A new slate of laws has recently gone into effect in Oklahoma, causing a myriad of problems for the cannabis industry at a crucial stage in its development.
Rather than copy and paste another state’s more developed cannabis policy, Oklahoma has insisted upon building its fledgling program from the ground up. As such, the ideology guiding the legislative progression has primarily been reactive to the developing market — fighting fires rather than taking proactive steps to prevent them. Industry players and legislators alike want to make sure there is a credible industry to serve our population, which necessarily means reining in control from seed to sale. After all, whittling away at the liberties present from the birth of a maturing market is all part of the process of achieving the ultimate goal, economic stabilization.
The advantages of a regulated system are not to be scoffed at. Namely, the indirect law enforcement savings due to decreased illegal activity and direct economic benefits from taxation are factors supporting regulation from the state’s position. From the patient perspective, higher testing standards mean safer products on shelves. To be clear, the industry not only appreciates but shares the state’s goals of legitimacy and safety. However, the recent string of legislation aiming to modify House Bill 2612, known as the “unity bill,” evidences nothing more than good intentions but poor execution. Frankly, the new licensure requirements pose a logistical nightmare for business owners.
One new headache-inducing requirement is any new or renewing business must provide documentation certifying compliance with local zoning classifications, municipal ordinances, and applicable safety, construction and building specification codes. This requirement results in polar opposite effects once applied. Because most counties do not have their own independent codes, businesses falling outside city limits are generally receiving blanket approval without inspection of the premises to ensure safety. On the other hand, businesses inside city limits must not only comply with extensive city codes, but must also deal with long wait times for these inspections as cities generally are home to a higher number of licensees and the inspection channel is currently flooded. While the intention behind requiring safety certifications is to lend credibility by upping compliance standards, secondary effects cannot be ignored.
The most prevalent secondary effect of this new requirement is the license lapse for renewers who cannot obtain inspections, much less certificates in such a tight time frame. Many familiar brands in our state broke ground shortly after the passage of State Question 788 last summer, which means loads of these folks are now up for renewal one year later. The problem is that city inspection wait times can make an otherwise wholly compliant business illegal. City officials are estimating the compliance check inspections have about a three-week delay. Thus, the 30-day grace period referenced in a recent email from OMMA to all businesses up for renewal is likely in direct response to the state’s realization that local authorities were simply not prepared to carry their burden under the new laws. Perhaps the most frustrating part of all is that had Senate Bill 1030 not amended 63 O.S. § 427.14’s allowance for applicants waiting on “necessary [local] permits” to receive a conditional one-year license so long as they had “fulfilled all other obligations required,” the inability to obtain timely renewals would have been solved before it ever became an issue.
An upshot for new license applicants is that it is more advantageous than ever to choose rural areas for business location. Conceivably, legislators might have unknowingly created a windfall of people relocating their cannabis businesses to rural areas. If the result is stimulation of rural economies, it could prove to be a happy accident. However, when coupled with SB 1030’s allowance for cities to ban processing and growing inside city limits altogether, it feels like purposeful penalization rather than regulation. Instead of having viable banking, taxation, testing and regulatory solutions, cannabis is being treated as if it were still illegal. What other American business could survive if it were completely prohibited from deducting business expenses, blacklisted from federally insured banking, yet still required to pay a 7 percent excise tax on top of traditional sales tax? The answer is none.
With competing policy interests at play, the most progressive solution available is compromise. Advocates for public justice and safety want to eradicate the black market while also being able to make products accessible, affordable and safe to consume. Businesses are worried that aggressive regulations would prevent a sustainable business model in our highly competitive market—especially for small business owners. OMMA’s temporary grace period for renewal applicants is a small step toward protecting compliant businesses from losing revenue during the renewal review process. However, it is not enough. If cities are not prepared to meet the demands of OMMA, then how can businesses be expected to comply? Something has got to give.
Kaimbri B. White is a cannabis industry attorney at Overman Legal Group. While in law school at University of Oklahoma, White founded her own cannabis industry consulting firm that was acquired by CLIMB Collective. White consults with businesses of any size and variety in every sector of the cannabis industry.