State Law Round-Up

Oregon

On October 1, 2015, recreational sale of cannabis became legal in Oregon. Oregon residents that are 21 years or older may now purchase up to 7 grams of recreational cannabis at roughly 200 of the 350 cannabis dispensaries originally set up to distribute medical marijuana.  Dispensaries specifically designed to cater to the recreational user will become operational sometime in 2016.

While many dispensaries believe that the legal status of recreational marijuana could greatly increase the volume of cannabis sales, some are concerned that local city and municipal regulation could interfere with business as usual. For instance, the Portland City Counsel passed an ordinance that restricts the house of operation for recreational dispensaries to between 7am and 9pm and prohibits a recreational dispensary from being within 1000 feet of a medical dispensary or a school. However, the ordinance applies to those that hold a Portland City recreational dispensary license, the application for which will not be available until 2016. While the city has asked that dispensaries comply with the spirit of the law and begin to restrict the sale of recreational cannabis in accordance with the ordinance, some dispensaries have recognized that the law does not yet have any legal effect and began selling recreational cannabis at 12:01 on October 1, 2015.

In addition to the restriction that Portland and many other cities, town and municipalities have placed on the sale of recreational marijuana, 33 towns and counties throughout Oregon have already completely banned the recreational sale of Cannabis.

Ohio

On November 3, 2015, Ohio voters will consider a state constitutional amendment, which, if passed, would legalize certain medical and recreational use of cannabis, as well as the cultivation and distribution of the plant. Under the amendment, those that are 21 years of age that have a valid state license would be able to use, possess, grow, cultivate and share up to 8 ounces of cannabis and four flowering plants. Individuals that are 21 that do not possess a license would be allowed to possess, purchase, transport, use or share up to one ounce and individuals with a certified medical condition could use cannabis.

However, the amendment comes with a provision that would give the exclusive right to commercially grow and cultivate cannabis to 10 Marijuana Growth, Cultivation and Extraction Facilities (MGCEs), creating a government-sanctioned monopoly in the cultivation industry. In response, Ohio lawmakers have introduced a competing constitutional amendment to the ballot, HJR 4, which would prohibit constitutional amendments that create monopolies, oligopolies or cartels; specify or designate tax rates; or confer commercial rights that are not equally available to similarly situated persons.  HJR 4 has a specific provision targeted at the legalization of cannabis, which states that any constitutional amendment on the ballot for November 3, 2015 that creates a monopoly will not take effect, in its entirety. This amendment, if operative, could invalidate the legalization of cannabis on all levels in Ohio.

If both amendments pass, it is unclear which will control. The Ohio constitution states that if two conflicting amendments are passed on the same ballot, the amendment with more votes becomes law. However, amendments introduced by Ohio lawmakers become effective immediately upon being passed, while those introduced by citizens, such as the cannabis legalization measure, become effective 30 days after passage. This has some convinced that the anti-monopoly amendment will invalidate cannabis legalization because it becomes effective first.  Ultimately, if both amendments pass, the question will likely have to be settled by the Ohio Supreme Court, as neither side appears willing to back down.

Update (11/3/15): the Ohio legalization measure was rejected, however many new outlets report that legalization itself had broad support (estimated at 57% by some polling sources) but concerns over granting an oligopoly to certain cultivators caused the measure to fail.

Washington

Beginning October 12, 2015, the Washington State Liquor and Cannabis Board (LCB) will begin accepting applications for state recreational cannabis licenses. Currently, Washington dispensaries are unregulated, but in order to remain operational, those businesses must obtain licenses by July 2016. The Washington health department still plans to craft a regulatory structure for the sale of medical cannabis, but does not have a time frame its completion. Therefore, medical dispensaries may want to obtain a recreational license to ensure that they can remain operational past July 1, 2016. Recreational dispensaries may also apply for a medical endorsement to distribute medical cannabis.

There is currently no limit on the number of licenses available, but priority will be given to those that already operate in the industry and that have paid all applicable taxes and fees in a timely manner. Given that there are nine months until the license requirements become effective, some will prefer to delay their applications in order to continue selling cannabis tax-free. Industry participants should, however, keep the July 2016 date in mind to ensure that there will be no interruption to their businesses as the market transitions to the new regulatory structure. 

Christopher Davis works in Finance, Banking and Securities Law. He is a member of the California and New York Bars.