Growing up 

Oklahoma’s medical cannabis industry is slowly transitioning from its Wild West laissez-faire roots to a more regulated model with expanded oversight and a temporary moratorium on business licensure.

Donald Gies

Photo provided

Donald Gies

Oklahoma’s legislative session saw nearly a hundred proposed cannabis bills, but after winding their way through the process, only a dozen were ultimately signed by Gov. Kevin Stitt.

A two-year moratorium and tiered licensing stirred some angst within the industry with others making fewer waves, but Oklahoma will be seeing some major shifts in current law.

click to enlarge Cassity Gies - PHOTO PROVIDED
  • Photo provided
  • Cassity Gies
One of the largest adjustments centers around the agency regulating the industry — The Oklahoma Medical Marijuana Authority will now be a standalone state agency receiving increased regulatory authority. House Bill 1543 separated the OMMA from the Oklahoma State Department of Health. As a freestanding agency, OMMA will absorb duties currently being overseen by OSDH. The executive director of OMMA will be appointed by the governor with advice and consent of the Senate and will have authority to conduct hearings, issue agency orders and impose disciplinary actions.

As this is happening, House Bill 3208 places a two-year moratorium on processing new cultivation, processing and retail licenses. Slated to end on Aug. 1, 2024, the moratorium could be terminated at any time prior to that date, if OMMA’s executive director determines that all pending licensing reviews, inspections or investigations have been completed by the agency.

Because cannabis entrepreneurs can still transfer licensure, the cannabis industry may be seeing a competitive seller’s market. All applications submitted prior to Aug. 1 of this year will be reviewed and processed and, while OMMA’s licensure numbers slipped more than 3 percent from April to May, the Authority should expect to see a big run on application submissions until the deadline.

The most controversial bill passed this season, House Bill 2179, introduces a tiered licensing system for Oklahoma cannabis businesses based upon square footage, production amounts and annual tax revenues. This bill raises serious implications on the constitutionality of the process that led to its approval.

The bill’s label includes the word “fees” as its own distinct subpart and the OMMA promises that this act “will certainly raise revenues.” Why does this matter? Because the Oklahoma Constitution heightens requirements for approving revenue bills, and when HB 2179 passed the House with sixty votes last month, it failed to receive three-fourths vote from both chambers. Unlike other bills, which only require a majority vote from the House, a revenue bill must have either been passed by Oklahoma voters in the general election or passed with three-fourths vote from both chambers. Data shows roughly $60 million dollars of excess revenue from licensing fees alone has been used to support the state government since 2019. In this way, HB 2179 could be a revenue bill in the strictest sense, and if so, its passage violated the mandated procedure.

Another bill generating conversation, House Bill 3530, creates the "County Sheriff Public Safety Grant Revolving Fund," which allocates the first $5 million dollars of cannabis excise tax to county sheriff departments. The bill also requires OMMA to establish programs and provide funding to support county sheriffs in enforcing the requirements of state cannabis law. Each county would receive roughly $65,000 annually without adjustment for their population or the number of active cannabis businesses in the county.

In addition to laws affecting the Authority and commercial cannabis businesses, some will affect individual patients. Senate Bill 1367 doubles the initial penalty for cannabis patients or caregivers who share three grams or less with an unauthorized person. Violating this law will now be a $400 fine for the first offense and a $1,000 fine for second violations and may also be accompanied by the revocation of licenses. Cannabis businesses transferring or selling cannabis to unauthorized individuals will receive a $5,000 initial fine and subsequent violations will be $15,000 in addition to other penalties.

House Bill 3971 will bring a more watchful eye to day-to-day dispensary operations and puts pressure on managers and owners to do their due diligence with training toward compliance. Also known as the “OMMA Secret Shopper Act,” this law will provide for OMMA to inspect at least 50 dispensaries annually by deploying undercover shoppers to purchase products and submit them for quality control testing. Multiple parts of this bill inspire optimism about the feedback and insight that OMMA will receive by participating in the purchasing process with individual transactions. Double-checking the testing process and deterring dispensary owners from selling to unauthorized individuals should encourage businesses to increase their employee training. This bill creates an opportunity to catch deficient products that may have slipped through the cracks of the laboratory process, adding protection for patient safety. Laboratory testing will also be seeing increased scrutiny by this time next year under a separate bill passed during the session.

The recurring theme of cannabis compliance also touches on smaller details in the industry. For example, House Bill 3019 allows edible packaging to be clear so patients can see the product. The bill mandates opaque exit packaging at the point of sale and also requires new warning language on the label: "For use by licensed medical marijuana patients only" and "Keep out of reach of children." These are things secret shoppers will be looking for, and, if not clearly understood and implemented, could result in compliance infractions for cannabis businesses owners.

Oklahoma’s latest legislation introduces additional rules for the cannabis industry, with increased focus on strengthening OMMA’s ability to enforce regulation. These new regulations, coupled with the mandatory implementation of METRC (the state's contracted seed-to-sale software tracking system) advance the legitimacy of the state’s medical marijuana program. Now four years old, our medical cannabis program could be a model for other states creating their own and having structured rules and processes lessens stigmas and quiets naysayers. With legislation cutting OMMA’s apron strings and increasing enforcement, our beloved baby industry, created overnight by the vote of the people, is no longer eating at the kid’s table.

Donald Gies is the founder of Gies Law Firm, which specializes in Oklahoma medical cannabis law. Cassity Gies is an attorney at Phillips Murrah.

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