Here are Ohio’s proposed rules for licensing adult-use marijuana dispensaries

This story was republished with permission from Crain’s Cleveland Business and written by Jeremy Nobile.

While these tentative rules are explained in some detail below, the full text of the proposed rules can be downloaded here.

Anyone looking to provide feedback on these rules can do so by emailing DCCRules@com.ohio.gov through Friday, Feb. 9.

Those companies must still go through the application process, but there is no fee to do so.

10(B) licenses

As far as 10(B) dispensary licenses, those will carry a $5,000 fee for each application.

Licensed Level I cultivators are eligible for up to three 10(B) dispensary licenses. Level II cultivators are eligible for one. And standalone medical dispensaries—with no common ownership or control with any other processor or cultivator—are eligible for one.

When applying, an applicant will note whether they seek a dual-use or adult-use only retail license.

Ultimately, DCC makes the call on what entities are eligible for 10(B) licenses and how many.

Regulations have previously capped the total number of dispensary licenses that any one company can control in Ohio at five. But with the availability of these additional retail licenses and the potential for Level I cultivators to secure another three of those, the maximum number of dispensaries that one entity could operate in the state is potentially eight.

Regulators note that the 10(B) licenses are slated to be awarded through a drawing conducted by a “third-party operator.” Applicants will then be informed of their randomly assigned ranks.

Ohio originally employed a merit-based scoring system for aspiring licensees under the medical program, but that resulted in several lawsuits by applicants who questioned those scoring methods. Some of those continue to be sorted out today.

As regulators released a second tranche of dispensary licenses in 2022—a process known at the time as RFA II—that awarding system was changed to a drawing conducted by the Ohio Lottery Commission. This seems to be the dynamic regulators will continue to employ moving forward.

According to the proposed rules, after receiving their ranking, applicants will select sites for their shops in two phases.

In the first phase, applicants will submit to DCC one proposed site for their license—within a deadline to be determined later—which is not permitted to be within a one-mile radius of a licensed dispensary or another proposed site.

If a submitted site is ineligible due to proximity to an existing medical dispensary, the applicant must pick another location.

If two eligible licensees submit sites that end up being within a mile of each other, the applicant with the higher ranking/drawing number wins out, and the lower ranked applicant will need to select another site.

Should any applicants not have an approved location at the conclusion of phase one, the site selection process for that facility will move to phase two.

At that time, DCC will publish a list of applicants with their associated number of 10(B) dispensary licenses remaining as well as a total number of licenses available in regional districts outlined by regulators.

Eligible applicants will submit preferred regional districts in which they wish to operate their dispensary. DCC will then inform them of what district they land in.

This process will also be shaped by an applicant’s ranking from the drawing: if too many applicants are competing for sites in a district that has reached its capacity for dispensaries, the applicant with the higher ranking wins out, and the one with the lower ranking will be bumped to the next district in their list of preferences.

The site selection process then effectively repeats phase one protocol from there. An applicant will submit the site in which they wish to operate but may be required to pick yet another location if that site is disqualified.

While the state has laid out these tentative rules, it is possible they could still be altered by the regulators themselves or through legislation passed by state lawmakers.

Social equity

It’s worth remembering here that the present adult-use marijuana law calls for the implementation of a Cannabis Social Equity & Jobs Program to be established by the Ohio Department of Development.

Through this, the ODD will certify program applicants based on social and economic disadvantages. As outlined by law firm McGlinchy Stafford, the term “social disadvantage” means “membership in a racial or ethnic minority group, disability status, gender, or long-term residence in an area of high unemployment.”

DCC is required to give preferential treatment to anyone qualifying under that program as it issues 40 newly designated Level III cultivator licenses—which permit 5,000 square feet of growing space—and 50 additional dispensary licenses.

At this juncture, DCC has simply said that it will “provide notice in advance of the application period for which preference will be given to participants” in the social equity program.

Medical program

Demand for medical marijuana—which has grown over the years but underwhelmed in terms of revenue growth—is expected to weaken as adult-use sales commence, regardless of the fact that medical marijuana patients pay less taxes as their purchases will not be subject to an adult-use excise tax presently set at 10%. Buyers of adult-use cannabis products will pay that plus sales tax.

Nonetheless, DCC has recommended some changes related to that medical program.

First, DCC has proposed eliminating the annual registration fees of $50 for patients and $25 for caregivers, something that has been a routine complaint of medical consumers.

Second, DCC proposes reducing the annual license renewal fee for medical marijuana processes from $100,000 to $50,000.

Finally, DCC proposes instituting a provisional medical marijuana employee badge to “streamline and expedite the hiring and onboarding process for medical marijuana industry employees.” That provisional badge would be good for 90 days, allowing an employee to begin working while they wait for a permanent badge to be processed.

“Eliminating the patient and caregiver registration fees is a strong move from the new Division of Cannabis Control and illustrates a clear dedication to improving the medical marijuana program for Ohio’s patients,” said Matt Close, executive director of the Ohio Cannabis Coalition (OHCANN), which represents the medical and recreational cannabis operators in Ohio.

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