Cannabis Control Board briefs Government Operations & Military Affairs committee on licensing, taxes and intoxicating hemp

James Pepper, chair of the Cannabis Control Board, told the House Government Operations & Military Affairs Committee on an informational briefing that Vermont’s regulated cannabis market has grown quickly since legalization and that the board is addressing licensing, product oversight and public-safety concerns while the legislature considers further policy changes.

Pepper said the board and its staff — including Commissioners Julie Hobert and Kyle Harris (who joined remotely) — are operating in four divisions and have grown to 26 positions as they implement a tax-and-regulatory system the legislature created after legalization. “We are an independent body, executive branch agency,” Pepper said. He added the board has begun building a quality-assurance lab and signed a lease for lab space the previous day.

The briefing covered market size, licensing counts, tax receipts and regulatory gaps. Pepper said Vermont has about 601 individual cannabis licenses, including 394 cultivation establishments and roughly 296 small cultivators (tier 1), which operate on 1,000 square feet or less. Retail licensing is currently paused; Pepper said the board halted issuing new retail licenses while it finalizes siting rules after towns exercised local opt-in/opt-out authority. He said the state currently has about 102–103 retail licenses and that retail locations cluster in larger population centers such as Chittenden County and Burlington.

Why it matters: the board’s work affects tax revenue earmarks, patient access, public-safety rules and how the state positions its market against neighboring states and an unregulated intoxicating hemp industry. Lawmakers in the committee asked about where excise and sales taxes go and how regulatory gaps are being closed.

Market and tax figures presented: Pepper said taxable retail sales rose from about $47.9 million in fiscal 2023 to $124 million in fiscal 2024. He said that generated roughly $17.4 million in excise tax revenue under Vermont’s 40% excise tax and that sales tax collections on cannabis totaled roughly $7.5 million; the Joint Fiscal Office had updated a revenue forecast projecting taxable sales just shy of $150 million for the current fiscal year. Pepper said the first dollars are used to cover the board’s budget shortfall (about $3 million annually), then 30% of remaining excise revenues go to state prevention funding (determined by the Substance Abuse Prevention Advisory Council) and the remainder flows to the general fund; sales tax receipts are earmarked for after-school programs through the Agency of Education.

Regulatory priorities and concerns: Pepper walked committee members through several high-priority issues the board is handling or that have emerged from industry stakeholders. Those include:

- Oversupply and seasonal price shocks: a large number of outdoor cultivators causes supply spikes each fall that depress prices and strain testing and processing capacity.

- Intoxicating hemp and synthetic cannabinoids: Pepper described a nationwide problem where producers extract and concentrate THC from hemp or create intoxicating isomers (delta‑8, delta‑10 and others) and distribute products through interstate channels that can reach children and retail outlets. He said federal law’s 0.3% dry-weight hemp threshold can be exploited by manufacturers who concentrate cannabinoids into edibles and drinks; by contrast Vermont caps THC at 5 mg per serving and 100 mg per package for cannabis products. Pepper said the legislature gave the Cannabis Control Board authority over cannabinoids and that the board has defined and banned many synthetic and intoxicating hemp products, treating them as cannabis when thresholds are exceeded.

- Patient access and medical program changes: Pepper said the state’s medical-patient registry declined after adult-use legalization and the number of medical dispensaries has fallen to about three. The legislature authorized a pathway for some adult-use retailers, if they accept added regulation, to serve medical patients; those rules are not yet finalized.

- Rulemaking and pending litigation: the board is conducting annual rulemaking covering medical endorsements, retail siting, propagation and licensing streamlining. Pepper told the committee a licensee has sought injunctive relief to block enforcement of certain advertising restrictions; the state attorney general represents the board in that litigation. He warned that judicial changes to advertising rules could require legislative follow-up.

Policy options and stakeholder requests: Pepper presented a menu of policy changes the industry raises repeatedly (noting the board is not advocating for them), including event licensing, on-site consumption, delivery, changing potency caps, and flipping the municipal opt-in/opt-out presumption for retail siting. He said these are issues the committee and the legislature may be asked to consider.

Committee follow-up and next steps: Committee members said they will work with board staff and legislative counsel on language for a miscellaneous cannabis bill. Pepper noted an upcoming cannabis advocacy day and said the board will bring industry stakeholders to meet with the committee. The meeting concluded with a motion to go into an offline security briefing; the transcript records the motion and that a show-of-hands vote was taken but does not record a numeric tally.

Ending: The Cannabis Control Board’s briefing laid out revenue flows, licensing counts and regulatory gaps that lawmakers said they will track as they draft changes. Members signaled they will continue working with the board and counsel on bill language and on monitoring the pending advertising litigation.