The 2023 budget was recently proposed by the governor of Rhode Island, which aims to establish a legislative framework for recreational cannabis legalization.

Rhode Island Governor Dan McKee presented his Fiscal Year 2023 Budget Proposal on January 20, and includes recreational cannabis legalization. “Today, we know there are still many pandemic-related challenges that we must once again come together to address—with our top priority being the health and safety of Rhode Islanders. At the same time, we have an historic opportunity to write Rhode Island’s next chapter now, with $1.13 billion in federal funds and an over $600 million surplus available to invest in our state’s future,” McKee wrote in the introduction of his proposal. “The decisions we make this year have the potential to bolster Rhode Island’s economic comeback and propel our state into the next decade with strength.”

In a press media presentation he briefly covers multiple topics included in his budget proposal. Under “other items,” includes the mention of adult-use cannabis “Allows for controlled, phased-in introduction of retail licenses, results in minimal net revenue in FY 2023.” A more detailed executive summary goes into detail of the Fiscal Year 2023 Budget Proposal in nearly 200 pages of plans, with cannabis being mentioned in a few key sections.

“The governor recommends creating a strictly regulated legal market for adult-use cannabis in the state,” the executive summary states. “This proposal would create a weight-based excise tax on marijuana cultivation, an additional retail excise tax of 10 percent, and also apply sales tax to cannabis transactions.” The summary states that 25 percent of cannabis tax revenue and fees collected from licensing would be given to public health and safety programs. An additional 15 percent would be granted to local governments and the remaining 60 percent would go straight to the state general fund (a combination of cannabis cultivation excise taxes and retail sales excise tax, in addition to the state’s seven percent sales tax). The summary also states that after a full year of sales by fiscal year 2024, the state projects that it will collect up to $16.9 million in general revenue.

The legislation proposal for legalization echoes similar states’ analysis of combating illegal cannabis sales. “Prohibiting the possession, cultivation, and sale of cannabis to adults has proven to be an ineffective policy for the State of Rhode Island,” it reads. “In the absence of a legal, tightly regulated market, an illicit cannabis industry has thrived, undermining the public health, safety and welfare of Rhode Islanders.”

Legal cannabis would allow adults to buy and possess up to one ounce of cannabis, or store up to five ounces at home. The proposed bill is set to begin starting April 1, 2023. In its current form, the proposal doesn’t allow home cultivation, and imposes consequences for those who might illegally cultivate plants at home. In terms of licenses, it requires that 25 retailers should be licensed per year between 2023 and 2025, through a lottery system. Five of those 25 licenses must be granted to a minority-owned business.

In the past, there have been differing opinions between McKee and House and Senate representatives about how to approach legalization in the state. For instance, while McKee’s most recent proposal directs responsibility of maintaining a state cannabis program to the Department of Business Regulation, other representatives have previously believed that a new department be created for the task.

In the beginning of the 2022 legislative session on January 4, Speaker K. Joseph Shekarchi mentioned that the Rhode Island congress is actively working on crafting a recreational cannabis program. “… We have also spent months analyzing the complex issue of marijuana legalization. The House and Senate intend to soon have draft legislation ready which will serve as a framework to begin a robust public hearing process. We may not be the first state to legalize marijuana, but our goal is to do it in the way that is best for all Rhode Islanders.”

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Ever since Tilray decamped for Portugal during the early days of the German cannabis cultivation bid circa 2017, the country has been touted as “the place” within the European Union (EU) for the German distributors to source their product.

That said, the actual progress of the industry has been a little slower than that—in part because of the length of time it takes for legislative change to happen. Indeed, it was not until April 15 of this year that Ministerial Order No. 83/2021 was finally published. According to local legal practitioners, at least, this order also has clarified a great many practical aspects of the application process. This includes reference prices.

Looking at the progress of cultivation licenses, however, and the proof is in the pudding. To date, there have been 114 applications for the cultivation of cannabis to the National Medicines Agency (Infarmed). Of these, just 23 are “under analysis,” 11 are awaiting a response from the cultivators, and 61 are waiting to be inspected (a major issue facing almost every budding cannabis cultivator thanks to COVID.)

Here are a few more dampening statistics. Of the 19 currently operational cannabis cultivation facilities, only three can manufacture medical grade extracts and products. One of these is in business solely for the purposes of providing “quality control.” The remaining facilities are in business to cultivate the plant as a “raw material,” or, of great interest of course to every German distributor looking for new sources of EU cultivated product, “active substances.”

What, exactly, is going on?

EU GMP Is Not an Easy Certification

Despite its reputation to the contrary, including the now pending legislative move to formally legalize adult-use cannabis, the medical authorities here are very strict. They must be. They are the country’s version of the Federal Drug Administration (or FDA).

Indeed, it was only this February that Tilray announced that it had received the first and only market authorization for medical cannabis products in Portugal. This means that everyone else is cultivating for export to other countries (notably Germany). Many German distributors (for starters) are currently importing raw flower (or flos) as “Active Pharmaceutical Ingredients” or APIs. There is clearly a market for the same.

Getting a medical license also takes capital. And it is also very clear that Portugal is also not the only game in town. Greek, Macedonian and, as of this year, African cannabis is also starting to enter the room.

Further, while there is a great deal of enthusiasm, generally, about the coming cannabis revolution on the recreational side, the medical game remains, as always, a difficult nut to crack, even after the capital has been raised. This is not always a popular task to take, but it is clear that when the dust clears, Infarmed is not interested in being just a pass-through agency.

According to Rob Smallman, a highly experienced Canadian cultivator who has been involved in multiple European projects, including in Portugal, “experience and a focus on the actual business in the room is a far better strategy than just satisfying investors.”

Michael Sassano, CEO and founder of SOMAI Pharmaceuticals as well as the recent recipient of an innovative product grant by the Portugal 2020 committee, concurs. “Cannabis entrepreneurs need to know exactly what they are doing to succeed and receive full certification,” he said. “Medical cannabis growing, and manufacturing requires more than just a lot of capital. It requires deep knowledge of regulations and GMP standards plus serious knowledge of the cannabis plant to surpass timely building, operational, and international sales goals.”

Portugal 2020 is a partnership agreement between Portugal and the European Commission to fund policy goals of interest to both member states and the EU as a whole.

Domestically, however, there is another catch. In a land known rather infamously if not accurately as “anything goes,” on the “illicit drug” front, cannabis as medicine is just as foreign here as it is everywhere else. Not to mention, just like everywhere else, medical cannabis is very expensive. The monthly price tag of about $600 is out of reach to most, if not many.

What Impact Does Pending Recreational Reform Mean for Portugal?

There are several answers to this question. The first and most obvious one is “nothing” since Infarmed only regulates a medical market, not a broader consumer one (more like BfArM in Germany than the FDA in the United States).

However, this is also not the only answer. Forward reform of Portugal’s legislative approach to recreational reform has repeatedly stalled, even as both Switzerland (outside of the EU) and Luxembourg (within it) have progressed.

There is of course this twist. Just like the Czech Republic (and Switzerland) have now started to discuss (and Holland has been in the midst of the same since 2017 when Dutch insurers stopped covering the drug the same month the German Bundestag or Parliament, voted to cover it under Deutsch public health insurance), the entire discussion of “medical” cannabis is coming under scrutiny. Particularly for domestic use, rather than foreign export.

This is a simmering issue. But it is bound to stay in the room, particularly given the advance of overall cannabis reform across Europe.

In the meantime, it is clear that Portugal is proving to be a stringent port of call for all things medically cannabis related—and far from just a pass-through cultivation or extraction state.

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