Cannabis Control Board: market grows but small producers face cash‑flow, regulatory and siting challenges

The Cannabis Control Board told the House Agriculture, Food Resiliency & Forestry Committee that Vermont’s legal cannabis market has grown rapidly but that many small cultivators lack business and technical supports and could be harmed by siting and setback rules for outdoor cultivation.

James Pepper, chair of the Cannabis Control Board, said the industry faces unique constraints because federal law prevents interstate commerce and blocks many standard business supports: “This is an industry like no other,” he said, describing limits on banking, federal loans and tax treatment.

Why it matters: The state’s cannabis excise and sales taxes generate revenue earmarked in part for prevention and education, and the Legislature built a policy goal into Act 164 (2020) to favor small, locally based cultivators. Board members warned that seasonal oversupply, lack of access to credit, and rapid market expansion raise business‑viability questions for small operators and social‑equity applicants.

Board and staff provided licensing and market figures: the board reported roughly 610 licensed businesses across seven license types and 396 cultivation licenses; 75% of cultivators are tier‑1 (defined as roughly 1,000 square feet or an outdoor equivalent of about 25 plants). The board said FY 2024 taxable sales were $124.3 million; the combined 14% excise tax and 6% sales tax generated roughly $17.4 million (excise) and $7.5 million (sales tax) in FY 2024, with 30% of excise revenue earmarked for prevention programs and the sales‑tax portion directed to an education special fund.

The board said it is addressing several regulatory and market issues: - Retail siting and local opt‑in: roughly 80–90 towns have voted to opt in for retail stores; retail siting rules are under development and the board paused issuing new retail licenses while rules are drafted. - Outdoor cultivation setbacks: Act 166 implemented automatic setbacks (50, 25 or 10 feet depending on local rules and districts) for outdoor cultivation. The board’s preliminary mapping found about 11 existing cultivators — about 14,000 square feet of outdoor canopy — that could be materially affected by the setbacks. - Market structure and scale: Vermont’s one‑license‑per‑entity rule and small tier sizes were designed to favor craft operators; the board said that also limits economies of scale and can make small operators vulnerable to price swings and seasonal oversupply. - Intoxicating hemp products and enforcement gaps: the board highlighted regulatory gaps created by the 2018 federal Farm Bill’s hemp definition and the growth of hemp‑derived intoxicants (delta‑8, delta‑10 and alike), stressing concerns about testing, packaging, product safety and youth exposure.

Board staff and commissioners urged more sustained, predictable funding for technical assistance. Staff described a proposal in their report — previously submitted to the Legislature — that would provide an annual appropriation (the board recommended an illustrative $1 million) to a Cannabis Business Development Fund to pay for business coaching, legal and accounting assistance and other supports for social‑equity and small outdoor cultivators.

Kyle Harris, commissioner, said the state has made market entry relatively accessible, but “the next step is how do we make sure that they stay in the market?” He and other commissioners urged partnerships with existing state and nonprofit business‑assistance programs while noting federal funding restrictions can limit those collaborations.

Other details: the board reported more than 4,000 unique registered products, a high share of outdoor cultivation (about 56% of licensed canopy was reported as outdoor) and monthly sales seasonality that tracks tourism. The board also noted that seeds classified as hemp under federal rules can be shipped through the mail so long as they remain under the hemp THC threshold.

The committee requested copies of three reports the board produced over the summer. The board said it will continue stakeholder engagement and follow up with the committee on retail‑siting rules, the outdoor‑setbacks mapping and proposals for the Cannabis Business Development Fund.