Regulation of Oklahoma’s Medical Marijuana Industry

Executive Summary

Key Objectives

• Identify key agency stakeholders associated with regulating the marijuana industry.
• Provide an analysis of OMMA’s current status and recommend key performance indicators to be achieved.
• Identify best practices from other states’ regulation of the industry.
• Identify a regulatory framework for Oklahoma’s medical marijuana industry that would limit illicit activity, enhance public safety, connect to the medical community, and support interagency coordination.

In 2018, Oklahoma voters approved an initiative petition to legalize medical marijuana. The statutory change enacted by the ballot measure provided the State just 60 days to establish an office for the regulation of medical licenses, dispensaries, growers, and processors.

The proponents of State Question 788 (SQ788) sought to ensure patient access to medical marijuana products. However, the measure’s language did not pro- vide for an adequate regulatory structure to address public safety, illicit activity, enforcement and compliance mechanisms, and consideration of the varied agencies that would be engaged with the industry.

With this evaluation, the Legislative Office of Fiscal Transparency sought to identify critical regulatory needs within the fast-growing medical marijuana industry, examine regulatory best practices from other states, and propose a regulatory framework to support public safety and health, curb illicit activity, and ensure proper enforcement.

This evaluation resulted in three key findings:

Finding 1: State Question 788 Created the Most Accessible Medical Marijuana Industry in the Nation

Three and a half years after the approval of SQ788, Oklahoma has the most accessible medical marijuana market in the country. Currently, Oklahoma has the greatest percentage of licensed medical marijuana patients, greatest number of dispensaries, and greatest number of growers of any state with medical marijuana.

Factors contributing to the level of access across Oklahoma’s medical marijuana industry include lower barriers to entry for both businesses and patients. Oklahoma has some of the lowest license fees for businesses, with no license limits, and is just one of three states that do not require a physician to verify a qualify- ing condition for patient access. Additionally, enforcement and compliance has been minimal in this early market, and there is a lack of clarity and authority regarding the roles and responsibilities of those involved in regulation.

Finding 2: Oklahoma’s Rapid Implementation of Medical Marijuana did not Allow for Develop- ment of an Adequate Regulatory Structure

Oklahoma’s four-month implementation was the fastest among states that regulate medical marijuana. The expedited timelines required under SQ788 resulted in Oklahoma bypassing key steps in planning that were undertaken by other states before the first sale of medical marijuana.

With no time on the front end to develop a regulatory framework for medical marijuana, Oklahoma policymakers have been attempting to improve regulation in an active industry. A key action was creating the Oklahoma Medical Marijuana Authority (OMMA) as the primary entity responsible for overseeing regulation. However, effective regulation requires cooperation from various entities, including law enforcement, tax compliance, and environmental agencies.

With the implementation of medical marijuana, several state agencies quickly found themselves providing services outside of their normal operations. The lack of standardized processes for cooperation among those agencies has resulted in inefficiencies in operations, interagency communication, data sharing and delivery of services.

Finding 3: A Strengthened Regulatory Structure is Key to Identifying and Achieving Evidence-Based Goals

The excise tax created through SQ788 was to ensure funding for the regulatory needs of medical marijuana, with excess funds apportioned to other state needs, such as education and drug and alcohol prevention. The Oklahoma Tax Commission reports approximately 40 percent of marijuana processors and dispensaries are delinquent with taxes. The collections of medical marijuana excise tax are volatile, and the continued evolution of regulations may impact the amount collected. As regulation improves, taxes could either increase for legal businesses coming into compliance, or decrease as bad actors exit the market. Proper regulation will force the market to find equilibrium between patients and providers.

While efforts to immediately improve the industry’s regulation are having an impact, the long-term effects are uncertain. Considering the brief three-and-a-half-year history of medical marijuana in Oklahoma, the lack of data collection, limited accountability for businesses through inspections, and an evolving regulatory environment, it is difficult to forecast the medical marijuana market and corresponding tax collections. Before Oklahoma can determine the cost of effective regulation of the medical marijuana industry, it must first establish an effective regulatory system. Additionally, while OMMA’s role as the regulatory authority is to ensure all regulatory functions are delivered, the agency is not required to deliver every function.

LOFT’s research of more than 30 state medical marijuana programs identified several best practices that led to development of a proposed regulatory framework for Oklahoma’s medical marijuana industry. The model includes developing a state strategy, identifying measurable objectives, centralizing data and coordination of needs, and using a funding structure that can adapt to changing priorities. LOFT identified both short and long-term objectives for effective regulation.