridge this gap between our two bills.”

“It’s a great substitute that’s before you today,” he told the Senate panel. “This is like an early conference report to give both bodies ample opportunity to review and vote on the consequential, necessary piece of legislation.”

While there was already considerable overlap between two proposals that were previously approved by the full House and Senate this session, the new, 103-page compromise bill attempts to smooth disagreement around three main areas: timeline and market launch dates, ways to promote equity in the new industry and how to regulate marijuana growers.

Regarding timing, retail stores under the new compromise bill would open no earlier than May 1, 2025, although the licensing process would begin in September of this year.

License fees during the first year of legalization would fund an equity-focused microbusiness support program, which would help provide access to capital, technical support and training, fee waivers and other advantages designed to redress past harms related to the drug war. After that, 60 percent of tax revenue from legal cannabis sales would go toward the the microbusiness program.

“These preferences, which will be race neutral, will offer significant economic opportunities for economically disadvantaged persons, including persons who have suffered hardship or loss due to the country’s war on marijuana exclusion,” Krizek said.

Microbusinesses would need to be at least two-thirds owned and directly controlled by eligible applicants. Those include people with past cannabis misdemeanors, family members of people with past convictions, military veterans, individuals who’ve lived at least three of the past five years in a “historically economically disadvantaged community,” people who’ve attended schools in those areas and individuals who received a federal Pell grant or attended a college or university where at least 30 percent of students are eligible for Pell grants.”

Retail sales of cannabis would be taxed at about 9 percent under the amended bill, including a 4.5 percent state tax and up to a 4.5 percent tax that local governments could optionally impose. The earlier Senate bill would have taxed products at up to 17.5 percent.

The compromise also regulates commercial marijuana cultivators by size, measuring scale by square footage rather than individual plant count, as the Senate bill originally provided. And unlike the earlier House bill, which would have banned outdoor grows entirely, the compromise proposal allows outdoor cultivation by smaller-scale growers. Larger operators would be restricted to growing indoors.

“This is truly a team effort, and we received input from Republicans, Democrats, business leaders, law enforcement, the grassroots community, agriculture, health care, criminal justice reform advocates and more,” Rouse said. “Every single potential stakeholder has their fingerprints on this bill. It’s a reason why we saw so many different substitutes and amendments in this bill.”

The chair of the Senate panel, Sen. Barbara Flavola (D), thanked Krizek for his hard work in crafting the deal the deal.

“You really have been remarkable in getting this large piece of legislation to a place where we all feel comfortable,” she said, adding: “We’ve done good work. I think this will be the bill that goes to the floor.”

While the compromise legislation has the support of small business advocates, existing medical marijuana operators, justice groups and much of the state’s legal hemp industry, others have expressed concerns about the emerging consensus.

JM Pedini, development director for the advocacy organization NORML and executive director of the group’s Virginia chapter, told Marijuana Moment after Thursday’s House panel hearing that they’re disappointed the latest bill pushes the opening of legal sales even further down the road.

Earlier this week day earlier, Krizek told reporters that the compromise bill would open stores in March. Now the start date’s been delayed by another two months.

“It’s unfortunate that once again Virginians are being told to wait another year for retail sales to begin,” Pedini said. “Consumers are being told to get in the back of the line while business interests are prioritized over theirs.”

Here’s what the latest version of HB 698 would do if enacted:

• Retail sales would not begin until May 1, 2025—later than what proponents said would likely be a March start date in the revised bill and later still than the January 1 date in the measures the House and Senate separately passed earlier this session.
• Adults would be able to purchase up to 2.5 ounces of marijuana in a single transaction, or up to an equivalent amount of other cannabis products as determined by regulators.
• A state tax of 4.5 percent would apply to the retail sale of any cannabis product, and local governments could levy an additional tax of up to 4.5 percent.
• The Virginia Cannabis Control Authority would oversee licensing and regulation of the new industry. Its board of directors would have the authority to control possession, sale, transportation, distribution, delivery and testing of marijuana.
• Local governments could ban marijuana establishments, but only if voters first approve an opt-out referendum.
• Locations of retail outlets could not be within 1,000 feet of another marijuana retailer.
• Cultivators would be regulated by space devoted to marijuana cultivation, known as canopy size, rather than by the actual number of plants they grow.
• Both indoor and outdoor marijuana cultivation would be allowed, though only growers in lower tiers—with lower limits on canopy size—could grow plants outside. Larger growers would need to cultivate plants indoors. Secure greenhouses would qualify as indoor cultivation.
• Only direct, face-to-face transactions would be permitted. The bill would prohibit the use of other avenues, such as vending machines, drive-through windows, internet-based sales platforms and delivery services.
• Existing medical marijuana providers that enter the adult-use market could apply to open up to five additional retail establishments, which would need to be located at their existing licensed facilities.
• Serving sizes would be capped at 10 milligrams THC, with no more than 100 mg THC per package.
• No person could be granted or hold an interest in more than five total licenses, not including transporter licenses.
• People with convictions for felonies or crimes involving moral turpitude within the past seven years would be ineligible to apply for licensing, as would employees of police or sheriff’s departments if they’re responsible for enforcement of the penal, traffic or motor vehicle laws of the commonwealth.
• An equity-focused microbusiness program would grant licenses to entities at least two-thirds owned and directly controlled by eligible applicants, which include people with past cannabis misdemeanors, family members of people with past convictions, military veterans, individuals who’ve lived at least three of the past five years in a “historically economically disadvantaged community,” people who’ve attended schools in those areas and individuals who received a federal Pell grant or attended a college or university where at least 30 percent of students are eligible for Pell grants.
• “Historically economically disadvantaged community” is an area that has recorded marijuana possession offenses at or above 150 percent of the statewide average between 2009 and 2019.
• Tax revenue from the program would first cover the costs of administering and enforcing the state’s cannabis system. After that, 60 percent of remaining funds would go toward supporting the microbusinesses program, 25 percent would fund substance use disorder treatment and prevention, 10 percent would go to pre-K programs for at-risk children and 5 percent would fund a public health and awareness campaign.
• Adults could also share up to 2.5 ounces with other adults without financial remuneration, though gray-market “gifting” of marijuana as part of another transaction would be punishable as a Class 2 misdemeanor and a Class 1 misdemeanor on second and subsequent offenses.
• A number of other new criminal penalties would be created. Knowingly selling or giving marijuana or marijuana paraphernalia to someone under 21, for example, would be a Class 1 misdemeanor, punishable by up to a year in jail and a maximum $2,500 fine, as would knowingly selling cannabis to someone reasonably believed to be intoxicated. It would also be a Class 1 misdemeanor to advertise the sale of marijuana paraphernalia to people under 21.
• Knowingly obtaining marijuana on behalf of someone under 21 would be a Class 1 misdemeanor.
• People under 21 who possess or use marijuana, or attempt to obtain it, would be subject to a civil penalty of no more than $25 and ordered to enter a substance use disorder treatment and/or education program.
• Illegal cultivation or manufacture of marijuana, not including legal homegrow, would be a Class 6 felony, punishable by up to five years imprisonment and a $2,500 fine.
• People could process homegrown marijuana into products such as edibles, but butane extraction or the use of other volatile solvents would be punishable as a Class 1 misdemeanor.

Even if the legislature does pass a consensus legalization bill this session, it will still have to get past the governor, who has sent mixed messages around legalization. While the governor has not explicitly said he’ll veto a retail marijuana bill, he signaled last month that he doesn’t have “any interest” in legalizing sales under the Democrat-led plans.

When he was first elected, however, Youngkin said he was “not against” allowing commercial sales categorically.

Use, possession and limited cultivation of cannabis by adults is already legal in Virginia, the result of a Democrat-led proposal approved by lawmakers in 2021. But Republicans, after winning control of the House and governor’s office later that year, subsequently blocked the required reenactment of a regulatory framework for retail sales. Since then, illicit stores have sprung up to meet consumer demand.

Following last year’s elections, Democrats took control of both chambers of the legislature.

A sales bill did advance through the Democratic-controlled Senate last session, but it stalled in committee in the House, which at the time had a GOP majority.

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Photo courtesy of Chris Wallis // Side Pocket Images.

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