Oregon Marijuana: High Time for the Recreational Market

Oregon CannabisThe Oregon cannabis industry is in the home stretch of its transition to the recreational pot market. That is sometimes hard to discern with all the noise around administrative rule tweaks and dynamic program deadlines, but the fact is inescapable. At this point, everyone whose motivation is profits should be pushing toward Oregon Liquor Control Commission (OLCC) licensure. The Oregon Health Authority’s (OHA) medical marijuana regime will soon recede to strictly limited, patient-caregiver relationships. The money there is gone.

First, let’s get the very recent stuff out of the way. Lately in Oregon, lots of marijuana industry people have been scratching their heads and more than a few have been pulling out their hair. The general confusion centered on the October 1 deadlines related to product testing, packaging and labeling, and concentration limits. A flurry of updates issued from state agencies on Friday, and we got another batch of temporary rules from OLCC and OHA. Friday was a big day.

Although the October 1 run up was challenging for some of our clients (and required many late nights of our Oregon cannabis business lawyers), most people were able to get through the packaging and labeling approval process without much delay, and the rest of the industry can take solace in the fact that OLCC will take an “educational approach” to noncompliance in the near term. As to testing quantity requirements, the OLCC’s rule tweak was certainly welcome: we noted back in July that testing labs were slow to come online, although they are finally trickling in. Going forward, we predict licensed processors will be the next recreational program bottleneck. Let’s hope it’s minor.

In the big picture, however, October 1 was just another bump in the introduction to Oregon’s recreational cannabis market, and the big bumps are now behind us. Today, the foremost challenge for existing industry players is probably timing. Anyone who has not yet applied to move into OLCC land should hustle, because the end of the year is drawing nigh. After December 31, OHA licensed dispensaries will no longer be able to sell to non-medical cardholders under the current “early start” program, and most of those dispensaries will have settled into the recreational market. Anyone who does not follow will be left out in the cold.

A common misconception in Oregon marijuana is that once a dispensary moves to OLCC, it can no longer sell to medical patients. That is not the case. OLCC licensed processors and wholesalers will be allowed to process and handle medical grade cannabinoid products, and dispensaries will be allowed to sell them. This one-page supplemental form grants that authority to any interested licensee. All sales to medical cardholders will be made tax free, but tracked in the OLCC system. This “co-sales” provision, more than anything, will obviate the need for OHA dispensaries. If any such dispensaries still exist a year from now, it will be due to wealthy, idealistic ownership, or more likely, vestigial local zoning rules.

The next step, as we have said for a while, will be for the Oregon legislature to fully merge the medical and recreational programs under one administrative agency (the OLCC). Though much of the early talk for next year’s legislative session surrounds cannabis cafés and public consumption, it would make a lot of sense for Oregon to take a run at this recreational-medical merger issue.

Bottom Line: For now, it is critical for anyone who has not begun to pivot from OHA to OLCC, to do so without further delay. License applications require time to process, and January 1, 2017 will be here before we know it.