Rhode Island Governor Gina Raimondo’s fiscal year 2021 budget includes over $20 million in revenue that the Governor expects to be generated by legalizing cannabis for recreational use. While the Governor’s support for legalization is welcomed news for the industry, there is a twist: dispensaries would be owned by the state and run by private operators, much like how states such as New Hampshire structure the sale of liquor.

The proposal calls for retail revenues to be split between the state (61%), the private operator (29%) and municipalities (10%). Licenses would be awarded to private contractors to manage the state-owned dispensaries, and licenses would also be granted to privately-owned cultivators and processors. Rhode Island’s Office of Cannabis Regulation, which currently regulates the state’s medical-use market and its industrial hemp program, would assume authority over the adult-use market as well. Adult-use purchasers would be allowed to buy up to one ounce of cannabis per visit to a retail shop.

While the state-owned model is not unheard of – Utah, New Mexico, and Pennsylvania have all considered (but not enacted) similar legislation – it has met resistance from some state legislators and is not expected to pass. The model may also have legal risks. Utah abandoned its plan for state-run dispensaries due to concerns that the system would “put public employees at risk of being prosecuted under federal drug laws.”

The state legislature will hold hearings on the Governor’s budget over the next several months. Industry stakeholders should follow the hearings carefully and be on the look-out for any budget amendments that alter the Governor’s proposed adult-use market structure.