The U.S. Virgin Islands is the latest region of the U.S. coming online with a regulated cannabis market. Unlike other states, where the barrier to entry is quite high and requires significant capital just to apply for a license, the U.S. Virgin Islands cannabis sector is shaping up to revolve around social equity. "They finally found a legislator to support it, and the program is set up. They should open up the application period within six months to a year," says Paula Savchenko, an attorney and consultant from Cannacore Group, a company specializing in supporting businesses entering the cannabis industry and ensuring they meet all regulatory compliances. "We set them up legally, identify opportunities, work with local groups, and find the right lobbies to push forward legislation. We also handle real estate, corporate work, and help secure competitive licenses in both cannabis and psychedelics."
Cannabis licenses in other states
Securing a license is one of the first steps of every cannabis business and can be a daunting and financially intensive task. "It's a competitive process at the state or local level. You need attorneys, lobbyists—it's costly," she explains. "And then, you have to deal with zoning laws and finding real estate that's actually viable for a grow operation. You can't just pick any area; it has to be properly zoned, and you need to ensure the land can handle that use."
Paula Savchenko
On top of that, cultivation adds another layer of complexity. "It's not just about getting a license; there are environmental tests, surveys, and making sure there's enough space, especially for outdoor grows. That's why cultivation is one of the most complicated parts of the industry. Manufacturing and retail don't need the same level of real estate and environmental considerations."
If all of that weren't enough, the cost of entry is another barrier many, especially small entrepreneurs, can't afford to overcome. "States want to weed out applicants who aren't serious, and the financial requirements make that clear. For example, in Florida, it costs $47,000 just to submit the application, and that's non-refundable. If you don't get the license, you lose the money. And if you do get it, there's a $1 million fee every two years." She adds that Florida's cannabis market is heavily dominated by large players. "It's monopolized, but the state relies on the taxes to enforce regulations." Applying for licenses can be a risky process. "Groups often invest significant capital in applying for these licenses, and if they don't get them, they may end up suing to secure a license years later through litigation. It's a time-consuming and expensive process."
Applying in the US Virgin Islands
That's why the U.S. Virgin Islands is setting up a regulatory framework that is quite different from Florida's, and not just because of the application fee. One of the notable requirements in the Virgin Islands is the residency requirement: 50% of a cannabis business must be owned by a local resident. "That's unusual," she says. "Most states have done away with that because it's been deemed unconstitutional. But in the Virgin Islands, they might get away with it since they're a former colony. There could be lawsuits, though."
There's also a social equity requirement, a common feature in many states. In the Virgin Islands, businesses get 150 additional points if the majority owner has been impacted by the war on drugs or was criminally persecuted for cannabis use for spiritual purposes. "It's good they're addressing social equity," Paula says. "It's a way to give back to the local community."
Regarding the interest from larger operators, Paula notes that multi-state operators (MSOs) are already eyeing the Virgin Islands. "The tax protections are attractive to them, and even though the population is small, we've seen demand in other states with smaller populations. MSOs want to establish a large footprint, and they're not deterred by the size of the market."
With a potential rescheduling or federal legalization, setting up shop in the Virgin Islands could be profitable if interstate commerce becomes an option. "Export is a big topic. It's not legal yet, but some states are passing laws in anticipation that cannabis will be able to cross state lines once it's federally legalized."
In the Virgin Islands, there will be caps on the number of licenses issued, making it a highly competitive process. "Saint Thomas will allow seven dispensaries and 15 cultivation licenses; Saint John will have three dispensaries and five cultivations, and Saint Croix will have seven dispensaries and 15 cultivations."
On the financial side, Paula says banking remains a challenge due to federal restrictions, but the industry is waiting on the SAFE Act, which could open up more banking options for cannabis businesses. "Right now, we're all waiting for that to move forward."
Cannacore Group helps clients navigate these challenges by structuring funding deals, whether through loans or equity. "We often bring in MSOs to help with operations, especially when the applicant lacks experience. Usually, MSOs or single-state operators will take equity in the license and enter into a management services agreement, where they share in profits for a set period."
For more information:
Cannacore Group
561-888-0874
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cannacoregrp.com