Ontario’s Approach to Recreational Cannabis: It Finally Gets A Little Less Hazy

Yes, the headline puns will be going into overdrive over the next few days (as always, Sussex looks to be ahead of the curve). Today, the Ontario Government announced the general framework for the legalization of recreational cannabis in the province, when it takes place next summer.

Despite the joke-y headlines and puns that will surely be part of the coverage, this is a very serious political and legal issue that will affect nearly all businesses in some way. To paraphrase an earlier comment from Minister Naqvi, this is the end of Prohibition in our time. Not since alcohol was legalized in the 1920s has there been a newly legal product on the market with such a proven level of demand and of users.

So, What’s the Plan?

This morning, the Hon. Yasir Naqvi, the Attorney General, the Hon. Charles Sousa, the Minister of Finance, and the Hon. Eric Hoskins, the Minister of Health and Long-Term Care, announced the Government’s proposed framework. Overall, the Province’s approach is guided by 4 over-arching principles:

• Protecting Ontario’s young people;
• Keeping our communities and roads safe;
• Focusing on prevention and harm reduction; and
• Eliminating the illegal market.

With these principles in mind, the Ontario Government will be bringing forward legislation this fall that contains a recreational cannabis legalization framework that includes:

• A legal minimum purchase and consumption age of 19;
• Retailing of cannabis through new stand-alone LCBO storefronts that will only sell cannabis, as well as on-line;
• Plan is for 80 stores by July 1, 2019 and 150 by July 1, 2020 throughout the province and on-line sales will be available as of July 1, 2018;
• While the LCBO will be in charge of retailing and distribution, this will be done through a subsidiary corporation;
• Clear commitment that alcohol and cannabis will not be sold side-by-side;
• The product will sold behind the counter and not be visible to consumers (consistent with the province’s approach to tobacco);
• LCBO will be the only legal retail distributor for cannabis in Ontario;
• Consumption of cannabis will only be allowed in private residences (illegal in public spaces, workplaces or in motor vehicles);
• Further consultations will take place over the coming months “to explore the feasibility and implications of introducing designated establishments where recreational cannabis could be used.”
•  A concerted campaign to work with law enforcement agencies to shut down illegal dispensaries; and
• Developing resources to guide employers, labour groups and others on workplace safety.

Very little information about medical cannabis was contained in today’s announcement, other than to confirm that this existing regime would continue under the new recreational cannabis framework.

Key issues, such as new measures to deal with drug-impaired driving and how to detect drug-impaired driving, will be unveiled by the Ministry of Transportation in the coming weeks. Similarly absent is any detail about pricing and the level of taxation. Minister Sousa indicated the approach would be cautious to ensure legal cannabis is priced at a level that drives out the illegal market. As a result, the Province is expecting revenues will be lower to begin with and will increase over time, indicating the tax rate is likely to start low and increase over time.

While an LCBO subsidiary corporation will be in charge of retailing and distributing cannabis, the Alcohol and Gaming Commission of Ontario will oversee and regulate this new regime.

Coupled with today’s Ontario announcement was a federal one setting out $274 million in funding for law enforcement and border efforts to detect and deter drug-impaired driving and enforce the legalization and regulation of recreational cannabis. In the same announcement, the federal government signalled that Finance Canada will soon be consulting on a proposed taxation regime for recreational cannabis.

What Does This Mean?

While today’s announcement provides more clarity about the legal framework that will be operating in Ontario from July 2018 onward, it largely is an announcement about future announcements and a commitment to consult with stakeholders on final details within the framework announced. It also makes clear that much of the legal cannabis regime will be dependent on further guidance from the federal government.

There is no legislation yet to analyze. Except for explicit assurances that “product types and formats will meet the federal government’s requirements,” there are no details about what exactly will be sold – will it just be dried product? Will there be oils and tinctures available? There also aren’t details about guidelines for where storefronts can be located – for example, can they be co-located within existing LCBO stores as a store-within-a-store? Can they be co-located within other retail stores (for example, pharmacies)?  Will there be agency stores in remote areas such as those the LCBO licenses today for alcohol retail?

Issues like these – and many more – are clearly still being formulated and will continue to be the subject of further consultations.

That being said, today’s announcement is significant. Ontario is the first province to set out what its legal cannabis framework will look like. This framework will likely influence other provinces.

It is also very clear that this cannabis framework is still a work in progress. Anyone with an interest in this file still has time to shape the outcome. But that time is running out and the nature of what can still be shaped has been slightly narrowed.

Next Steps

Based on today’s announcement, we know that legislation will be forthcoming in the fall. Because of the federal July 2018 timeline and the provincial election in June 2018, this legislation will need to be passed by early 2018 at the latest. Consultations are likely to be on-going for a few more months.  

By necessity, this will be a priority piece of legislation going through the Legislature. If you have a position on this file, now is definitely the time to get engaged, if you aren’t already. Sussex is a market-leader in government relations, regulatory issues and communications within the cannabis sector.  We are actively supporting Licensed Producers, applicants to the Federal ACMPR, technology companies and others within the sector.  If you have questions or wish to advocate on these issues, please contact us.  In the meantime, Sussex will continue to monitor this file and will provide updates as developments occur.