Maryland Exempts ESOPs from 5-Year Cannabis License Hold

For the first time, Maryland dispensary owners can now grant stock to their employees immediately without waiting five years. 

Governor Wes Moore has signed into law a provision that exempts ESOPs (Employee Stock Ownership Plans) from the state’s strict five-year hold requirement on cannabis dispensary licenses. 

This is a big deal for both cannabis operators and advocates of employee ownership. This provision establishes Maryland as the first state to formally recognize the unique structure of ESOPs in cannabis licensing. 

Both Dispensaries and Employees Benefit

According to Darren Gleeman, managing partner at MBO Ventures, this new policy creates a win on both sides: a graceful way out for founders, and a powerful path up for employees. 

“For dispensaries, it opens the door to something that was nearly impossible before: a real exit,” he says. “The state’s five-year license lockup rule meant owners were stuck holding on longer than they wanted.”

But now, with the ESOP carveout, they can sell to their employees right away. 

“And for employees? This is huge,” Gleeman adds. “It’s a once-in-a-lifetime shot to go from worker to owner. They’re not just clocking in anymore — they’re building real wealth, real equity and a real stake in the future of the business. It turns jobs into ownership and changes the game for people who’ve been doing the hard work on the ground.”

Advantages of ESOPs

Gleeman notes that ESOPs offer real, tangible advantages — especially in industries like cannabis where the usual rules don’t apply. 

Tax. When a company is 100% owned by an ESOP, it pays zero federal and zero state income taxes. The company keeps all the profit, which means cash flow can double or even triple. 

280E Becomes Irrelevant. Cannabis companies usually get crushed by 280E, with effective tax rates hitting 60-70% since they can’t deduct normal business expenses. But in a 100% ESOP-owned structure, the company doesn’t pay income taxes at all, so 280E doesn’t matter. 

Flexibility and Control. You’re not selling to private equity. You decide whether to stay, exit or transition slowly. ESOPs let you structure a deal that works for your timeline, your people and your legacy. 

Alignment. Employees become owners. When people own what they help build, they act like it. Retention improves, performance improves and culture improves. Everyone’s rowing in the same direction — and the results show it. 

“ESOPs give you a tax-free, flexible and mission-aligned exit while still giving your employees the upside they’ve earned,” Gleeman says. 

Encouraging Cannabis ESOPs in Other States

With Maryland being the first state to formally carve out ESOPs in its cannabis legislation, it’s unlikely to be the last. Every state allows ESOPs for normal companies, so it’s just a matter of making them more available to cannabis licenses. 

“For cannabis companies, most states allow ESOPs as well, but in the few that don’t, it’s usually due to a legislative oversight,” Gleeman says. “We’re actively working to fix that. Right now, we’re involved in efforts to update the laws in Washington and New Jersey so cannabis businesses there can also benefit from tax-free employee ownership.”

Gleeman also mentions that MBO Ventures is actively speaking with multiple firms in Maryland who are exploring ESOPs now that this carveout finally gives them an exit strategy. 

“This model keeps ownership local, boosts cash flow by eliminating state and federal taxes, and hands equity to the very people running the business. It’s transformative,” says Gleeman. “This decision is turning employees into owners, unlocking liquidity for founders and laying the groundwork for long-term, stable growth in Maryland’s cannabis industry.”

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