Ohio Cannabis Companies Look to Legalization, Reforms to Boost Business

State legalization of adult-use has stalled, but med program might be overhauled.

This story was reprinted with permission from Crain’s Cleveland and written by Jeremy Nobile

As marijuana companies work through a business downturn amid surging inflation, a buildup in supply and simultaneous decreases in prices and sales, stakeholders are looking all the more hopefully at a number of policy changes at state and federal levels that could benefit the industry.

Key among these is legalization of recreational use, which would make marijuana accessible to all adults age 21 and older — something that would significantly expand the potential marijuana customer base in Ohio’s medical-only market.

“The Ohio market was seen as a bull market for some time, and that may be fading to some degree right now,” said Douglas Berman, executive director of the Drug Enforcement and Policy Center at Ohio State University. “That may amp up the pressure internally or externally to press forward on some other reform bills.”

In addition to legalization efforts, there are a number of other pending policy changes in motion that could stand to benefit businesses and consumers.

Federal legalization

At least 68% of Americans want marijuana to be legalized at the federal level, according to the latest Gallup survey.

However, the recent midterms were a mixed bag in terms of building further momentum behind that.

While voters in Maryland and Missouri approved recreational marijuana — bringing the number of states permitting adult use to 21 — similar measures failed in Arkansas, North Dakota and South Dakota.

Despite marijuana’s clearly growing popularity, those results indicate that not everyone is on board with adult access to legal weed just yet, which could influence how much federal lawmakers prioritize marijuana descheduling and legalization.

Berman notes that even if marijuana were federally descheduled, recreational access wouldn’t happen instantly. There will likely be a wind-up period, perhaps something between one month to one year, built into any change in federal policy to allow states to adjust and set their own rules.

Ohio legalization bills wither

Two separate legalization bills were introduced in Ohio by Democrats (House Bill 382) and Republicans (House Bill 498) in 2021.

Each has been touted by their backing lawmakers as drawing bipartisan support, though no one seems to be working together across the aisles on either.

Both have seen zero activity since being introduced to the House Finance Committee roughly a year ago.

Ohio’s marijuana industry stakeholders tend to say that is disappointing but not surprising, considering the state of Ohio’s legislature and given that the proposed laws have been sitting dormant for so long.

“It’s a good thing lawmakers are talking about this,” remarked one marijuana industry official. “But I don’t think leadership has any interest in taking on either of those bills. Especially (the Democratic) bill. Everyone knew that was going nowhere.”

Enacted statute stalls

The enacted statute introduced by a group known as the Coalition to Regulate Marijuana Like Alcohol, which aims to establish a recreational marijuana program in Ohio, had some momentum this year before hitting some snags. But it will be back in motion in 2023.

That measure must draw a certain number of voter signatures to be introduced into the General Assembly. Once that happens, lawmakers have four months to pass or reject the proposal.

If they reject it or refuse to take action — the more likely outcome — the CRMLA must collect a second tranche of signatures to bring the measure before voters.

The CRMLA coalesced to work on its legalization effort in 2020. The idea was to be on the ballot in the presidential election year when voter turnouts are highest.

But the COVID-19 pandemic created unforeseen challenges with collecting voter signatures that typically would be gathered at public events, which were largely shut down, or by knocking on doors.

In early 2022, the CRMLA submitted its first petitions to the secretary of state for verification. Some signatures were rejected. So, the CRMLA mobilized, made up the difference, re-submitted its petitions and got the OK to be handed over to the General Assembly.

It was expected the proposed law would sit until four months elapsed in late May. At that point, the group could gather more signatures to qualify for the fall ballot.

However, Ohio Republicans filed a lawsuit challenging whether the CRMLA met a January deadline for submitting its measure in order to be considered by lawmakers this year. While CRMLA delivered its first petitions before that deadline, the group came back with its additional signatures replacing the disqualified ones after that.

Tom Haren, CRMLA spokesman and chair of Frantz Ward’s cannabis law group, was prepared to fight the lawsuit on the grounds that there is to be a remedy period to correct the issues with the signatures, which he said it was within.

Instead of fighting in court, though, both parties settled.

The deal that was struck kept the enacted statute off this year’s ballot in exchange for the secretary of state carrying over previously OK’d petitions and re-transmitting the CRMLA’s proposed law to the General Assembly on Jan. 3, 2023.

That settlement puts the CRMLA on track to begin collecting its second tranche of signatures next spring in order to qualify for the 2023 ballot.

While marijuana businesses would like to see a rec program sooner rather than later — a few have contributed significant levels of funds to the CRMLA campaign — Haren is not worried about the setback.

“The rule of thumb tends to be that if it is a progressive ballot campaign, it needs to come in a general election year, because in off years, you tend to have a more conservative electorate,” Haren said. “But if there is one thing we think polling has shown, it is that legalization is popular across the political spectrum. For an issue like ours, you always want high turnout. But we think our initiative does just as well in 2023 as it would have done in 2022.”

Medical program overhaul

In fall 2021, Sen. Stephen Huffman, R-Tipp City, lead sponsor of House Bill 523 — which set the framework for the Ohio Medical Marijuana Control Program (OMMCP) when it was passed in 2016 — and co-sponsor Sen. Kenny Yuko, D-Richmond Heights, introduced Senate Bill 261. If passed, it would be the first major overhaul of the state’s medical program since its inception.

One of the bill’s key features is putting regulation of the medical program solely in the hands of the Ohio Department of Commerce.

Under the current regulatory scheme, Commerce regulates cultivators, processors and testing labs. The Ohio Board of Pharmacy oversees dispensaries. And the state medical board awards physicians their certificates to recommend marijuana.

This dynamic with Commerce and Pharmacy, in particular, has been criticized by marijuana companies as inefficient and onerous. It has been blamed as one of the factors contributing to retail costs that are higher here than in neighboring markets and one of the reasons the program is slow to adapt to changes.

But there are many other aspects of the OMMCP the bill could change.

The law would add new qualifying conditions such as migraines, autism spectrum disorder and opioid-use disorder as well as give broad authority to physicians to recommend marijuana for any condition that could “reasonably be expected to be relieved” by the drug. All these things could greatly expand marijuana’s customer base.

The bill could loosen tight restrictions on advertising and allow for new products currently unavailable in Ohio like pills, suppositories and inhalers. It also would increase the limit on the concentration of THC in products from 70% to 90%.

These things benefit patients and could lead to more sales, benefiting businesses.

But there are some more controversial aspects of the bill as well, such as a provision that awards cultivation licenses to some standalone processors, including those that were previously disqualified for licenses by the state.

This includes Cincinnati businessman Jimmy Gould, owner of marijuana processor CannAscend, who was among those who sued the state for not being awarded a cultivation license in 2018.

Many current license holders are reticent to discuss these more controversial aspects of the bill publicly. But to be sure, there are some annoyed that there could be businesspeople awarded lucrative grow licenses through this law after they had to secure theirs through a competitive and expensive application process.

There is talk in some industry stakeholder circles of potentially pushing for having some of these more controversial elements of the bill taken out. Whether they are or not could play a role in whether that bill sees any further action before the end of this year.


WHO’S FUNDING THE CRMLA?

Between 2021 and 2022, the CRMLA, which is pursuing marijuana legalization in Ohio through an enacted statute, has received more than $1.5 million in contributions supporting its efforts. The group’s top donor is the Marijuana Policy Project, a Washington, D.C., legalization advocacy group that finances legalization campaigns across the country. All other contributions come from licensed marijuana businesses in the state.

Here’s who has given to the CRMLA campaign in the last two years:

  • Marijuana Policy Project: $840,000
  • Battle Green Holdings: $160,000
  • The Firelands Co.: $160,000
  • ATCPC of Ohio: $155,000
  • Standard Wellness Co.: $105,000
  • Buckeye Relief: $50,000
  • Riviera Creek: $37,500

FundCanna

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