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Oregon Recreational Licensing Opens New Vistas

22 Jun Oregon Recreational Licensing Opens New Vistas

Oregon’s Measure 91 permits four license types for the recreational cannabis industry: producer, processor, wholesaler and retailer. A company can apply for all four, thus setting itself up as a vertically integrated operation; it can apply for one only; or it can mix and match, to carve out its own niche in the supply chain.

The “at least one but fewer than four” alternative is significant because it lowers entrance barriers to the industry. The regulations now being drafted by the Oregon Liquor and Cannabis Commission may allow smaller players to participate in the green rush.

They may also create a more open framework for the growth of ancillary business-to-business services such as distribution or courier services.

The larger concept of offering more different license types may also allow states to bring existing illegal or semi-legal but thriving businesses under the umbrella of regulation rather than driving them underground.

Consider the dilemma Washington State faces with collective gardens or California faces with Humboldt Valley growers. When you can’t beat them, is the solution to specially license them?
 

Licensing Shapes the Industry

Perhaps the best way to appreciate the impact of a licensing scheme is to look at the differences between New York, Colorado and the emerging direction of the OLCC.

New York requires that medical marijuana licensees be vertically integrated. The process, which just closed, required a deposit of $210,000. Applicants had only 40 days to complete the application, which required detailed site plans, architectural drawings and leases at four locations. Some applications ran to as many as 1,500 pages and cost applicants as much as $1 million to complete.

As many as 300 teams filed applications for the five licenses that will be awarded in July. It was a process that clearly favored the well-heeled.

Colorado, on the other hand, has no cap on the number of retail licenses. Although the state originally required businesses to grow 70 percent of what they sold, that restriction was eased as of July 1, 2014, when the state opened a second round of recreational license applications.

In Oregon, the regulations are still being written, but Measure 91 does not specifically address the number of retail outlets allowed.  The OLCC will begin accepting applications on Jan. 4, 2016, and will require a non-refundable application fee of $250 per application. At the outset, at least, it appears that the process will resemble Colorado’s second round and will be far more open than New York’s.

Aeron Sullivan, Founder and CEO of Colorado start-up Tradiv, commented recently that vertically integrated businesses need very little in the way of B2B services. He sees great business potential, however, in providing those services to the smaller and less integrated cultivators, processors and retailers licensed in Colorado’s second round.

This may be a harbinger of things to come in Oregon if cannabis entrepreneurs take advantage of the opportunity to “right size” their operations with fewer licenses.
 

States Shape Licensing

Colorado and New York are hardly the only states to shape their licensing processes to further social and political goals.  Nevada, for example, has significant gaming and tourism interests. The initiative to legalize recreational marijuana that will appear on the Nov. 8, 2016, ballot includes a special licensing category for distributors, designed to blunt the anticipated opposition of the liquor industry.

Some argue that the regulations in Washington State that failed to consider the existence of a medical marijuana program were ill-conceived from the beginning. It was a lost opportunity, and the remedy may leave patients without medicine, at least in the short term.

California is the biggest prize yet to come. If, as anticipated, it also legalizes retail marijuana in 2016, the legal market in the United States would more than double in size. But the state has had a long and messy history with cannabis that may make the implementation of the law extremely difficult. It is going to fall to the regulators.

The Medical Marijuana Program Act, passed in 2003, provided a framework for implementing medical use, which had been permitted since 1996. The laws have been subject to differing legal interpretations, and counties and municipalities have enacted their own guidelines, all of which have contributed to a sense of chaos.

In addition to the complications of local control, California has a large, open, thriving, 40-year old illegal industry centered in the Humboldt Valley, which is often described as America’s marijuana capital. Nowhere is legalization less welcome. Shutting it down to implement a legal system might simply bring back the worst days of the drug wars.

The solution is not clear, but the task may ultimately fall to a collection of relatively anonymous commissioners who find themselves writing the rules to implement California’s legalization statute. As much as its own history, California may also look to the work of the OLCC and other regulatory bodies that have already tackled the problem of balancing interests to open the industry.

The post Oregon Recreational Licensing Opens New Vistas appeared first on MJI News.

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