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Don Murphy: Maryland — The Free (Market) State?

By Don Murphy

The writer served in the Maryland House of Delegates from 1995 to 2003. He is the original lead sponsor of the Darrell Putman Compassionate Use Act.

By the time Maryland finally joins the list of legal cannabis states, half the country could be ahead of us. Not that we are doing the right thing for the right reasons, but because we were dragged kicking and screaming by competition from neighboring states.

As was the case with legalization of gaming, when it comes to cannabis legalization, sadly the Free State is a follower. Most of the states to our north have legalized. Neighboring Virginia has legalized. Even red states like South Dakota have legalized. Among blue states, Maryland is a befuddling outlier.

So how will Maryland stand out among the crowd of legalized states in the future? It could very well be with Maryland’s ascendant Legislative Black Caucus as the leader. And why not?

What legislative power group has a better reason to be skeptical of installing caps on the number of licensees? If the caucus leads on this issue, the Free State, could be the first free market state in the country.

The caucus has plenty of reasons to question giving state government the right to pick winners and losers when allocating recreational cannabis licenses. Caucus members have seen this movie before.

It took years for Maryland to figure out how to award medical cannabis licenses, and when it finally did, minority applicants were left outside looking in. What they saw was incredibly lucrative licenses awarded with not a single firm minority owned.

It took the creation of a few extra licenses to right that wrong. Today, Maryland’s medical licensees stand as a legislated cannabis monopoly with only a slight minority presence in the ranks of grower ownership.

The same scenario is repeating itself with sports gaming.

Unable to just let the free market work, state government has tied itself in knots trying to create a new regulatory scheme. Faced with no sports gaming for at least another year, the state now says it will allow large corporations with existing gaming operations to forge ahead and open “temporarily” while it figures out requirements the small and new operators must meet.

Maryland never lets opportunity stand in the way of creating a new bureaucracy.

A path away from this tired old story does exist for legalized cannabis use — if the General Assembly wants to take it. Legislative Black Caucus Chair Darryl Barnes has proposed eliminating caps on licenses altogether. In 2020 and 2021, Barnes was the lead sponsor of HB 1449 and HB 453. These bills removed the caps from licenses for growing and processing medical cannabis. His co-sponsors were all members of the caucus. This would allow minority entrepreneurs to get in on the ground floor of a new industry, without the roadblock of a government-imposed limitation on who can be in business and who cannot.

A program without caps on growing, processing and selling legalized cannabis means that Maryland can show the country that it has learned from its mistakes with medical cannabis and sports gaming.

By virtue of eliminating the caps, Maryland can level the playing field for any grower of any size to enter the marketplace.

Today, only well-funded growers with their cohort of well-heeled lobbyists can grow cannabis. But under a system with no caps, all the jockeying and influence peddling goes by the wayside because anybody who wants a license to grow could get one.

In essence, such a move would quarantine Maryland’s cannabis monopoly to medical grade only, prohibiting anyone else from growing medical cannabis. However, anyone could grow cannabis for adult use, even the medical cannabis cartel. But the medical grower monopoly would be subject to the market pressures of other entrants, and why shouldn’t they?

Competition will drive prices down and quality up. We can all agree this would be better for consumers.

Members of the Legislative Black Caucus make up one-third of the House and one-quarter of the Senate. If the caucus makes this a priority, they will find some willing allies. Republicans will back such a free-market proposal and the governor, no fan of regulation, will probably be with them. Meanwhile, voters, patients and consumers will thank them.

The seeds for such leadership are already there and were on display at the recent Maryland House of Delegates Cannabis Work Group organizational meeting.

John Hudak of the Brookings Institute provided a 101-level introduction. Hudak pulled back the curtain to expose the good news and the bad news from the various legal states. One member referred to Hudak’s presentation as, “weirdly unbiased,” and it was. But the statistics he shared proved to be a witness for the prosecution against caps.

The debate has shifted since Colorado and Washington both passed ballot initiatives in 2012. It is no longer a question of when marijuana will be legalized, but how. The focus of the first working group was no different.

Equity and expungement dominated the questions from members. But the answers were as elusive as they were disappointing. The definition of equity was unclear and unquantified.

At one point it was suggested that equity in one part of a bill/law would be defined differently than in another section of the bill/law. One caucus member referred to dispensary licenses as, “crumbs.” Score another point for the free market.

As to expungement, Hudak explained that in many jurisdictions it is simply government’s inability — or unwillingness — to sort through paper records that stand in the way of righting the past.

The most damning indictment of limited licenses came in the form of an observation and question from Del. David Moon. He noted that medical cannabis dispensaries in his district had been sold and resold to multi-state operators, making it impossible to tell the make-up of their ownership.

Referring to equity he asked, “Would it last?” Hudak responded by saying, even if the state tried to limit equity license transfers to similar applicants that over time those licenses would be “eaten up by the forces of the market.”

Most of Hudak’s presentation was filled with history and statistics that made the case for legalization and one that made the case for doing it now. Of the top nine counties in the country for per capita cannabis arrests, three — Worcester, Dorchester and Calvert — were in Maryland.

With these sobering statistics, the committee should act with urgency, not wait for the outcome of a ballot referendum in 2022. It should not endorse the creation of an unwieldy regulatory process that will only serve those who know how to game the system. It should not allow a few lucky or connected license holders to use state government as an economic police force to keep unlicensed competition at bay.

Everyone already knows what the 2022 referendum vote results will be.

Maryland voters will support legalizing cannabis by a 2-1 margin. Voters want to end this losing war against cannabis. After the voters have spoken, will the Maryland General Assembly create an artificial regulatory entanglement that limits economic opportunity and maintains the specter of criminal penalties for those not anointed by the government?

The question not being asked is, “What is best for the patient and consumer?”

By now the answer is obvious. The free market is not perfect, but it always beats government sanctioned monopolies. The free market is best for patients, consumers, the businesses that serve them and those who want to serve them.

Maryland should learn from the mistakes of its past and from the failures of other states. The Free State should embrace a free market, and we should do it sooner rather than later.


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Don Murphy: Maryland — The Free (Market) State?