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In the year 2023, the state of Oklahoma found itself grappling with an overwhelming surge in cannabis production, a situation marked by both legally regulated and unregulated, illicit activities. This unprecedented increase prompted Oklahoma’s regulatory authorities to intensify their enforcement efforts, particularly targeting those businesses suspected of failing to adhere to the established compliance standards.
This rigorous approach by the state regulators, however, was not met without resistance. Critics of the enforcement strategy raised concerns, suggesting that the regulatory bodies may have exceeded their jurisdictional limits and authority in their zealous pursuit of non-compliant entities. They contended that these rigorous regulations might hinder the industry’s growth and progression.
On the other hand, there exists a contrasting viewpoint advocating for increased regulatory oversight. Proponents of this perspective argue that a more robust and comprehensive regulatory framework is essential for the stabilization of the market, particularly concerning wholesale prices. They believe that without such oversight, the market remains vulnerable to volatility and instability, which could hinder the industry’s long-term sustainability and growth.
In this complex landscape, Oklahoma stands at a crossroads, balancing the need for effective regulation to ensure compliance and market stability, against the concerns of overregulation and its potential impacts on the burgeoning cannabis industry.
Oklahoma’s Rigorous Oversight Leads to Decline in Cannabis Cultivation Licenses
In January 2023, the Oklahoma Medical Cannabis Authority (OMCA), as confirmed by a spokesperson, reported a total of 7,066 active licenses for cannabis cultivation within the state. This figure was reflective of the significant interest and growth in the state’s cannabis industry. However, in the following months, there was a notable decline in the number of active licenses, which fell to 4,880.
Porsha Riley, the Public Relations Manager for OMCA, communicated via email to MJBizDaily the authority’s dedication to upholding the integrity of Oklahoma’s medical cannabis sector. Riley pointed out that the decrease in licenses resulted from decisive actions taken against illicit operators and those failing to comply with regulations. These measures were guided by data-driven decisions and supported by input from various groups, including medical cannabis users, industry leaders, and state government partners, focusing on protecting both patient and public health.
OMCA’s approach to tackling illicit and noncompliant activities included comprehensive supervision. In 2023, the agency carried out over 7,000 facility inspections and more than 4,600 operational status checks. These actions were supported by information from OMCA’s online Business Complaint Form, the inventory management system Metrc, and data from NCS Analytics.
Riley reported that these extensive efforts led to 1,314 administrative cases in 2023. The enforcement measures resulted in seizing large amounts of illicit cannabis and placing embargoes on thousands of pounds of dried cannabis flowers and plants. In May, OMCA also extended a moratorium on new cultivation licenses until 2026, demonstrating continued vigilance.
Furthermore, Riley noted the implementation of a stringent license application review process. This was aimed at preventing unscrupulous individuals from entering Oklahoma’s medical cannabis market, thereby strengthening the regulatory structure.
The rise in popularity of Oklahoma’s medical cannabis market dates back to its establishment following the legalization approved by voters in 2018. The market’s swift expansion was largely due to the state’s low licensing fees and minimal entry barriers compared to other states. Oklahoma legislation requires a minimum of 75% resident ownership in licensed cannabis operations. However, there have been concerns about certain participants potentially bypassing these regulations, possibly with the assistance of legal offices.
In June, OMCA published a study indicating that Oklahoma was producing cannabis at a rate far exceeding the needs of its 332,000 registered medical cannabis patients, suggesting that the surplus in the regulated system might be feeding into the illicit market at both the cultivation and retail levels.
In March, Oklahomans voted against a proposal to legalize cannabis for adult use. This outcome might suggest that the state’s current medical program sufficiently meets the demand for cannabis, underscoring a commitment to maintaining a regulated and compliant medical cannabis environment.
Excessive Cannabis Supply Remains
Throughout this year, wholesale cannabis prices have consistently remained below $1,000 per pound, as reported by LeafLink, a New York-based wholesale platform. This pricing trend, according to Ben Burstein, Senior Corporate Development Officer at LeafLink, is not anticipated to shift shortly, even in light of the efforts made by the Oklahoma Medical Cannabis Authority (OMCA).
To provide a clearer understanding of the situation, Burstein draws a comparison between the cannabis markets in Oklahoma and Massachusetts. Oklahoma’s monthly cannabis sales are around $60 million, which is significantly less than Massachusetts, where sales exceeded $120 million per month in 2023. This disparity in sales figures between the two states is noteworthy.
Further delving into the specifics, in Massachusetts, the number of cannabis plants harvested each month has seen a steady increase, reaching just over 18,000 by the end of 2023, as per the data from the state’s Cannabis Control Commission. In stark contrast, Oklahoma, with its more favorable conditions for outdoor cultivation, recorded the growth of more than 600,000 cannabis plants in December alone, based on the data from OMMA. As of January 3rd, the state reported a staggering 6.8 million live plants in production.
However, Burstein raises an important point regarding the data collected by the OMMA. He notes that these figures do not account for plants that are not tracked by Metrc, the inventory tracking system, nor do they include those destined for the illicit market. This unaccounted-for segment could represent a significant portion of the overall cannabis cultivation in the state.
Given this context, Burstein argues that even if the OMMA’s initiatives are aimed at addressing noncompliant or illicit operators, their impact on the regulated wholesale market dynamics may be limited. He expresses skepticism about the likelihood of these efforts influencing the pricing structure in the cannabis market. According to him, despite the regulatory actions, the wholesale prices of cannabis are unlikely to be affected significantly. This analysis suggests that the complexity of the market and the presence of unregulated segments pose challenges to influencing overall market pricing through regulatory measures alone.
New Legislation and Resistance from Small-scale Operators
Several operators within the cannabis industry have expressed concerns that the actions of the Oklahoma Medical Cannabis Authority (OMMA) are impacting not only non-compliant entities but also those that are fully compliant with the law. These operators argue that legal, law-abiding businesses are inadvertently becoming collateral damage in OMMA’s enforcement drive.
In response to these allegations, the OMMA issued a statement last spring to address the growing unease among the industry participants. The agency firmly denied the accusations through a memo published on its website. The memo stated, “The narrative that OMMA is shutting down businesses for minor violations is simply untrue and is being used to unnecessarily spark fear among businesses acting within the law.” This statement was intended to reassure compliant businesses and dispel any fears that they might be unfairly targeted.
However, in November, the OMMA disclosed that it had initiated 165 petitions to revoke licenses from facilities that allegedly failed to comply with the mandated signage requirements around their premises. A former operator, who chose to remain anonymous, claimed that many of the companies facing license revocation met the signage requirements. The operator suggested that the combined burden of legal representation costs and increased licensing fees was a significant barrier, preventing these companies from effectively defending themselves in the regulatory process.
Despite these concerns, the OMMA has indicated no intention of scaling back its inspection activities in the current year. The authority plans to extend its focus to the state’s more than 2,800 dispensaries. To further enhance its regulatory measures, a new law has been enacted that allows the OMMA to employ undercover shoppers. These shoppers will be responsible for acquiring products from dispensaries, which will then be submitted for lab testing, ensuring compliance with quality standards.
Additionally, the new regulations mandate that employees working at cannabis companies in Oklahoma must obtain certification from the OMMA. Furthermore, medical cannabis (MMJ) cultivators are now required to either possess a surety bond or provide proof of land ownership. These measures are part of the OMMA’s continued efforts to ensure compliance and uphold the integrity of the state’s cannabis market. The introduction of such stringent requirements reflects the OMMA’s commitment to maintaining a regulated and safe cannabis industry, while also addressing the challenges and concerns raised by various stakeholders in the sector.
