Will Legalization Embrace The Grey Market?

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Will legalization embrace the grey market? While American states are including grey market elements, Canada might not follow suit

Section 62(7) of Bill C-45 states that the Minister may refuse to issue a licence where there are reasonable grounds to believe that the applicant has contravened the Controlled Drugs and Substances Act in the past 10 years. So essentially, grey market involvement (even in the absence of a conviction, and even in the absence of charges) is a sufficient basis for refusal.

Everyone holding a key role in a licensed producer’s business must also be security cleared. The bases for security clearance refusal will be found in the regulations to the Cannabis Act (which we haven’t yet seen) but I expect they will closely follow s.62. Similar language is found in the current ACMPR (and its predecessor, the MMAR). While it is true that some MMAR participants have successfully transitioned to roles with licensed producers, the legislation is not designed to create an inclusive industry that embraces grey market participants.

Contrast the language in the ACMPR and Bill C-45 with approaches taken in other jurisdictions. Cannabis regulations in Oregon dictate that prior convictions for marijuana possession may not form the basis for licence refusal. They goes further, extending this ‘refusal amnesty’ for certain prior convictions for the manufacture or delivery of marijuana.

Colorado does not penalize applicants for previous felony convictions for marijuana possession where such offense is no longer a felony. Washington has adopted a point system for prior convictions, with some possession convictions attracting no points and mitigating circumstances being taken into account in respect of certain other offences, including the growing and sale of marijuana. The bill in Massachusetts states that an applicant is not disqualified from receiving a licence due to a prior marijuana conviction unless the offence involved distribution to a minor.

The point is that other jurisdictions have considered, and codified, the approach that will be taken when individuals with prior (illegal) cannabis industry involvement apply for cannabis licences. Although the approaches differ from state to state, the common thread is that the manner in which these situations will be addressed has been specifically set out in the regulations. Bill C-45 doesn’t do this—a prior conviction (and even a reasonable suspicion of grey market involvement) is a permissible ground for refusal, but ultimately the decision on whether to grant a licence is left to the discretion of the Minister.

We have yet to see how any of the provinces will address this issue. To the extent that privately owned dispensaries are permitted, provinces will be forced to address the issue of whether current dispensary owners will qualify for a licence.

My personal view is that we must, to some extent, embrace the grey market. This is not due to any sense of obligation or entitlement, but rather for two practical reasons: (1) those who are excluded will continue to operate illegally; and (2) exclusion of the grey market means the failure to bring decades of know-how and genetics into the legal system.

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