Navigator’s take on Ontario’s new cannabis retail rules

Late last week, the Ford Administration introduced the details of Ontario’s cannabis retail model, creating one of the most open and free cannabis markets in Canada.  This bold new approach is expected to generate substantial investment by aspiring cannabis retailers across the province. At the same time, there remains a number of key political and policy issues to resolve in the months ahead which will determine the ultimate size and shape of Ontario’s cannabis market. Here are some key insights from Navigator on the province’s new cannabis rules:

1. The battle for the hearts and minds of municipal politicians begins. Ontario’s cannabis bill will give newly-elected municipal councils across the province until January 22, 2019 to decide whether they will close their borders to cannabis retail stores.  At the same time, the bill limits the authority of municipalities to control where cannabis stores can be located through local licensing and land use planning. The stakes are high, particularly in major markets like Toronto, Mississauga, Ottawa and Hamilton.  In the weeks to come, aspiring retailers will be battling for the hearts and minds of municipal politicians to convince them not to opt out.

2. Dispensaries – in or out of Ontario’s retail market? The province has been clear that illegal dispensaries in Ontario who don’t close their doors by October 17th will not be eligible to obtain a licence in the legal market.  It is less clear, however, whether those who do choose to shut down by “legalization day” will be able to pass Ontario’s rigorous licensing process. Ontario’s new cannabis regulator, the Alcohol and Gaming Commission of Ontario, is tasked with looking into “the past and present conduct” of every applicant to be assured that they will act “with integrity, honesty and in the public interest”. This may prove too tall an order for many dispensary owners who have spent years operating outside of the law.

3. What is an “affiliate”? It has been widely reported that Licensed Producers were dealt a blow when Ontario’s new cannabis bill revealed that they would be able to operate a single store on the premise of a production facility.  But that may not be the end of the road for LPs.  The law does not expressly prevent an LP from having a commercial relationship with a licensed retailer, unless the licensed retailer is a yet-to-be-defined “affiliate” of the LP.  The meaning of “affiliate” will be defined in forthcoming regulations, meaning the province will be receiving arguments from all sides in the weeks to come.

4. Betting on the buffer zone. The new cannabis bill takes a pass on defining specific “buffer zones”, which refers to the minimum distance that must exist between a cannabis store and certain sensitive use areas, such as public schools.  This decision has been left for forthcoming regulations, which is sure to be causing profound anxiety among aspiring retailers who have already locked in retail locations across Ontario on a speculative basis.  They will have to wait a few months more to find out whether their locations are inside or outside of the provincial buffer zone.

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