Mississippi Becomes 37th State to Legalize Medical Cannabis

On February 2, 2022, Mississippi Governor Tate Reeves signed legislation authorizing cannabis for medical use. Mississippi is now the 37th state to legalize medical cannabis. The passage of SB 2095 (the "Act") comes more than a year after an overwhelming majority (74%) of Mississippi voters voted to approve a ballot initiative (Initiative 65) establishing a legal medical cannabis program during the 2020 election cycle. On May 14, 2021, the Mississippi Supreme Court ruled 6-3 to overturn Ballot Measure 1 (Initiative 65). The state’s medical cannabis program is anticipated to launch later this year.

Licensing

The Act establishes several license types including cultivation facilities, processing facilities, medical cannabis dispensaries, transportation entities, disposal entities, research facilities, and testing facilities. Cultivation and processing licenses are divided into tiers based on canopy size and the amount of cannabis to be processed, respectively. This includes micro-cultivator and -processor licenses, which are assessed lower fees and limited to cultivating and processing smaller amounts of cannabis. The Mississippi Department of Revenue (“MDOR”) will be responsible for licensing medical cannabis dispensaries while the Mississippi Department of Health (“MDOH”) will be responsible for licensing all other facilities. Note that, at this time, retail delivery licenses do not appear to be authorized by the Act.

After 120 days from the effective date of the Act, MDOH will begin accepting applications, registering and licensing medical cannabis patient registry identification cards and practitioners. At that time, MDOH will also begin licensing and registering cultivation facilities, processing facilities, testing facilities, research facilities, disposal entities, and transportation entities. And MDOR will begin licensing medical cannabis dispensaries thereafter.

License Types and Fees 

Cultivation Licenses: 

License Type	Canopy (sq. ft.)	One-time Application Fee	Annual License Fee
Micro-cultivator Tier 1	<1,000	$1,500	$2,000
Micro-cultivator Tier 2	1,000 – ≤2,000	$2,500	$3,500
Cultivator Tier 1	2,000 – ≤5,000	$5,000	$15,000
Cultivator Tier 2	5,000 – ≤15,000	$10,000	$25,000
Cultivator Tier 3	15,000 – ≤30,000	$20,000	$50,000
Cultivator Tier 4	30,000 – ≤60,000	$30,000	$75,000
Cultivator Tier 5	60,000 – ≤100,000	$40,000	$100,000
Cultivator Tier 6	100,000+	$60,000	$150,000

Processor Licenses:

License Type	Dried biomass processed annually (lbs.)	One-time Application Fee	Annual License Fee
Micro-processor Tier 1	<2,000	$2,000	$3,500
Micro-processor Tier 2	2,000 –<3,000	$2,500	$5,000
Processor	3,000+	$15,000	$20,000

Other License Types:

License Type	One-time Application Fee	Annual License Fee
Dispensary	$15,000	$25,000
Transportation Entity	$5,000	$7,500
Disposal Entity	$5,000	$7,500
Testing Facility	$10,000	$15,000
Research Facility	$10,000	$15,000

Qualifications for Licensure – Mississippi Residency

Minimum qualifications for applicants for cultivation, processing, medical cannabis dispensary, transportation entity, and disposal entity licenses include residency requirements. Until December 31, 2022, an individual applicant must have been a resident of Mississippi and a citizen of the United States for at least three years prior to the date of application; and entity applicants must demonstrate that at least 35% of equity ownership interest is held by individuals who have been residents of Mississippi and citizens of the U.S. for at least three years prior to the date of application.

Until and after December 31, 2022, micro-cultivators and processors must be registered with an entity who has been a resident of Mississippi for the at least the past three years, and 100% of the equity ownership interests in the entity must be held by individuals who have also been residents of the state for at least the past three years.

Note that similar residency requirements in other states have been struck down as unconstitutional. For example, a U.S. district court judge invalidated Maine’s residency requirement for Maine medical cannabis dispensaries in August 2021. An appeal of that ruling is pending in the U.S. Court of Appeals for the First Circuit as of the date of this alert. A federal district court judge in Missouri struck down a similar requirement of Missouri’s medical cannabis law in June 2021. District court judges in other states have rejected challenges to residency requirements.

Owners and Investors

The application requires the name of each principal officer and board member of the proposed medical cannabis establishment as well as disclosure of all persons, entities or affiliated entities who directly or indirectly own 10% or more of a medical cannabis establishment. Background checks are required of every prospective principal officer, board member, agent, volunteer, or employee, before the person begins working for the cannabis establishment.

The Act requires medical cannabis establishments to notify the MDOR or MDOH within one business day of any change in ownership. Additional requirements or restrictions pertaining to ownership changes may be imposed in the forthcoming regulations.

Marketplace Regulation

Medical cannabis establishments may only purchase, grow, cultivate, and use cannabis that is grown and cultivated in Mississippi and may not transport it outside of the state. This restriction is consistent with federal prohibition of cannabis.

The Act permits (but does not require, as some states do) vertical integration of medical cannabis businesses. But there are some limits on how many licenses an individual or entity may hold an economic interest in. Specifically, no individual or entity may hold a direct or indirect ownership or economic interest of greater than 10% in more than:

• One cultivation facility license;
• One processing facility license; and
• Five medical cannabis dispensaries. 

Local Control

Municipalities and counties may enact zoning restrictions and maintain their own licensing and permitting regimes, but they may not prohibit medical cannabis dispensaries. This is in stark contrast to other states, like New York and California, which allow local jurisdictions to prohibit cannabis retail operations within their borders. If applying in a jurisdiction with its own medical cannabis program, the applicant must submit proof of registration with the applicable municipality or county as part of their state license application. 

Product Regulation

The Act defines “cannabis products” to include flower, concentrates, extracts, and cannabis infused products intended for consumption by humans including, edibles, beverages, topicals, ointments, oils, tinctures and suppositories containing THC and CBD. A processing facility that makes edibles must hold a food establishment permit and comply with all MDOH requirements applicable to food establishments.

Mississippi resident medical cannabis patients (“resident cardholders”) are subject to daily limits. The Act creates a measuring standard called the Mississippi Medical Cannabis Equivalency Unit (“MMCEU”) to establish those limits. One MMCEU is equivalent to three and one-half grams of medical cannabis flower, one gram of medical cannabis concentrate, or 100 milligrams of THC in an infused product.

A resident cardholder may purchase no more than six MMCEUs in one week from any dispensary and no more than 24 MMCEUs within 30 days from any dispensary. The overall possession limit for resident cardholders is 28 MMCEUs in 30 days from any dispensary. Nonresident cardholders may obtain no more than six MMCEUs of cannabis per week and no more than twelve MMCEUs of cannabis within fifteen days. Nonconsumable products like ointments, lotions, and other topicals are not subject to possession limits.

The Act prohibits medical cannabis establishments from selling flower with a potency exceeding 30% total THC.^[1] Medical cannabis dispensaries are prohibited from selling tinctures, oils, or concentrates with a potency exceeding 60% total THC. Any cannabis product with a potency of more than 30% total THC must be labeled as “extremely potent.”

Banking

To facilitate access to banking for licensed medical cannabis establishments, the Act holds harmless under state law or regulation any bank that provides any services to any medical cannabis licensee in the state, if the bank provides those services to any other business. Banks may provide financial services to licensed medical cannabis establishment and invest any income from providing financial services to licensed medical cannabis establishments. Of course, Mississippi cannot protect banks from the risks under federal law associated with providing financial services to cannabis companies. But Mississippi’s approach is similar to the approach proposed by the federal SAFE Banking Act, which is pending in the U.S. Congress.

Beginning the effective date of the Act, the MDOH and MDOR will each promulgate rules and regulations, as relevant to the role of the respective agency, to implement the program.

Contributions to this alert by Cannabis practice legal intern Zac Weiner.

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Goodwin was the very first AmLaw 50 firm to formally establish its cannabis practice, and continues to represent the innovators and investors transforming the rapidly evolving market. To learn more about Goodwin’s Cannabis practice, watch this animated video.

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^[1] Total THC is defined as THCA multiplied by .877 plus THC Delta 9 and all other psychoactive forms or isomers of THC added together.