Virginia's adult-use cannabis bill could become law, even if the governor fails to act

By Steve Gelsi

Gov. Glenn Youngkin may opt not to sign the bill but the state has no pocket veto

Virginia could become the first Southern state to allow regulated retail sales of cannabis if Gov. Glenn Youngkin doesn't sign, veto or amend the measure that the legislature passed, advocates told MarketWatch.

While other states have so-called pocket vetoes allowing governors to kill approved bills through inaction, Virginia state law dictates that bills become effective 30 days after the Assembly adjourns if the state's chief executive does nothing.

Since the measure landed on his desk last week, Youngkin has made no new public comments on his plans for the bill, which passed both the state Senate and the house of delegates.

Asked by the Associated Press and other news outlets about the bill, spokespeople for Youngkin have referred to a statement he made to journalists back in January: "I've said before, this is an area that I really don't have any interest in. What I want us to work on are areas where we can find a meeting of the mind and press forward to the betterment of Virginia, and there are so many of them."

Irina Dashevsky, partner and co-chair of the cannabis Law practice group at Greenspoon Marder, told MarketWatch that Youngkin has no interest in signing the measure, but he may not veto it or send it back to the legislature with amendments either.

If the measure is allowed to become law, Youngkin "can still say he never signed it," as a way to appeal to his conservative supporters, she said.

Meanwhile, Youngkin has voiced support for a bid by the Washington Capitals NHL team and the Washington Wizards NBA team to move to northern Virginia.

The governor in December reached a handshake deal with team owner Ted Leonsis but the pact would require a new arena in Alexandria, according to reports.

State Democrats have told the governor that they will support the arena only if he allows regulated recreational cannabis.

"The Democrats see it as a bargaining chip for sports team votes," Dashevsky said.

Virginia has allowed adult-use of cannabis and home cultivation of up to four plants since 2021. Unregulated stores have since popped up, with no tax revenue going to the state.

The bill that passed last week would set up a regulatory structure for retail sales of cannabis with an applications period for licenses starting on Sept. 1 and a market open as early as May 1, 2025. State taxes on cannabis would range up to 11.625%.

If the governor vetoes the measure, the legislature does not likely have the votes to override the measure, but he has not publicly threatened to do this, according to sources.

Another option is for the governor to send the measure back to the legislature with amendments.

JM Pedini, development director for the National Organization for the Reform of Marijuana Laws (NORML), said public safety will be better served through a regulated marketplace, with the governor's support.

"NORML would argue that perhaps a better policy position to take would be to agree with Virginians that it is time to take control of Virginia's marijuana market instead of leaving that in the hands of illicit operators," Pedini said.

Cannabis companies currently operating in the medical market in Virginia include Jushi Holdings Inc. (JUSHF), Dharma Pharmaceuticals, Green Leaf Medical and Columbia Care.

With a population of about 8.7 million, Virginia ranks as the 12th largest state in the U.S.

Adult-use legalization bills are now moving forward in Hawaii and New Hampshire. The Florida Supreme Court is expected to rule in coming weeks on a bid to place a referendum on the November for adult-use cannabis.

The governor of Pennsylvania has thrown his support behind legalized adult-use cannabis to raise tax revenue, but it's not expected to get past the Republican-controlled state Senate.

In November, Ohio became the 24th U.S. state to legalize adult-use cannabis.

Also read: Cannabis stocks gain as Pennsylvania governor prioritizes legalizing adult-use pot

Also read: Americans' support for legalizing cannabis edges up to 70% and Ohio voters OK pot referendum, as cannabis stocks rise

-Steve Gelsi

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03-06-24 1541ET

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