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Cannabis Crossroads: What's in Store for Marijuana Reform in Ohio?

On Friday, November 19, the Drug Enforcement and Policy Center and Natural Therapies Education Foundation cohosted a virtual discussion featuring panelists representing current Ohio cannabis reform endeavors. The event provided attendees with knowledge about pending initiatives and legislation, as well as a vision of what the future may hold for cannabis in Ohio.

Can I grow my own marijuana?

Ohio Medical Marijuana Control Program—EXISTING LAW

NO – patients and caregivers are not allowed to cultivate their own marijuana.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

YES – adult users will be allowed to grow six plants per individual, with a limit of 12 plants total per residence where two or more adult use consumers reside at one time.

HB 382—PROPOSED LEGISLATION

YES – adult users will be allowed to grow twelve plants, no residency limit established.

As with any policy choice, there are pros and cons to allowing home grow of marijuana for personal use. Vast majority of states (14 of 18) that have legalized adult use allow their residents to grow limited number of plants for personal use, ranging between two (Montana) and 12 plants (Michigan). In our previous research regulators stressed that effectively managing home grow is necessary for public safety and for limiting the possibility of diversion to the illicit market. There are two strategies that can limit the potential negative effects of home grow provisions: giving law enforcement agencies clear and enforceable directions and keeping the allowed number of plants relatively low while also incorporating residency limits (limiting the number of plants that can be grown in a residence regardless of how many adults reside there).

  • Enables patients to grow their own supply to avoid the uninsurable cost of marijuana
  • Consumers can grow specific strains that might otherwise be hard to find in dispensaries
  • Potentially creates downward pressure on pricing in the market
  • Home cultivation makes enforcement of illegal grows in residential settings more difficult and creates uncertainty among law enforcement as well as the public
  • Plants cultivated at home are not tested for harmful pollutants
  • Creates possibility for diversion to illicit market or to other states

How much marijuana can I possess?

Ohio Medical Marijuana Control Program—EXISTING LAW

The amount of medical marijuana possessed by a registered patient shall not exceed a ninety-day supply:

  • Tier I of med. marijuana – 8 oz (226.8g)
  • Tier II of med. marijuana – 5.3 oz (150.3g)
  • 26.55 grams of Tetrahydrocannabinol (THC) content in lotions, patches, creams, ointments
  • 9.9 g of THC content in oil, tinctures, capsules or edible form
  • 53.1 g of THC content in oil for vaporization
  • Terminally ill patients have higher limits
An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

2.5 ounces in any form except extract, 15 grams of adult use extract. May purchase 2.5 ounces from dispensary per day.

HB 382—PROPOSED LEGISLATION

5 ounces of marihuana or fifteen grams of hashish. In Residence: 2.5 ounces and excess must be stored in container or area equipped with locks or other functioning security devices that restrict access.

Possession limits across legalized states vary, but they are generally between 1 - 2.5oz of cannabis flower in public, with some states having higher limits for concentrates or cannabis infused solid products. The state with the highest permitted possession limit is New Jersey, which permits possession of 6 oz.

Are there restrictions on how I can consume marijuana?

Ohio Medical Marijuana Control Program—EXISTING LAW

The smoking or combustion of medical marijuana is prohibited. Any form or method that is considered attractive to children is prohibited. With respect to tetrahydrocannabinol content: plant material cannot have more than 35% of THC content, and extracts are limited to 70% THC content.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

No limitation on how cannabis can be consumed. The Division of Cannabis Control will set rules regarding THC content which should not be lower than 35% for plant material and 90% for extracts.

HB 382—PROPOSED LEGISLATION

No limitation on how cannabis can be consumed. The marijuana regulatory agency is given the responsibility for adopting rules for maximum THC content.

Will there be employment and other protections for marijuana users?

Ohio Medical Marijuana Control Program—EXISTING LAW

NO – employers are allowed to continue workplace drug policies prohibiting consumption.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

NO – employers are allowed to continue workplace drug policies prohibiting consumption. Act creates additional protections for:

  • Concealed Carry Licenses
  • Adjudicatory hearings to determine shelter care placement
  • Parental Rights and Responsibilities
  • Parenting Time Orders
  • Eligibility for any public benefit program administered by the state or locality
  • Right to medical care and/or inclusion on a transplant waiting list
  • Users cannot be rejected as a tenant but owner can prohibit smoking on premises.

Officers must have an independent, factual basis giving reasonable suspicion that an individual is operating a vehicle under the influence or a test from the person's blood, blood serum, plasma, breath, or urine.

HB 382—PROPOSED LEGISLATION

NO – employers are allowed to continue workplace drug policies prohibiting consumption. Property owners still have the ability to prohibit consumption, cultivation, distribution, processing, sale or display of marijuana/marijuana accessories.

Employment protection for marijuana use is a complex issue, shaped partially by the continued federal prohibition on marijuana as well as the challenge of detecting how and when past marijuana use may impair job performance. In our annual survey of medical marijuana patients, the fear of losing one’s employment was the fourth most quoted reason for why people abstain from using marijuana. Ohio is not alone; majority of states that have legalized marijuana do not provide employment protections. Three states, Nevada, New York and New Jersey, have enacted laws preventing employers from taking action solely based on the presence of cannabinoid metabolites in the employee’s system or refusing to hire based on individual’s use of marijuana outside of the workplace. However, in all three states employers can continue with drug free workplace policies.

How many licenses will be issued and how long will it take?

Ohio Medical Marijuana Control Program—EXISTING LAW

Cultivation – Level I Cultivator (25K sqf) & Level II Cultivator (3K sqf): 33 licenses awarded, 19 Level I and 14 Level II. Initial cap was 12 licenses for each tier.

Processor – 47 provisional licenses issued, initial cap set at 40.

Testing Laboratory – No limit place on testing laboratory licenses.

Dispensary – 57 licenses awarded to date, additional 73 dispensary licenses to be awarded in 2022.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

There are no caps on the number of licenses. Licenses should start to be issued within 9 months of enactment.

HB 382—PROPOSED LEGISLATION

There are no caps on the number of licenses. Application for licenses will start to be accepted 12 months after enactment.

The question of whether to limit the number of licenses carries with it both pros and cons. States have approached this question from various angles, with many states having different regulations for different types of licenses and some of them imposing limits on how many licenses can one entity or one individual hold at one time to mitigate fears of market domination by large actors. Of the 18 states that have legalized adult-use marijuana, six have enacted license limits based on an established cap or contingent on county population. Arizona limits licenses relative to the total pharmacies operating in the state.  

  • Ability to charge higher licensing fees to support effective regulatory structure
  • Generally, only well capitalized businesses can enter market due to high fees creating more stable market
  • Ability to regulate supply of product and react to changing conditions in the market to prevent oversaturation
  • Allows for preferential treatment of certain classes of applicants
  • Limits how many entities can enter the industry
  • Gives advantage to well capitalized individuals/business, limiting diversity in the industry
  • By restricting supply, creates potential for higher prices to consumers
  • Necessitates creation of government selection process which can create controversy

How much will licenses cost?

Ohio Medical Marijuana Control Program—EXISTING LAW

Cultivator Level 1: $20,000 Application Fee, $180,000 Licensure Fee, $200,000 Renewal Fee.

Cultivator Level 2: $2,000 Application Fee, $18,000 Licensure Fee, $20,000 Renewal Fee.

Processor: $10,000 Application Fee, $90,000 Licensure Fee, $100,000 Renewal Fee.

Dispensary: $5,000 Application Fee, $70,000 Licensure Fee, $70,000 Renewal Fee.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

The licensing and application fees have not been established. The responsibility to set fees upon implementation was given to the Division of Cannabis Control.

HB 382—PROPOSED LEGISLATION

The licensing and application fees have not been established; however, Department of Commerce will be responsible for their collection. A municipality or township will be able to assign additional fees not to exceed $5,000 to defray application, administrative, and enforcement costs associated with the operation of cannabis businesses.

The licensing fees assessed by states for adult-use businesses vary widely from state to state and license to license. In some states, such as Alaska, fees can be as low as $1,000 while other states, such as New York, can assign fees as high as $200,000. There are many considerations that go into determining license fees – states want to ensure that their regulatory structures can be wholly funded by the proceeds from the marijuana industry while at the same time they also need to consider the barrier high fees can create for small and minority-owned businesses. Transparency about the costs of administering a marijuana program and how fees are spent can be helpful in ensuring that fees are not set too low or too high. 

Will existing medical marijuana operators get a preference?

Ohio Medical Marijuana Control Program—EXISTING LAW

N/A

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

YES

  • Dispensary issued 1 dispensary license
  • Level I Cultivator shall be issued three adult use dispensary licenses and one Level I Adult use cultivator license
  • Level II Cultivator shall be issued one adult use dispensary and one level II adult use cultivator license
  • Dispensary shall be issued one adult use dispensary license at different location if dispensary does not have common ownership or control of any Level I, II, or processor license
  • Processor shall be issued one adult use processor license
  • Testing lab shall be issued one adult use laboratory license
HB 382—PROPOSED LEGISLATION

YES For two years after MRA begins receiving applications, the agency shall only accept applications for marijuana retailers, processors, Class B marijuana grower, Class C marijuana grower, marijuana secure transporters from individuals holding a state operating license pursuant to Chapter 3796 (Medical Marijuana Control Program).

Most states that have undergone a transition from medical to recreational marijuana market have treated existing medical marijuana licensees as having a preferred status compared to the general population, whether by being able to submit applications ahead of others, having a fast-tracked approval process or being automatically eligible for licenses within the recreational sphere. As any other policy choice, this carries with it both benefits, such as shorter implementation time, and drawbacks such as limiting the ability of new entrepreneurs and entrepreneurs from affected communities to get involved.

  • Shorter implementation timeline due to already established growers and retailers
  • Smoother start of adult-use regime due to greater levels of familiarity with marijuana regulations and established record of compliance
  • Increases perceived legitimacy of the new industry as existing medical participants have already undergone public scrutiny
  • Limits the ability of new entrepreneurs to get involved in the industry, possibly limiting involvement of underrepresented communities
  • Possibility of greater concentration of the industry in fewer hands, limiting competitiveness of the market

Will there be any preference for in-state or minority or small businesses?

Ohio Medical Marijuana Control Program—EXISTING LAW

The 2016 Ohio medical marijuana law required 15% of all licenses for growing, processing, and selling marijuana be awarded to minority-owned businesses. This part of the law was subsequently struck down in 2018 (for cultivators and processors) and in 2019 (for dispensaries). There are currently no provisions for preferential treatment for minority owned businesses.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

Division of Cannabis Control shall issue up to 40 Level III adult use cultivator licenses with preference provided to applicants who have been certified as cannabis social equity and jobs program participants. Division of Cannabis Control shall issue up to 50 additional adult use dispensary licenses who have been certified as cannabis social equity and jobs program participants. The initiative does not appear to have any provisions giving preferential treatment based on residence.

HB 382—PROPOSED LEGISLATION

The current legislation does not have any provisions giving preferential treatment to minority-owned businesses or small businesses. However, there is a preference for Ohio residents who apply for a Class A Marihuana grower or a Marihuana microbusiness license.

Requirements for licenses have changed through the years with multiple states removing in-state residency requirements for their adult-use licenses. States were initially concerned with large corporations entering the market and leaving less economic opportunity for actual state residents. Currently, only four states have provisions requiring resident status to qualify for a specific marijuana license. A majority of states have enacted license provisions granting social equity applicants preference for certain license types. Three states have implemented social equity programs that require 50% of all licenses must be allocated to a social equity registered applicant.

  • Limits the ability of out-of-state investors to enter the market
  • Protects existing small businesses from capture by large players
  • Provides opportunity for state residents
  • Eliminates a potential red flag that could trigger federal enforcement action
  • Limits the amount of capital available to the industry
  • Can delay the growth of the industry in localities that lack sufficient capital
  • Could expose states to legal challenges from out-of-state business owners

How much will the state tax marijuana?

Ohio Medical Marijuana Control Program—EXISTING LAW

No special tax levied on medical marijuana purchases. Patients are subjected to regular state (5.25%) and local sales tax (0.25 – 2.25%).

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

10% excise tax, plus regular state and local sales tax, totaling between 15.25% - 17.5% tax levy.

HB 382—PROPOSED LEGISLATION

10% excise tax, plus regular state and local sales tax, totaling between 15.25% - 17.5% tax levy.

The taxation levels under both legalization proposals fall in the middle of the taxation spectrum when compared to other states. Majority of states impose an excise tax of 10-15% in addition to their regular sales tax. Based on available information, New Jersey appears to have the lowest tax burden of 6.625% plus a variable local tax of up to 2%; the state of Washington on the other hand levies a 37% excise tax, plus 6.5% state sale tax and additional local state tax.

How will money be spent?

Ohio Medical Marijuana Control Program—EXISTING LAW

Sales tax from marijuana products goes to the state general fund. There are no designated expenditure areas.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

Adult Use Tax fund - all funds initially deposited in this fund and distributed quarterly as follows: 36% for the Cannabis Social Equity and Jobs fund, 36% for the Host Community Cannabis Fund, 25% for the Substance Abuse and Addiction Fund and 3% for the Division of Cannabis Control and Tax Commissioner Fund.

HB 382—PROPOSED LEGISLATION

Revenue deposited in Marihuana Receipts fund. Tax Refund fund gets the amount certified by the tax commissioner; remaining amount is transferred to the Marihuana Tax Administration Fund equal to the costs associated with levying the tax. Any remaining money is deposited in the Marihuana Regulation Fund equal to costs associated with administering Chapter 3775. After these transfers occur: Up to $20 million annually is allocated into the marijuana research fund for the two fiscal years after the fiscal year this bill becomes effective. Remaining funds are allocated as follows: 15% to municipal corporations with at least one marijuana retail store, allocated in proportion to the number of marijuana retail stores within each municipal corporation, 15% to counties with at least one marijuana retail store, allocated in proportion to the number of marijuana retail stores within each county, 35% to marihuana profits education fund, 35% is distribute in the same manner as revenue distributed under division (E) of Section 5735.051 of the Revised code.

Every state with legalized adult-use marijuana has established a plan to allocate marijuana revenue generated through the tax and fee collection. The plans vary widely, with some states focusing on funding education and law enforcement, while others distributing resources to localities, substance abuse programs, social equity programs, research, veteran services and others.

What social equity provisions are incorporated?

Ohio Medical Marijuana Control Program—EXISTING LAW

No social equity provisions incorporated beyond the 15% set aside for minority-owned businesses that was subsequently struck down in court.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

The initiative includes establishment of the cannabis social equity and jobs program in the interest of remedying the harms resulting from the disproportionate enforcement of marijuana-related laws and to provide financial assistance and license application support to individuals most directly and adversely impacted by the enforcement of marijuana-related laws who are interested in starting or working in cannabis business entities. Additionally, Division of Cannabis Control shall issue up to 40 Level III adult use cultivator licenses and 50 additional adult use dispensary licenses with preference provided to applicants who have been certified as cannabis social equity and jobs program participants.

HB 382—PROPOSED LEGISLATION

The proposed legislation offers expungement provision for individuals with offenses no longer considered a violation under this act - offenses of obtaining, possessing, or using 5 ounces of marijuana or 15 grams of hashish or less as well as offenses involving cultivation of 12 or fewer marihuana plants. It does not address other social equity provisions; however, it orders the marijuana regulatory agency to create a plan to “promote and encourage participation in the marihuana industry by people from communities that have been disproportionately impacted by marihuana prohibition and enforcement and to positively impact those communities.”

Overtime, social equity has slowly become a major concern for legislators and drafters preparing adult-use legislation. States whose initial regulations did not include social equity provisions have amended the original legislation to include provisions assisting communities and individuals disproportionately impacted by marijuana enforcement. Almost every state, besides Alaska and Maine, have implemented some form of expungement for past marijuana offenders, with four states providing for automatic expungement. Additionally, states have set aside licenses for social equity applicants and established funds to help communities negatively impacted. 11 states have established funds to assist these communities either through reduced licensing fees, loan programs, business assistance, or programs to aid youth development and violence prevention.

Will my locality be able to prohibit marijuana businesses?

Ohio Medical Marijuana Control Program—EXISTING LAW

YES The legislative authority of a municipal corporation may adopt an ordinance, or a board of township trustees may adopt a resolution, to prohibit, or limit the number of, cultivators, processors, or retail dispensaries licensed under this chapter within the municipal corporation or within the unincorporated territory of the township, respectively.

An Act to Control and Regulate Adult Use Cannabis—PROPOSED INITIATIVE

YES Localities may adopt ordinances to prohibit adult-use dispensaries but may not prohibit or limit existing operational medical marijuana cultivators, processors, or dispensaries; or an adult use cultivator or an adult use processor, or an adult use dispensary who is co-located with adult use cultivator and an adult use processor, who have, or whose owner have, a medical marijuana certificate of operation at the same location as of the effective date of this act. Municipal corporation or township may vote to prohibit the operation of an adult use dispensary within 120 days of the dispensary license being issued.

HB 382—PROPOSED LEGISLATION

Municipalities and townships can prohibit or limit the number of marijuana establishments. Localities may also impose a local license and annual fees not exceeding $5 thousand.

Almost every state has adopted laws enabling localities to completely prohibit or significantly limit adult-use marijuana establishments from operating within their jurisdiction. Localities can prohibit establishments through ordinances or opt-out through voter referendum. Unlike the rest of adult-use states, New Mexico is the only state where the legislation included provisions preventing local jurisdictions from completely prohibiting adult-use licenses from operating.  

Medical marijuana patients

The circulating proposals for marijuana legalization in Ohio leave several important questions unanswered in respect to medical marijuana patients. While both existing proposals leave the medical marijuana program operational, the following questions need to be answered in order for us to be able to estimate impact on medical marijuana patients:  

At present both proposals are silent on the question of whether medical and adult-use facilities will continue to be separate or whether growers, processors and dispensaries will be able to serve both types of consumers. While both proposals detail how will existing medical marijuana licensees get preferential treatment in regard to adult use licenses, the question of co-location is not clearly demarcated.  

Under the current Ohio Medical Marijuana Control Program, patients are only required to pay existing state and local sales taxes usually ranging between 5.25% and 7.50%. Under both existing proposals, an additional 10% excise tax would be levied on purchases of recreational marijuana. Majority of states that have legalized adult use marijuana recognize the different nature of use between medical and recreational user and do not impose any additional taxes on patients beyond the standard state sales tax. Clarity on whether Ohio patients will be excluded from the additional excise tax would be helpful to determining to what extent will legalization of recreational marijuana impact medical marijuana patients. 

Under OMMCP rules, plant material cannot exceed a THC content of more than 35% and extracts cannot exceed THC content of 70%. The initiative proposal would give regulators the power to regulate concentration levels but explicitly say that concentration limits cannot be set below 35% of THC content for plant material and 90%, which are the same or higher than the existing OMMCP rules. The legislative proposal tasks regulators with creating THC concentration limits and does not include any limits.