What to do if You Receive a Deficiency Notice for Your New York Cannabis License Application

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If you receive a notice from the New York Office of Cannabis Management (OCM) that your application or True Party of Interest (TPI) disclosure is deficient, don’t panic. Although concerning, prompt and corrective action can put you back in the running for your application. Based on our experience helping dozens of other applicants, below are some key points to keep in mind while navigating this process:

Pay Attention to Deadlines

OCM typically gives a timeframe that ranges from five (5) to thirty (30) days to address deficiencies. The number and type of deficiencies you are notified about usually dictates the timeframe. Pay close attention. Missing these deadlines can result in your application being disqualified, which is why a timely response is essential. 

Give Extra Attention to Your TPI Disclosures

It is critical your TPI disclosures are done correctly. Carefully review that all relevant information for both individual and entity-based TPIs are accurate and up-to-date. This may include, but is not limited to, ownership percentages, financial details, and any potential conflicts of interest that may arise.

Make Sure All Contractual Requirements Are Complete and Up-to-Date

Double check that your lease agreements and security agreements are complete and up to date. NOTE: These must be valid, legally binding agreements. For businesses with a physical location, make sure you have a valid Certificate of Occupancy. Letters of Intent (LOI) for real estate are not accepted and do not help your license application. Point of Sale (POS) vendor contracts and Labor Peace Agreements (LPA) will also be required.

Double Check Your NY Business Express and TPI Portal Submissions

These are two separate portals and make sure you go through both methodically. We often see applicants miss information like adding in their intended business hours because they don’t know them yet. While seemingly benign, you will get a deficiency notice for leaving information like that out. Verify your hours are correct and, if necessary, adjust and resubmit these details within the NY Business Express portal. The TPI portal houses all your TPI submissions and is separate from your NY Business Express Portal. Again, meticulously review all required information to ensure accuracy and resubmit. TPI portal submissions can be complicated and, if you haven’t done this before, some of the contracts required for Labor and PoS systems can be difficult to get in a timely manner. Budget extra time so you don’t feel pressured as deadlines approach. 

Be Mindful of OCM Response Times

We recommend a courtesy email to the OCM confirming receipt of your supplemental documentation. It’s important you document as much as possible your proactive efforts to comply with the notice of deficiency. Please bear in mind, OCM typically takes about two business days to respond so if you have a question that you need answered we recommend you factor in that 48 hour window so you don’t miss critical deadlines. 

 

Know When to Ask for Help

If you find yourself getting overwhelmed, instead of asking “what do I need,” ask instead “who do I need” to help me get through this process. 

Working with a competent cannabis attorney who has deep experience with applying for cannabis licenses in New York can help ensure compliance submissions that meet required deadlines. Losing the opportunity to be a New York cannabis operator, or the ability to sell a lucrative license, is a heart break for anyone who has spent their hard earned time and money on a cannabis application.  If you’re feeling stuck, don’t get frustrated – Get help. We’re here for you and would love to guide you through the process as we’ve done many times before. 

 

Andy Sick, Esq. | Mr. Cannabis Law

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Florida Supreme Court Approves Recreational Marijuana for 2024 Ballot: A Victory for Democracy

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In a pivotal decision, the Florida Supreme Court recently gave the green light for a constitutional amendment on recreational marijuana to be included in the November 2024 statewide ballot. The initiative, known as Amendment 3, marks a significant step forward for the cannabis industry and serves as a powerful reminder of the strength of a democracy where the people have the power to change laws even when they’re not supported by politicians.

This victory for advocates comes after a series of setbacks that saw similar efforts to get adult-use amendments on the statewide ballot twice thwarted by the Florida Supreme Court in 2021.

The next step for it to become law is getting 60% approval from Florida voters. We expect voters to exceed that threshold as cannabis stigma continues to fade and legalization becomes less of a partisan issue. More than 70% of voters approved the 2016 ballot initiative to legalize medical marijuana and support for adult/recreational use has only grown since then. Recent polling supports these predictions and it would be a major surprise to all parties if Amendment 3 does not pass. 

Five justices ruled in favor of the measure, with only two in opposition. Justice Jamie Grosshans, writing for the majority, stated, “In light of those limited considerations, we approve the proposed amendment for placement on the ballot.” This approval underscores the careful scrutiny applied to the amendment’s language and its adherence to legal standards, despite opposition from DeSantis and others. Here is Grosshans’ full 48-pg legal opinion if you need a little light reading.

One of the key points of contention in this debate has been the clarity and fairness of the amendment’s language. Critics, including Florida Attorney General Ashley Moody, raised concerns about potential ambiguities and misleading information. However, the majority of justices found that the language met the necessary standards, paving the way for its inclusion on the ballot.

Advocates argue that legalization not only aligns with changing societal attitudes but also presents economic opportunities and benefits, including tax revenue generation and job creation.

While a victory for the industry, new and existing Florida cannabis entrepreneurs will still have regulatory headwinds from combative legislative and executive regulatory bodies who might respond to the passing of Amendment 3 with more stringent licensing requirements and complex taxation laws. This is on top of the existing federal prohibition of cannabis, which comes with its own set of banking and financial hurdles. 

Governor Ron DeSantis and other conservative voices have expressed reservations about the potential impact of recreational marijuana, citing concerns about public health and safety. However, the court’s decision emphasizes the importance of allowing voters to make informed choices and participate directly in shaping state policies.

As we look ahead to the November 2024 election, the debate surrounding recreational marijuana will undoubtedly intensify. Proponents and opponents will continue to make their cases, engaging with voters to secure their support or opposition.

Ultimately, the approval of Amendment 3 for the ballot underscores a fundamental principle of democracy—the power of the people to enact change through their collective voice. Regardless of individual opinions on recreational marijuana, this decision reflects a broader democratic process that values civic engagement and participation in shaping our communities’ futures.

If you have any questions about what Amendment 3 can mean for your existing business, or a new venture you’re considering starting, contact your trusted legal and/or business advisor to strategize how to best prepare for the anticipated changes.

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Considerations for Out-of-State Hemp Businesses Concerning Florida’s New Hemp Legislation

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The Florida Legislature recently approved Senate Bill 1698 to regulate hemp products in the state and sent it to Governor Ron DeSantis’ desk for signature. The bill amends and adds to Section 581.217, Florida Statutes–the statute governing the state hemp program. The bill imposes strict THC limits on hemp extract products while banning certain cannabinoids altogether. 

 

Considerations for Out-of-State Hemp Businesses | Mr. Cannabis LawSpecifically, the bill provides that the amount of THC in hemp extract products cannot exceed 5 milligrams per serving or 50 milligrams per container; and it prohibits the sale of products containing delta-8 THC, and other cannabinoids, including delta-10 THC, THCV, and THCP, by amending the definition of “hemp extract” to explicitly state that hemp extract does not contain the foregoing cannabinoids. If the bill becomes law, which is highly likely, then it will take effect on October 1st. 

 

The limitations and restrictions set out in SB 1698 are important for out-of-state hemp businesses to be aware of, as they apply to hemp businesses, including those domiciled out of the state, that have dealings in Florida. For instance, if an out-of-state hemp retailer offers delta-8 THC gummies for sale on its website, and consumers can purchase these gummies for delivery to Florida addresses, then the hemp business would be subject to and in violation of the new bill, which altogether bans the sale of delta-8 THC in Florida. The new bill prevents online hemp retailers from shipping certain hemp products into Florida, including hemp extract products that contain a THC concentration exceeding 5 milligrams per serving or 50 milligrams per container and products that contain delta-8 THC, delta-10 THC, THCV, or THCP. 

 

This is significant because if SB 1698 becomes law, it will have a substantial impact on out-of-state online retailers and distributors shipping to Florida. This will then also trickle down to out-of-state cultivators and manufacturers who supply hemp products to these online retailers and distributors. 

 

If the bill becomes law, in order to be compliant with the new law, any out-of-state online hemp retailer who sells hemp extract products that contain a THC concentration exceeding 5 milligrams per serving or 50 milligrams per container, or products that contain delta-8 THC, delta-10 THC, THCV, or THCP, should consider setting up some sort of mechanism or tool on their website which would deny any of these products that are now illegal in Florida from being purchased by someone in or shipped to Florida. 

 

In recent months, we have seen increased and stricter enforcement of § 581.217, Florida Statutes, by the Florida Department of Agriculture and Consumer Services (FDACS), and we expect to see even more inspections conducted by FDACS if the new hemp bill becomes law. Hemp businesses that receive stop-sale and/or stop-use orders from FDACS for their hemp products should contact an attorney for assistance. 

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How Can Florida Hemp Businesses Remain Viable Under Restrictive New Hemp Legislation?

Florida Hemp Business - Mr. Cannabis LawFlorida’s hemp industry could soon change drastically under new legislation which poses an enormous threat to businesses selling hemp products in the state. Despite significant pushback from industry stakeholders, the Florida Legislature recently approved a bill to regulate hemp-derived products and altogether eliminate delta-8 THC products–some of the most popular products sold by hemp retailers in recent years. Senate Bill 1698, which has been sent to Governor Ron DeSantis’ desk for signature, provides that the amount of THC in hemp-derived products cannot exceed 5 milligrams per serving or 50 milligrams per container, and it completely bans the sale of products containing delta-8 THC, in addition to certain other cannabinoids, including delta-10 THC, THCV, and THCP. If Governor DeSantis signs the bill into law, which is likely, then delta-8 THC and other cannabinoids will become illegal in the state beginning on October 1st, obviously putting Florida hemp businesses at risk. 

 

The impact of SB 1698 cannot go unstated, as it poses a significant threat to Florida hemp cultivators, manufacturers, and retailers, by imposing strict THC limits on hemp products and limiting the types of products hemp businesses can legally make and sell (including those products which have been the most popular amongst consumers in the past several years) and by, in turn, likely also diminishing consumer interest altogether. Many Florida hemp businesses have built their business models around product offerings containing higher levels of THC and delta-8 THC; however, under the new regulations, these businesses will ultimately have to reformulate their products or change their business models to comply with the new regulations. 

 

Florida hemp businesses could have a lifeline in the form of strategic partnerships with marijuana businesses, especially as the following two significant events are about to occur in the state: (1) 22 additional medical marijuana treatment center (MMTC) licenses are expected to be awarded by the Florida Department of Health as soon as April; and (2) an adult-use legalization initiative is expected to be on the ballot in November, with a vote approving the initiative also expected. Many of the newly-licensed MMTCs may lack the infrastructure necessary to scale their operations quickly, especially considering the anticipated demand surge that would result from adult-use legalization. This is where hemp businesses come in. Hemp cultivators, manufacturers, and retailers already possess established infrastructure and expertise in various aspects of the cannabis industry, which they may leverage into mutually beneficial partnerships with marijuana businesses. The forthcoming issuance of 22 new MMTC licenses coupled with the potential legalization of adult-use marijuana presents a unique opportunity for collaboration. To capitalize on this opportunity, Florida hemp businesses should begin actively seeking out potential partnerships.

 

This would be a win-win for Florida hemp businesses and marijuana businesses alike. By entering into partnerships with established hemp companies, marijuana license holders could use the hemp companies’ existing infrastructure and expertise to scale their own operations and capitalize on an emerging adult-use market. For example, hemp cultivators could offer cultivation facilities and expertise in growing cannabis plants, while hemp manufacturers could provide machinery and formulation know-how for developing diverse product lines. Additionally, hemp retailers could provide physical locations for retail stores and offer distribution channels and consumer insights. Meanwhile, Florida hemp businesses will have come up with a creative solution to keep them in business amidst significant regulatory obstacles. 

 

Although Florida’s new hemp bill, with its limitations on THC levels and outright ban of certain cannabinoids, including the immensely popular delta-8 THC, undoubtedly presents a serious challenge to the sustainability of hemp businesses in the state, opportunities exist for strategic partnerships with marijuana businesses. Florida hemp businesses may leverage their existing infrastructure and expertise and help play a key role in the quick scaling of marijuana operations, particularly in anticipation of the award of new MMTC licenses and the potential legalization of adult-use marijuana. By embracing strategic partnerships with marijuana businesses, Florida hemp businesses may not only survive but also thrive. 

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Ohio Regulators Release First Batch of Adult-Use Licensing Regulations

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Nearly three months after Ohio voters approved Issue 2 in November 2023, effectively legalizing adult-use cannabis in the state, cannabis regulators released a small set of proposed rules for Ohio’s adult-use market, focusing on requirements for certain applicants seeking to become licensed retailers. These proposed rules, which are the first in what is expected to be multiple batches of rules for Ohio’s new adult-use cannabis program, contain proposed fees for various business licenses, details on how the application process would work, and information on how medical cannabis businesses could transition to a dual license to serve both medical and adult-use consumers. The rules must be finalized before the state’s adult-use market can officially launch, as legal sales of adult-use cannabis cannot occur until licenses are issued.

 

Ohio’s Division of Cannabis Control (the “DCC”) was requesting stakeholder feedback on the recently released proposed rules until February 9th. In accordance with Chapter 119 of the Ohio Revised Code, the DCC 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. Both of these processes will give stakeholders further opportunity to comment on the proposed rules. The timeline for legal sales is likely one of the topics that will receive the most commentary, especially because Governor Mike DeWine has criticized the “goofy situation” Ohio is in, where adults 21 and older are able to legally possess and grow marijuana, but there are no legal avenues available to purchase adult-use marijuana in the state. 

 

Notably, the proposed rules may need to be amended, as Governor DeWine and a number of state legislators have been pushing for a series of changes to the ballot measure Ohio voters passed, including a possible expedited timeline to allow existing medical cannabis dispensaries to begin serving adult-use consumers within months, instead of waiting until September for the first potential licensing approvals. The problem in Ohio is that because Issue 2 was an initiated statute ballot measure approved by voters, the statute may be amended by the state legislature; and the Ohio Legislature is indeed actively considering updates to the statute. Any amendments to the statute would likely then impact the timeline for the rulemaking and the applications and licensing processes. As such, as far as the Ohio adult-use cannabis industry goes, everything is still up in the air.

 

For the time being, though, the proposed rules would require regulators to begin accepting applications from medical cannabis operators seeking a dual license by June 7th; and the DCC would need to begin issuing provisional licenses to eligible entities by September 7th. The proposed rules also describe how the DCC would need to post notice of an exclusive application window for prospective licensees who participate in a social equity and jobs program that is being developed.

 

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What Rescheduling Marijuana Means for R&D Tax Credit

We recently posted a blog on the FAQ’s around HHS’s letter to the DEA recommending rescheduling marijuana to Schedule III. In that blog, we explained that the biggest impact of rescheduling is that Section 280E would no longer apply to state-authorized marijuana companies. Most people think of Section 280E only in the context of deductions. However, removing the application of Section 280E also opens the door for state-authorized marijuana companies to use the R&D Tax Credit, which could provide a significant reduction in tax liability and foster innovation within marijuana industry.

The R&D Tax Credit

The R&D Tax Credit is a government incentive to reward companies for investing in innovation within the United States. It has proven to be a key financial tool to foster economic growth and technological advancements. The IRS has specific criteria for a company to be eligible for the R&D Tax Credit. These activities should be technological in nature and must be part of a process of experimentation aimed at creating new or improved functionality, performance, reliability, or quality. This may include research or experimentation around marijuana production, marijuana formulation, marijuana strain development, and several other activities.

The Barrier to R&D Tax Credit for Marijuana Companies – Section 280E

Section 280E prohibits businesses engaged in the trafficking of controlled substances (i.e., state-authorized marijuana companies), as defined by Schedule I and II of the Controlled Substances Act, from deducting any expenses related to their trade or business. While many state-authorized marijuana companies have expenses that would qualify for the R&D Tax Credit, Section 280E prohibits these companies from taking the R&D Tax Credit since marijuana is currently classified as Schedule I. The result is that state-authorized marijuana companies are not incentivized to invest in research and development, which has hindered the growth of the marijuana industry.

The Implication of Rescheduling Marijuana to Schedule III

Recently, HHS sent a letter to the DEA recommending marijuana to be rescheduled to Schedule III; and most industry experts expect the DEA to follow this recommendation some time in 2024. The key implication of rescheduling marijuana to Schedule III is that Section 280E would no longer apply to state-authorized marijuana companies and, thus, the R&D Tax Credit would be available to state-authorized marijuana companies. This shift should foster innovation and growth within the marijuana industry.

Claiming the R&D Tax Credit

Claiming the R&D Tax Credit involves various complicated steps, including, but not limited to, determining eligibility, identifying Qualified Research Activities with extensive documentation, choosing a calculation method, completing the relevant tax forms, maintaining detailed records, considering state tax credits, and filing of your tax return. Due to the complexities and detailed documentation required for the R&D Tax Credit, it would behoove marijuana companies to start working with professionals now in anticipation of the rescheduling. The founder of Mr. Cannabis Law is a CPA and has significant experience maximizing the benefits of the R&D Tax Credit. If you are interested in learning more about how you can start preparing for the R&D Tax Credit, please contact us today to speak to one of our attorneys.

Date: 1/23/2024

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Navigating Corporate Structure for Ketamine Telehealth Companies: the Friendly PC Model

The emerging opportunity in creating a ketamine telehealth company (also known as at-home ketamine company) demands a nuanced understanding of corporate structures since these types of companies sit at the intersection of two highly regulated and evolving areas: telehealth and controlled substances. Through representing some of the first ketamine telehealth companies at my law firm and working with various ketamine telehealth companies through my investment fund (Iter Investments), one corporate structuring strategy that has emerged as an effective model is the “friendly PC” (Professional Corporation), tailored to comply with the unique legal and operational needs of ketamine telehealth companies.

The Reason for the Friendly PC Structure – Corporate Practice of Medicine

The corporate practice of medicine refers to an entity delivering medical services or employing physicians if the entity is owned by non-physicians. While some states have no prohibition on the corporate practice of medicine, other states have strict prohibitions on the corporate practice of medicine with limited exceptions (i.e., California, Colorado, New Jersey, New York, Tennessee, and Texas). In other words, a ketamine telehealth entity owned by non-physicians is not allowed to provide medical services in states that prohibit the corporate practice of medicine. The friendly PC model, through the structuring of multiple entities and multiple agreements between those entities as described below, provides a viable solution to this problem.

The Friendly PC Structure

In its simplest form, the friendly PC structure involves at least two entities: an investor-owned management service organization (MSO) and a professional corporation owned by a single physician owner (the PC or medical group). The MSO and PC enter into a management service agreement whereby the MSO provides management services to the PC, and the PC in turn compensates the MSO. The PC is kept “friendly” to the MSO through various agreements that provide rights to the MSO as it relates to the single physician owner. This structure can begin to look even more complex as the MSO expands into additional states where a separate PC entity is formed in certain states.

Other Considerations

Beyond the simple explanation above, the friendly PC structure involves various other complicated aspects that should be discussed with an attorney, including:

  • Selecting the right physician to own the PC;
  • Understanding who can be the owner of the PC under various different state laws;
  • Determining the conditions for which the MSO may replace the physician owner with another owner;
  • The proper staffing of the PC;
  • The amount the MSO charges the PC for the management services and how the funds should flow, including avoiding anti-kickback laws;
  • The structure of the MSO providing funding to the PC; and
  • Accounting standard for consolidating the financials of the MSO and PC.

Mr. Cannabis Law has been at the forefront of advising ketamine telehealth companies and at-home ketamine companies. If you are interested in learning more about the complexities of a friendly PC model for your at-home ketamine company or ketamine telehealth company, please do not hesitate to contact us.

Author: Dustin Robinson

Date: 1/13/2024

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Minnesota Became the 23rd State to Legalize Adult-Use MJ Last May

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Marijuana is now legal for adults 21 and older to possess and use in Minnesota, as the state became the 23rd in the country to legalize marijuana for adult use in May of last year.

In 2022, Minnesota legalized the sale and consumption of edibles containing small amounts of hemp-derived THC. Then, on May 30, 2023, Minnesota Governor Tim Walz signed an expansive cannabis legalization bill into law, allowing the adult use of cannabis for adults 21 and older beginning on August 1, 2023.

The legislation allows Minnesotans 21 and older to possess and use certain amounts of cannabis and cannabis products. Specifically, adults 21 and older are now allowed to possess or transport up to 2 ounces of cannabis flower, 8 grams of concentrate, and 800 milligrams of edible product (including low-potency hemp-derived product). An adult who is at least 21 years old may also possess up to two pounds of cannabis flower in a private residence and grow a limited number of cannabis plants at home.

The legalization legislation established a new Office of Cannabis Management (OCM) in Minnesota, which will regulate cannabis (including for the adult-use market, the Medical Cannabis Program, and for lower-potency hemp edibles) and will eventually license adult-use cannabis businesses, including retail dispensaries. Notably, the legislation proposes that retail sales for adult-use cannabis in Minnesota (except for tribal nations) will begin in the first quarter of 2025.

The OCM will release applications, issue licenses, and develop regulations outlining how and when businesses can participate in the new adult-use industry in Minnesota. Over the coming months, the OCM will develop the regulatory framework for legal adult-use cannabis and establish processes and timelines to apply for licenses. According to the legalization legislation, there will be over a dozen license types available, and applications for business licenses from people who are considered social equity applicants will be prioritized. The OCM is currently seeking input as it begins its work to draft rules for the new cannabis industry in Minnesota.

Generally speaking, adult-use cannabis dispensaries cannot open until the OCM figures out a system for licensing businesses. However, tribal governments do not have to wait for the state’s licensing system to open dispensaries. Minnesota’s 11 tribal nations are sovereign, meaning they can operate independently from state laws and regulations. Each tribe in Minnesota determines how they want to regulate and oversee businesses–including cannabis businesses–on their land. As such, despite the fact that the OCM has not yet developed its licensing system, the first adult-use cannabis dispensary opened on August 1, 2023, on the Red Lake Nation in north central Minnesota. Shortly thereafter, the White Earth Nation became the state’s second reservation to begin selling adult-use cannabis. Adults 21 and older can shop at these dispensaries.

Key Takeaway: If you are a cannabis entrepreneur looking to obtain a license to grow and/or sell cannabis in Minnesota, unless you can work through a Tribal Nation, you will have to wait until the OCM releases application information. Based on trends from other states that recently legalized adult-use marijuana, we expect cannabis application requirements to be released approximately 6 months ahead of when the state is planning to implement retail sales. If this trend holds true for Minnesota, be ready for applications to be released middle of 2024, considering a planned Go Live in Q1 of 2025. While we know the costs to apply for a license in MN, we do not yet know the rules and/or the number of licenses the state will award. If you are interested in applying for a license in Minnesota, please feel free to contact us to speak with one of our attorneys.

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Arizona Awarding $5M in Grant Money for Psilocybin Clinical Trials

An Arizona Psilocybin Research Advisory Council (the “Council”), which was established under the Arizona Department of Health Services (ADHS) as part of a large-scale budget bill that the governor signed in May, was set to meet for the first time on Tuesday, November 28th, to start the process of providing millions of dollars of grant funding to support research into the therapeutic potential of psilocybin mushrooms. In less than a month’s time, officials plan to open an application period for potential grant recipients.

The state legislature has appropriated $5 million for psilocybin research, focused on clinical trials that are meant to identify therapeutic applications that could receive federal Food and Drug Administration (FDA) approval for the treatment of 13 listed conditions, including, but not limited to, post-traumatic stress disorder (PTSD), depression, anxiety disorders, symptoms associated with long COVID, substance abuse and addiction disorders, obsessive compulsive disorders, and eating disorders.

John Garcia, Program Director of the Arizona Biomedical Research Centre (ABRC), under the ADHS, said in a notice published last week, on November 24th, that the division plans to begin accepting grant applications in approximately thirty days from the publication of the notice to conduct clinical trials on the efficacy of psilocybin whole mushrooms on various conditions, disorders, and diseases. “Any clinical trials that are funded pursuant to this announcement and subsequent grant solicitation shall prioritize: using whole mushroom psilocybin cultivated under a Schedule I license for research, issued by the United States Drug Enforcement Administration; and using veterans, first responders, frontline health care workers and persons from underserved communities as the research subjects,” Garcia said.

A team of peer reviewers must then consider research grant applications and submit their recommendations to the Council by February 1, 2024.

At Tuesday’s meeting, the Council was set to consider the timeline for grant application approvals, the scope of services for psilocybin clinical trials, and some other administrative matters. The notice provided that the function of the Council is to “establish criteria for the clinical trials that qualify to receive research grants; oversee the application process and review applications for the clinical trial research grants; to assist the director in selecting the most credible clinical trials to award the research grants; and ensure that all advisory council meetings are open to the public and to allow for public testimony.”

Please see the following for the full notice: https://deal.town/az-dept-of-health/30-day-notice-to-open-grant-solicitation-for-psilocybin-clinical-trials-grants-PKLEV4ZPE.

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Ohio Issue 2 Legalizing Adult-Use Marijuana Passes

Ohio became the 24th state to legalize marijuana for adult use, on Tuesday, November 7th, when voters in the state approved Ohio Issue 2. The new law authorizes and regulates the cultivation, processing, sale, purchase, possession, home grow, and use of adult use cannabis by adults at least 21 years of age. It allows the sale and purchase of marijuana, which a new Division of Cannabis Control would regulate; allows adults who are 21 years of age and older to use and possess marijuana, including up to 2.5 ounces of marijuana and 15 grams of marijuana concentrate, and to grow up to six cannabis plants at the individual’s primary residence, with a total limitation of not more than twelve cannabis plants per residence where two or more adults reside at one time; and enacts a 10% tax on marijuana sales, some of the revenue of which will go towards a social equity and jobs program. The new law goes into effect 30 days after the election.

Issue 2 creates the Division of Cannabis Control (the “Division”) within the Ohio Department of Commerce, which will be responsible for licensing and regulating state adult-use marijuana operators. The new law requires the Division to adopt rules on twenty-two topics, including the following: establishing application, licensure, and renewal standards and procedures for license applicants or license holders related to adult-use cannabis operators, adult-use testing laboratories, and individuals required to be licensed; establishing reasonable application, licensure, and renewal fee amounts to ensure license applicants and license holders pay for the actual costs for administration and licensure for the Division; the process and requirements for Division approval of any requested change in ownership or transfer of control of an adult-use cannabis operator or adult-use testing laboratory; determining penalties for violation of Division rules or of the new law, and a process for imposing such penalties; establishing training requirements for employees and agents of adult-use cannabis operators and adult-use laboratories; prescribing standards and procedures for product packaging and labeling of adult-use cannabis products; and much more. The Division is also granted the authority to adopt other rules necessary for the administration, implementation, and enforcement of the new law. In addition, the new law imposes certain deadlines by which the Division must issue specific license types. For instance, regulators will have to begin issuing adult-use licenses to qualified applicants who operate existing medical operations within nine months of enactment. Further, the new law requires that adult-use cannabis operators and adult-use testing laboratories adopt operating procedures that comply with operation requirements required by the Division rules adopted pursuant to the new law.

Notably though, as a citizen-initiated statute, the new law is subject to change. Lawmakers who remain opposed to Issue 2 in the state legislature are free to tweak the law, and even repeal it, though the political stakes are higher now that voters have approved it. So, although Governor DeWine–who vocally opposed Issue 2–does not have the authority to veto the ballot initiative, according to the Ohio Constitution, legislators can still propose and pass modifications to the new law after the election. In this sense, lawmakers have the final word. In fact, Ohio Senate President Matt Huffman, who also opposed adult-use marijuana legalization, recently said that while there were no immediate plans to repeal the law if Issue 2 were to pass, it would likely undergo some changes.

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