Ohio’s medical cannabis operators will get a two-year head start at the state’s nascent adult-use market this fall, based on the first round of proposed regulations from the Department of Commerce’s Division of Cannabis Control (DCC) released Jan. 29.
Existing medical operators will be the first businesses allowed to access the adult-use market through the issuance of “dual-use licenses.” Medical operators will also be able to apply for adult-use only licenses that would be for new dispensary locations in addition to any existing medical dispensaries the applicant already controls.
The state’s medical market currently has 137 licensed dispensaries, 59 processor licenses and 37 cultivation licenses, according to the CRB Monitor licensing database.
There is no application fee for a dual-use license at existing dispensaries. The application fee for new licenses is $5,000 each.
After the initial application process, there will be a moratorium on new applications for 24 months after the first adult-use license is issued. Following that two-year period, the state will determine whether additional application periods should be opened based on market supply and demand, anticipated market growth and geographic distribution of dispensary sites.
Dispensary applicants can have no financial ties to a licensed testing lab, nor can they be employed by an Ohio regulatory agency.
Dispensary license recipients will be selected through a lottery conducted by an as-yet unnamed third party where applicants will be randomly ranked. Medical operators seeking dual-use licenses will be twice as favored in the lottery than those seeking new retail licenses. The DCC has not yet set a limit on first round dispensary licenses.
The Department of Commerce is currently accepting public comment concerning the proposed regulations until Feb. 9, 2024.
“The Division will review and consider the comments received prior to submitting the proposed rules to the Common Sense Initiative and the Joint Committee on Agency Rule Review in accordance with Chapter 119 of the Ohio Revised Code,” said the DCC post announcing the new proposal.
Applications will become available on June 7, 2024, with Sept. 7 set as the deadline for the first provisional license approvals, according to the DCC.
Patient fees eliminated
The new rules would also eliminate existing fees for medical patients and caregivers. The annual fee for patients is $50, while caretakers must pay $25. The annual renewal fee for processors was reduced from $100,000 to $50,000.
Ohio’s legislature legalized medical cannabis in 2016, with the first sales taking place on Jan. 16, 2019. By the end of 2023, the state had 410,565 registered patients. The state’s medical market generated about $484 million in sales throughout 2023.
The state was originally going to put the question of legal adult-use to the voters in 2022, but Republican leadership in the legislature blocked the question from appearing on the ballot. A lawsuit from legalization activists in early 2022 culminated in a compromise settlement where the question of legalization would be deferred to fall of 2023. Voters would ultimately legalize adult-use cannabis in the Buckeye State in November, 57% to 43%.
Ohio’s adult-use market is poised to pick up a lot of customers that deliberately avoided the legal medical market. A 2022 study from Ohio State University’s Drug Enforcement and Policy Center found that over half of those recommended by doctors for a medical license never bothered to actually obtain one. A leading cause was the state’s perceived lack of employment protections for licensed medical patients.
Legalization opponents continue efforts to change the law
Immediately after the election, legalization opponents inside and outside government vowed to keep fighting and make substantive changes to the voter-approved law.
Presently, Ohio’s GOP-led legislature is considering HB 341 and HB 354, both of which would amend how adult-use cannabis taxes are allocated and the extent to which municipalities can restrict access to cannabis.
The current law, as approved by voters, calls for a 10% excise tax on all adult-use sales. It specifies that 36% of the revenue go toward a Cannabis Social Equity fund, 36% to a host community cannabis fund, 25% toward Substance Abuse and Addiction fund, and the remaining 3% would finance the DCC.
Under HB 341, five separate funds that cover social equity and jobs, community host impacts, substance abuse research, addiction and treatment as well as law enforcement would each receive 19.4% of those revenues, with an additional 3% set aside to fund the DCC.
It would also remove limitations on municipal power, allowing them to limit research at local educational, medical or private institutions. They would also be able to levy local taxes and they could prohibit home cultivation.
HB 354, which had Finance Committee hearings in December, would change the name of the governing agency to the Division of Marijuana Control and it would create an additional 10% excise tax for cultivators, and it would reallocate taxes differently than the voter-approved law. Under HB 354, 36% would go to a local jail fund, 36% toward an adult-use cannabis county fund, 23% for law enforcement training and 5% toward an adult-use cannabis crime victim fund.
Republican Gary Click is lead sponsor on HB 341, while Republican Jamie Callender is sponsoring HB 354. Both bills remain in the House Finance Committee.