[POLITICO] Toke-lahoma becomes a target for lawmakers

In this Nov. 30, 2018 photo medical marijuana is displayed in Shawnee, Okla. | Sean Murphy, File/AP Photo

More than 100 marijuana-related bills have been filed, many seeking to restrict Oklahoma's booming medical program.

Staunchly conservative Oklahoma has emerged as an unlikely weed utopia with more than 12,000 cannabis businesses and the nation’s highest per capita rate of medical marijuana patients.

While other states have embraced tight restrictions on weed businesses, Oklahoma has become the nation’s test case for unfettered cannabis capitalism, placing few limits on licenses.

That could soon change.

Republican Gov. Kevin Stitt and state lawmakers in Oklahoma City are trying to rein in the freewheeling market that has proliferated since voter-approved legalization in 2018, introducing dozens of bills that would impose tighter restrictions.

“When Oklahomans voted for medical marijuana, they were sold a bill of goods,” Stitt said, setting the tone during his State of the State speech last month. “The state question was misleading, and it has tied our hands as we regulate the industry.”

Oklahoma’s experience serves as a cautionary tale for other red states, which have seen unprecedented momentum to legalize pot in recent years. When Mississippi lawmakers passed a medical marijuana bill last month, they repeatedly emphasized that they didn’t want to follow the wild west path blazed by Oklahoma.

“We are not Oklahoma, and this program is not going to be Oklahoma 2.0,” Mississippi GOP state Sen. Kevin Blackwell, who sponsored the medical marijuana bill, said during the floor debate.

Republicans have sounded alarms, but cannabis proponents say states with strict rules aren’t exactly models of success. Early adopter states have experienced massive legal fights and allegations of corruption from entrepreneurs seeking a limited number of potentially highly lucrative licenses.

Oklahoma libertarian legalization advocate Chip Paul argues that the problem isn’t the state’s unlimited licensing structure, but rather the failure of state regulators to establish sound guardrails and adequate enforcement.

“You can pretty much do whatever you want with no fear that you’re going to get inspected,” Paul said. “Our state is whistling Dixie and letting it all happen.”

The legislative agitation comes as cannabis advocates are pushing to put a recreational legalization referendum on the ballot this year, but two competing petitions have splintered the pro-marijuana forces.

Market retrenchment

There’s some evidence that Oklahoma’s Green Rush has crested. Over the last two months, the number of licensed businesses has dropped from 13,785 to 12,021 — a 15 percent dip. Roughly 40 percent of that decrease came from businesses failing to comply with a new requirement that they disclose any foreign ownership, according to the Oklahoma Medical Marijuana Authority. In addition, businesses with expired licenses lost a grace period to stay in business.

But most close market watchers still believe there’s a market correction on the horizon. The price of marijuana has fallen significantly due to the glut of product on the market, industry officials say, which will almost certainly lead some businesses to shut down.

“The unlucky and incompetent will not make it,” said Chip Baker, a longtime marijuana entrepreneur who moved his business operations from Colorado to Oklahoma after the medical marijuana market launched in 2018.

In addition, a recent court settlement will allow Oklahoma to move forward with its long-delayed seed-to-sale tracking system. The Oklahoma Medical Marijuana Authority hired Metrc — which runs cannabis tracking systems in 17 other U.S. states and territories — to establish the program in 2020, but that sparked a lawsuit challenging the contract, and a temporary restraining order barring implementation has been in place since last April.

OMMA Executive Director Adria Berry, who was appointed by Stitt to lead the agency in August and has made beefing up enforcement a top priority, believes that putting the track-and-trace system for marijuana products in place will alleviate many of the concerns raised by lawmakers, particularly about product being diverted into the underground market.

“It will completely change the dynamic,” Berry said prior to the court settlement. “I’ll be able to give [lawmakers] metrics and data that they’re asking for, such as knowing how much marijuana is actually being sold across the state from dispensaries.”

But so far that hasn’t done anything to quell the calls for big changes to the program. Legislative proposals include a moratorium on new medical marijuana business licenses, tougher penalties for patients and businesses that divert product outside the regulated market, and eliminating the tax exemption on business supplies for weed farmers.

“My constituents, they’ve been complaining about the marijuana business and how out of hand it’s gotten,” said GOP state Rep. Rusty Cornwell, who introduced the moratorium bill and represents a rural district in the northeast corner of the state that’s seen a huge influx of marijuana farms.

Cornwell emphasizes that legitimate existing businesses would not be affected by the moratorium, that it would initially be in effect for just two years, and that the OMMA could lift it at any time before that if state regulators conclude that the enforcement issues have been adequately addressed.

“If you talk to the good players in [the medical marijuana industry], they’re fine with the moratorium,” Cornwell said. “They want everybody to be in compliance, because they’re having a hard time doing legitimate business because of all the ones that are the bad actors in the industry.”

There’s a broad coalition of groups advocating for tighter guardrails around the industry. The Oklahoma Municipal League, which wields considerable influence at the Capitol representing cities, is working with the Association of Oklahoma Narcotic Enforcers and Oklahoma Faith Leaders to push a trio of bills being carried by state Sen. Lonnie Paxton, who chairs the Senate Public Safety Committee. The legislation would heighten penalties for businesses and individuals who illegally sell or transfer marijuana, as well as increase OMMA’s authority to strip licenses for businesses that violate state laws.

“When the state question passed, I think people in Oklahoma — and people across the country for that matter — didn’t think that we would be the forefront of the marijuana industry,” said Daniel McClure, the Oklahoma Municipal League’s deputy general counsel. “So we weren’t ready from a regulatory standpoint at the city level or the state level.”

All three bills cleared the Public Safety Committee by 11-1 votes last month and are headed for floor votes.

Advocate infighting

The backlash comes as advocates are preparing to push for a referendum on full legalization. Two different referendums have been filed with the secretary of state’s office. The biggest difference between the two measures is that one would enshrine the right for adults to use marijuana in the state’s constitution, while the other would change state law. But both face legal challenges to their constitutionality.

In fact, the petition challenging the statutory referendum was filed by the individual leading the campaign to pass the constitutional referendum. That infighting among legalization advocates could undermine efforts to pass either petition given the backlash that the industry is facing.

“I think eventually it’s going to happen nationwide,” said Cornwell, noting that younger generations are more comfortable with marijuana use. ”Do I think the timing is right for Oklahoma right now? No.”