Oregon cannabis business operators can finally start planning for the future now that a new law will prevent the already saturated market from becoming even more diluted.
Gov. Tina Kotek signed HB 4121 into law on March 20, which sets new limits on the number of available licenses based on the population of the state, effectively creating an indefinite hiatus on new licenses. These new limits include one production and retail license per 7,500 residents older than 21, while processor and wholesale licenses are limited to one per 12,500 residents.
“If you look at the number of active licenses per population, Oregon is in no danger of becoming a lower license state. We’ve still got the better part of 1,300 production facilities, almost 900 retailers, and that’s not gonna change tomorrow at all,” said Mike Getlin, chair of the Cannabis Industry Association of Oregon. “What it does for Oregon businesses is that it allows us for the first time, really ever, to do some future planning without the threat of another 1,000 licenses being dumped into the system.”
The state’s cannabis market currently has 2,754 active licenses, according to the CRB Monitor database. This includes 1,374 cultivator licenses, 299 processor licenses, 806 retail licenses and 259 wholesale licenses, as of April 12.
The state currently has about 3.3 million residents that are at least 21 years old. Based on the state’s current projections for population growth in Oregon and the current number of active licenses, it would be 2027 before a new wholesale license could be issued, and perhaps decades before any other new licenses could be issued.
A spokesperson for Oregon Liquor and Cannabis Commission shared a fact sheet with the legislature breaking down the state’s population and the ratio of residents to licenses for the four main types. He added that the commission has no position on the bill, nor does it have one on the moratorium.
Existing business licenses may become more valuable
“Everybody who has a license, wanted this bill to pass because the OLCC allows those businesses to effectively sell their licenses if they want to close up shop or if they’re not using them for any reason,” said Vince Sliwoski, a partner at Harris Sliwoski. “So they have value like an asset and not like a license in the classic sense.”
The new law still allows license holders to effectively sell their licenses. Without the prospects of new licenses, existing ones are able to draw thousands of dollars, according to Sliwoski.
“With this moratorium being permanently put into place, people at least have something they can liquidate if they go out to business, and they’re not small amounts of money,” he said. “Even the lowest producer licenses ever went for about $30,000 in the state, and they’ve been selling for higher than that over the years.”
The OLCC has to approve all license transfers. The way this process works in Oregon is that an existing license holder will agree to surrender their license to the commission, in exchange for the OLCC approving a license for the new operator.
“So it’s not a sale per se. It’s more like we’re gonna cancel this license and in its place, give this other person a new license,” said Sliwoski. “It doesn’t really make a lot of sense as a matter of law, but it’s worked. And if OLCC allows that, people are gonna do it. It hasn’t really come before a court. So that’s kind of the status quo right now in Oregon.”
Before this law, the commission had been renewing short-term moratoriums, but now the moratorium is indefinitely long-term.
“The license numbers have been creeping up, year over year,” said Sliwoski. “So I think people are happy to know that it’s gonna finally be permanently capped for most license types and perhaps even start to go down a little bit.”
Despite those benefits, there is still more work to be done in Oregon to correct the market, according to Getlin.
“Oregon has a long way to go to get back to that national leader status that we enjoyed for a brief window there, but this is a critical step because now at least we can do some planning,” he said.
