The Land of Forgotten Licenses

Lisa
April 2, 2021

Industry Colleague Ed Keating Leads Us Through Opportunities in Cannabis Markets that Tend to Get Overlooked

A lot has been written about the jurisdictions that are awash in cannabis licenses. According to our Cannabiz Media License Database – 83% of US licenses are located in 5 states: California, Colorado, Washington, Oregon, and Oklahoma. Oklahoma is notable for its medical-only licenses and the lowest in the nation price to secure one at $2,500.  But what about the states that occupy a whole different tier in terms of the quantity of licenses issued?

There are a number of programs that are characterized by few licenses but that may present opportunities for those fortunate enough to acquire them. Here are some snapshots of programs in Rhode Island, Georgia, Washington D.C., and Texas.

Rhode Island

Background

The Rhode Island program currently has three dispensaries and 60 cultivators that supply them. The dispensaries have been open since 2013 and 2014 and they have tried to fiercely defend their oligopoly. Three years ago a spokesman for one of the original dispensaries suggested that help could be provided to the state in the form of a $5 million payment to help the state fill a budget hole. The offer came with the condition that state regulators would have to change their plan to hike the number of state-licensed pot dispensaries from the existing three to 15!

Current Developments

The state received 45 applications for a lottery to operate six new dispensaries and has since issued an RFP for a firm or individual to conduct a lottery to award the licenses on or about May 14, 2021. Other factors:

  • The state has expensive fees for license acquisition and renewals.
  • Governor Gina Raimondo was a big proponent of the program but has now left to join President Biden’s Cabinet
  • Rhode Island’s new governor puts marijuana legalization plan in the budget, days after lawmakers file a competing plan.

Analysis

Rhode Island is a small market that may soon be surrounded by adult-use programs in the Northeast. Everywhere is a short drive from Rhode Island so they may be price takers if they are not mindful of what is happening across the borders and in the region.

Georgia

Background

Georgia has a low THC oil program that is challenging for patients and their families. The oil had to be sourced out of state and patients needed a waiver. The regulations stipulated that the ‘Low THC oil’ means an oil that contains not more than 5 percent by weight of tetrahydrocannabinol and an amount of cannabinol equal to or greater than the amount of tetrahydrocannabinol. According to one source as of last June, there were 14,000 Georgians with permission to purchase low THC Cannabis products, up 50% from a year ago.

Current Developments

Georgia’s Access to Medical Cannabis Commission received 70 applications for six licenses. The commission may issue up to two Class 1 production licenses which permit growing cannabis indoors for the manufacture of low THC oil and are limited to 100,000 square feet of cultivation space. They may also issue up to four Class 2 production licenses which allow for growing cannabis for low THC oil with a limitation of 50,000 square feet of cultivation space.

  • Winners are now expected to be announced by midyear and the state is still determining rules for dispensaries.
  • A collection of MSO’s have set up shop in the state and have been involved in lobbying over the last few years.

Analysis

Georgia is a populous state that is adjacent to Florida. The Sunshine State also began with a low THC program and migrated to a medical marijuana system with over 400 dispensaries.  The state is now making adult-use rumblings. For Georgia, it will be important to see how they choose to set up their dispensary rules and regs as some entrepreneurs with a long view may try to get that license foothold and parlay it into a true medical license and eventually an adult-use one if the regulations change. Some of Florida’s license winners chose this path and cashed out.

Washington DC

Background

The district has a program that defies easy description. Possession is allowed but selling is not. As a result, residents got creative to work around the rules and rely on creative barter like selling $100 t-shirts that include a free gift of cannabis.  Five years ago we reviewed all the rules and regulations of the legal states and DC stood out because “marijuana may not be sold anywhere that also sells gasoline. But that’s not all. Marijuana cannot be sold in any location that also offers auto repair.”

Current Developments

According to MJBiz Daily, the new regulator – the District’s Alcoholic Beverage Regulatory Agency (ABRA) – has taken steps to boost medical marijuana patient counts and make it easier for companies to operate. The ABRA also would likely play a key part in rolling out a new recreational program.

According to ABRA, there are two cultivation and two testing licenses that still have not been awarded. There is also one dispensary license available for Ward 3 or 5.  Earlier in March ABRA issued a window for interested parties to file Letters of Intent for the remaining 5 licenses.

Analysis

Washington is a small market, though it may have statehood going for it soon. The surrounding states of Virginia, Maryland, and Delaware all have programs – and Virginia has just added adult-use. If the D.C. program is not expanded, District residents will cross the border and/or use illicit suppliers – a challenge similar to what Rhode Island may face.

Texas

Background

A majority of the state’s registered voters are in favor of some form of marijuana legalization, according to a University of Texas/Texas Tribune Poll from June 2019. More than 80% of the state’s voters said they would legalize cannabis in some capacity, including medical marijuana (31%), small amounts (30%), or any amount (23%). However, the state is blessed with one of the most restrictive programs in the nation.

In 2015, Texas passed the Compassionate-Use Act, which allowed the first legal use of low-THC cannabis products in the state for patients with intractable epilepsy. It was expanded in 2019 to include other conditions. As of February 2021, there were only 4,510 patients who are supported by 3 license holders. These licenses are held by MSO’s Surterra, Fluent; and Texas Original Compassionate Cultivation.

Current Developments

There have been some rumblings to change this very limited program. Having 3 licenses to cover a state as big as Texas is unworkable. In addition, Oklahoma has enacted a program to make it very easy for out-of-staters to get an Oklahoma medical card that is good for two years. This makes it very easy for Texans to head across the border to purchase cannabis.

Analysis

It looks to be a long game in Texas. With issues like Covid and the power grid, cannabis reform is not at the top of the list. While bills have been introduced into the Texas House of Representatives they’ve not made it further. Also, Texas caps their products at .05% THC which is just a few notches above hemp. The state has a long way to go.

Conclusions

While many of us have focused on the big license producing states like California, Oklahoma, Colorado, Washington, and Oregon where over 83% of the nation’s licenses are issued, we miss out on other states that are quietly issuing licenses or are evaluating their programs. All of the programs outlined above are “limited license” states – for now, and may present opportunities for those who are patient, have capital and have connections or partners in those states.  

The issues raised are not new to states. With states able to craft their own rules for regulated products like tobacco, alcohol, gasoline, and even lottery tickets, the cross-border shopping issue comes into play. The newness of cannabis — and the tax dollars that go with it — will drive a lot of the policy-making and may lead to a harmonization of regulations in some parts of the country.

To keep up to date on these and any other states we recommend subscribing to the regulator’s newsletters, read any current and proposed regulations, and if available, review what programs require for successful licensure. It is also crucial to make sure you are working with partners like Canna Advisors. With something as resource and capital intensive as cannabis licensure, you want to align yourself with a team that has had multiple successes in several states.

 

Author

Ed Keating is a co-founder of Cannabiz Media and oversees the company’s data research and government relations efforts. He has spent his career working with and advising information companies in the compliance space. Ed has managed product, marketing, and sales while overseeing complex multijurisdictional product lines in the securities, corporate, UCC, safety, environmental, and human resource markets.  

At Cannabiz Media, Ed enjoys the challenge of working with regulators across the globe as he and his team gather corporate, financial, and license information to track the people, products, and businesses in the cannabis economy.  

Ed graduated from Hamilton College and received his MBA from the Kellogg School at Northwestern University.

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