Oklahoma cannabis industry leaders are calling on regulators and law enforcement to take action against illicit marijuana businesses hiding behind the state’s legal, medical marijuana industry. Oklahoma’s Bureau of Narcotics recently declared the state the number one supplier of illicit cannabis in the U.S.
While officials in Northern California and Southern Colorado might dispute the claim, the OBN insists that criminal groups outside the U.S. operate 25% of the state’s 8,500 medical marijuana grow licenses. But Oklahoma’s loose medical marijuana regulatory framework and low barriers to entry produced unforeseen consequences.
Oklahoma cannabis companies are calling for a seed-to-sale tracking system, increased inspections, advanced testing rules to ensure product safety, and raising the price of a business license. Oklahoma has the highest number of cannabis retail outlets in the nation.
“The state could have and should have made it more difficult to get a business license,” said Denise Mink, who owns the Med Pharm dispensary outside Tulsa.
Since legalizing medical marijuana in 2018, the Oklahoma Medical Marijuana Authority has issued 13,281 marijuana cultivation, manufacturing, and retail permits.
Colorado-based Clear Cannabis is a maker of marijuana concentrates that also operates in Oklahoma. President Seth Wiggins agrees that lax regulations have created problems. “The unchecked expansion of the cannabis industry is increasing all kinds of illegal activity throughout the state,” said Wiggins. “Vague regulation and scarce law enforcement breed opportunities for legally flexible opportunists and flat-out illegal activity.”
To be sure, too many licenses can quickly create an oversupply of jars of cannabis in the market. This glut of permits leads to a lack of profitability. Licensed businesses often resort to the black market to recoup their losses or even turn a profit.
In many ways, Oklahoma has repeated the mistakes made in Oregon – a low barrier to entry, an overabundance of licenses, and no limit on the number issued. Officials in Jackson County, Oregon, recently asked the state for just over $7 million to fight increasing illicit growth across the region. Officials from neighboring counties have voiced similar concerns. Backlogged in processing applications, Oregon regulators imposed a moratorium on new licenses.
For many industry leaders, traceability is a critical component to stop the growth of the illicit cannabis market. Eric Leslie is the chief marketing officer and co-owner of Denver-based edibles brand Cheeba Chews, which does business in Oklahoma. “Once Oklahoma implements its statewide seed-to-sale tracking system, along with stricter enforcement, many of the bad actors will be naturally pushed out of the space,” said Leslie.
After a group of dispensaries sued the Oklahoma Medical Marijuana Authority over implementing Florida-based Metrc’s seed-to-sale tracking system, a judge’s order prevented its rollout in Oklahoma.
States with more rigorous license applications and stricter regulations have demonstrated the ability to ensure medical marijuana products stay within state borders, as do associated tax dollars. The most successful cannabis markets enact a balance of free-market economics and regulation.
“In free markets where there is free rein, you are going to have trouble,” said Sara Gullickson, CEO of Arizona-based consulting firm The Cannabis Business Advisors.
“Oklahoma’s current law incentivizes operators to grab market share, and first-mover advantage by any means possible,” Wiggins said.
Oklahoma Medical Marijuana Authority Director Adria Berry started in August and almost immediately requested more inspectors to keep pace with the ever-increasing number of new businesses. The agency plans to hire 40 additional compliance inspectors.
“It will get way better when inspections finally start happening,” said Chip Paul, chair of Oklahomans for Health. “We have folks who have been operating for years and have never been inspected.”
New testing rules recently went into effect in Oklahoma. The new regulations include forbidding an entity with an ownership stake or a financial interest in a cultivation operation or a dispensary to operate a marijuana testing lab.
Industry leaders like Arshad Lasi, CEO of the Nirvana Group, a vertically integrated medical marijuana company in Tulsa, are calling for regulations that “create better opportunities for new and existing businesses to operate legally and offer safe, properly tested products for consumers. With opportunity, fair prices, and safety standards in place, ideally that would help to curb unlicensed market competition.”
Several industry officials also suggest the price for new business licenses is too low. Including the application and license fees for the first year, it costs Oklahomans $2,500 for a medical marijuana business license. By comparison, after Arkansas charges $7,500 for a dispensary application, licensees must pay a $15,000 fee and then post a $100,000 performance bond. For cultivation permits, Arkansans must pay up $15,000 to apply and then a $100,000 payment for the awarded license.
Oklahoma has more cannabis business licenses than the entirety of the West Coast, with just a handful of the population. Their unfettered free market medical marijuana industry has run wild and resulted in rampant instability.
“There was always the fear that what happened in Oregon will happen here, and it looks like those fears were well-placed,” Med Pharm’s Mink said.