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Obtaining commercial licenses for medical marijuana in Oklahoma

published in McAfee & Taft Business Alert | July 6, 2018

By Elizabeth L. Dalton

With the recent passage of State Question 788 (authorizing the production, sale, and use of medical marijuana), the Oklahoma State Department of Health (OSDH) is poised to adopt implementing regulations. The current draft regulations set forth the manner in which the OSDH proposes to regulate the growth, processing, transporting, researching, testing, selling, and purchase of medical marijuana, as well as requirements for recommendations by physicians. The OSDH is expected to adopt regulations on July 10, 2018.

The following are some of the highlights of the law and proposed regulations affecting those seeking commercial licenses for dispensaries, commercial growers, and processors. As a reminder, marijuana remains illegal under federal law, and there remain legal risks for those engaged in the business even though they may be operating in compliance with Oklahoma law. Further, because of the federal regulatory landscape, medical marijuana may not be transported across state lines. Consequently, as a practical matter sales in dispensaries will not begin until commercial growers are able to obtain licenses and grow, harvest, test, and sell their products.

General

All commercial licensees must be Oklahoma residents with no more than 25% of their equity held by non-Oklahoma residents. Within 30 days prior to applying for a commercial license (or a medical researcher license), all individual applicants, individuals applying on behalf of an entity, principal officers of an entity, and owners (defined generally as owning 5% or more) must undergo an Oklahoma state criminal history background check. Applicants must submit fingerprints. Applications must include a list of all persons that have an ownership interest (including proof of residency to support the 75% residency requirement), all creditors holding a secured or unsecured interest in the entity or the premises, a list of persons with management authority, and an Affidavit of Lawful Presence for each owner. A physician who recommends use of medical marijuana may not hold an economic interest in an enterprise that grows, processes, or dispenses medical marijuana.

If the proposed location is not owned by the individual applicant or entity, the application must include a copy of the lease and a written statement from the landlord certifying consent to the operation of a medical marijuana commercial facility on the property. Applicants that are entities must attest that the entity will not be located on tribal lands. All applicants must submit proof of a bond in the amount of $50,000 made payable to the OSDH and designate a successor-in-interest or designee.

Employees of commercial licensees must be at least 21 and pass a criminal background check. Minors under 18 may not enter commercial establishments unless the minor is a patient license holder accompanied by his or her appointed parent or guardian. No commercial establishment may allow the consumption of alcohol, medical marijuana, or medical marijuana products on the premises. No commercial establishment may manufacture or sell any medical marijuana product intended to be attractive to children, including gummy bears, lollipops, animal or similarly shaped candies or products, fake cigarettes, or gummy worms.

If requested by the applicant, a marijuana transportation license will be issued to qualifying applicants for a commercial license at the time of approval. A transportation license enables the holder to transport marijuana from to and from Oklahoma commercial licensees. Vehicles used in transportation must meet specified requirements, and individuals transporting medical marijuana must be employees of the licensee. The product must be clearly labeled and shielded from public view. Specified manifests must be maintained.

Commercial licensees are responsible for implementing appropriate security measures to deter and prevent theft and diversion, including alarm and video surveillance systems. Licenses are non-transferable, and each license is specific to its location. All prospective licensees are subject to inspection by the OSDH before a license will issue, and licensees must permit OSDH representatives to further inspect their premises and records.

Dispensaries

Dispensaries may not be co-located with any other business entity and may only sell medical marijuana and medical marijuana products, which includes products containing cannabinoids including oils, tinctures, edibles, and patches, but would not include vaporizers, pipes, rolling papers, or other marijuana paraphernalia that does not include cannabinoids. Neither the statute nor the proposed regulations limits the number of dispensaries a licensee may own (although each location must have a separate license). Applicants for dispensary licenses must submit proof that the dispensary will be at least 1000 feet from schools. Dispensaries may only be open to the public on Monday through Saturday, from 10:00 a.m. to 9:00 p.m. In addition to employees, only patient and caregiver license holders may enter dispensaries. All medical marijuana sold in dispensaries must be labeled in accordance with specified requirements.

A single transaction by a dispensary with a patient or caregiver is limited to three ounces of usable marijuana, one ounce of marijuana concentrate, and 72 ounces of medical marijuana products. Dispensaries may not deliver products to patient license holders or their caregivers. Dispensaries are required to collect a tax on retail medical marijuana sales at 7%.

Growers and Processors

Many of the requirements for growers and processors are the same. All growing and processing of marijuana must take place indoors in a building that has a complete roof enclosure (which may be retractable), on a foundation or slab, that meets standards that ensure that the growing and processing activities contained within are undetectable. All external locks must be equipped with biometric access controls. Growers and processors must maintain detailed plans and elevation drawing of all operational areas, although they are not required to submit the plans to the OSDH for review prior to construction. In addition to standards for construction of floors, walls, and ceilings, lighting, and plumbing, all facilities must be constructed to meet applicable building codes. Growers and processors must submit their products for testing to accredited laboratories licensed by the OSDH specifically for the testing of medical marijuana and marijuana-derived products. Growers may only sell at retail to processors or dispensaries. Processors may process personally grown product for a patient licensee for a fee.

Applications

Applications will be available on the OSDH website on July 26, and OSDH will begin accepting them on August 25. The filing fee for each commercial license is $2,500. The OSDH must process complete applications within two weeks.

For more help

There will no doubt be a number of unresolved issues that the OSDH must work out as a result of its rapid efforts to comply with its obligations under the new law. If you have any questions about commercial medical marijuana licenses in Oklahoma or would like assistance in reviewing or evaluating your application, please do not hesitate to contact Elizabeth Dalton at (405) 552-2217 or elizabeth.dalton@mcafeetaft.com.

Please be aware that this publication does not contain legal advice. The views expressed in the article are provided for informational and discussion purposes and do not necessarily reflect the views of the author or of McAfee & Taft A Professional Corporation.

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