Recreational Cannabis in Oregon: Who Can Participate?

Oregon’s recreational cannabis market will become legal on July 1, 2015, but some would-be entrepreneurs and investors still don’t know if they are eligible to participate.

“It’s a mind numbing time to be in Oregon,” said Michael Hughes, a cannabis attorney based in Bend, Oregon. At least it is for those following the cannabis legislation movement, where the government has made an unprecedented move to rewrite the state’s medical cannabis bill, instead of hash out the details of Measure 91, an initiative approved in November 2014 to legalize a recreational cannabis market.

Time is running out, but the government’s joint “implementation committee” has made little progress in regards to the regulatory details of Measure 91, which will legalize the possession, private use, and cultivation of cannabis for adults 21 and older.

Entrepreneurs and investors seeking recreational dispensary licenses are in limbo, still unsure of the state’s rules regarding residency requirements, taxes, and packaging and label regulations. Further, the state has hinted that regulated dispensaries may not be eligible to open until the fall of 2016—creating a considerable time lag between when recreational cannabis becomes legal and when shops can actually sell it.

“It’s like a bonanza for black market dealers at this point,” said Hughes, whose firm represents a number of business owners frustrated with the process. “If we could at least have some meaningful hearings and have an idea of what the committee is considering.”

The implementation committee has been meeting regularly since February, but has been bogged down with controversy over the medical cannabis market, primarily regarding local municipalities’ power to ban and tax dispensaries and the number of plants permitted allowed under medical growers. Ironically, the legislators say they are attempting to curb the black market, but by not establishing key regulations for the recreational market, they are actually condoning it.

Perhaps the biggest issue on Measure 91 requiring clarification is the state’s residency requirements—who is eligible to sell cannabis and who is eligible to fund these operations under this initiative?

“We’re still not even sure about the registration necessary for the grow side and the customer side,” said Hughes. “Reading the tea leaves, there is going to be some tie to the person holding the license but I have no idea if they’re going to tie requirements to investors.”

Precedents set by other states suggest Oregon will have some sort of residency requirement for applicants seeking commercial cannabis licenses; Colorado has a two-year residency requirement, while Washington requires three months of residency for investors and license holders. These regulations have supposedly prevented “Big Pot” from taking over by maintaining the investment opportunities within the state.

Measure 91 had no discussion of investor residency requirements, which has been tantalizing to investors outside of Oregon looking to break into the industry. This is also confusing for entrepreneurs trying to raise capital to get their recreational cannabis businesses up and running—where exactly should they look for capital?

But while the residency requirements and regulations are important, it is more important that the state’s lobbyists back off and accept Oregon voters’ position on the medical cannabis market, including local municipalities rights to ban or tax cannabis. According to Hughes, lobbyists have threatened to exercise their “nuclear option” if they don’t get their way on suggested revisions to the bill. If they take their case to federal court, the state’s recreational market could be over before it has even begun.

“They want to make it easier to ban medical marijuana dispensaries and they’re threatening to go into federal court,” Hughes said. “This could go into the federal induction and then I guess it doesn’t matter if I am a resident or not. Before we even get to July 1, we could end up with both programs shut down.”

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