Application period open for state’s recreational marijuana industry

Interested in applying for a marijuana industry license? Whether in the retail, manufacturing or cultivation sector, it comes with a price.

And that’s just the application fee, which puts applicants into a lottery pool. 

The nonrefundable application fee starts at $5,000, but is reduced to $1,000 for social equity applicants, and $3,000 for a microbusiness, said Robert Coupe, head of the Delaware Office of the Marijuana Commissioner.

The application fee period opened in August and will close Monday, Sept. 30. Those who have ponied up the funds will be put into a lottery for one of the 125 licenses. Of that number, there are 47 earmarked for social equity applicants – those who have been negatively impacted by past marijuana policy. There is also a set number of licenses for retail, manufacturing and cultivation. A two-year license starts at $10,000, with deeper discounts for social equity and microbusiness licensees, and reductions based on cultivation sizes.

The lottery will be run by the Delaware Lottery, and will be broadcast live on Facebook for full transparency, Coupe said.

“I’m kinda relieved by the lottery, because no one can say Coupe looked out for someone,” he said.

Still, he acknowledged the price tag just to be put in the lottery is steep.

“I’ve had some folks tell me that’s an expensive lottery ticket,” Coupe said.

There are minimal requirements to apply for the lottery, but, he said, officials are working with people to ensure they would qualify for a license if chosen.

Coupe said if all goes well, he is hoping licenses will roll out by November, so that Delaware has a legal avenue for marijuana sales.

After six years of bills, revisions and a veto, legalized marijuana use for adults became law in 2023 after Gov. John Carney took no action on the bill. Since its legalization in Delaware, five other laws have been passed adding to the original legislation or modifying. Among them is allowing medical marijuana facilities – operating since 2011 – to purchase conversion licenses to sell marijuana for adult recreational use.

Those licenses will cost $100,000 for the first year for retail, manufacturing and lab testing facilities, and $200,000 for cultivators. Renewal fees are $10,000.

Jennifer Stark, co-owner and CEO of The Farm, a Delaware-owned and -operated facility near Felton, estimates her final tax bill is about 70% even though Delaware’s tax is 15%. 

“Cannabis gets taxed on its gross income,” she said, noting federal law prohibits cannabis companies from deducting expenses the way other businesses are allowed to under tax code.

There is only one bank in Delaware, Shore United Bank, that does business with marijuana companies, but even then, transactions are limited.

Stark said she has to hire an armored car company to take cash directly to the federal reserve for deposit, which then shows up on the business account in a day or so.  Checks can be written off the balance, she said, but she cannot do credit or debit card sales.

The marijuana industry is the only one with a sales tax – 15%. Total medical marijuana sales were about $49 million in 2022, increasing to about $54 million in 2023. 

The majority of the revenue goes into the state’s general fund, instead of a specific earmarked use, which the bill’s original sponsor, Rep. Ed Osienski, D-Newark, said he fought hard for.

“Our goal has been to compete with the illegal market as best as we could,” he said.

Add to that competition from neighboring states.

Paul Hyland, deputy commissioner of the Office of Marijuana, said medical sales dropped about $1 million per month when Maryland started offering it.