On June 7, Ohio opened the application process for state medical marijuana dispensaries to sell recreational products. Published on the Division of Cannabis Control’s website, the dual-use license permits would allow existing businesses to conduct non-medical sales with adults aged 21 and older.
“Existing businesses” is the key phrase, as permit applications are not currently available to the general public. The state will consider patient and consumer demand during a 24-month review period before giving would-be cannabis entrepreneurs a shot at recreational ownership, said James Crawford, public information officer for the Ohio Department of Commerce, which oversees the Division of Cannabis Control.
“We want to make sure there is fair access to Ohio consumers, and do everything we can to eliminate the illicit market,” Crawford said in an email. “And so the division will be mindful of where dispensaries are located to avoid large pockets where an illicit market can flourish in the absence of legal facilities. The division also wants to avoid an over-concentration of facilities in the same geographic region, which could lead to a higher failure rate of facilities.”
Medical companies enrolled in a state-run caregiver registry, meanwhile, are eligible for a 10(B) license, with Level I growers eligible for up to three licenses, and Level II growers qualified for one. Cultivation license types are classified into two categories based on production size. Level I cultivators are currently allowed 25,000 square feet of growing space, while a Level II license designates 3,000 square feet of production capacity.
However, non-medical licensees may submit an expansion request under the Issue 2 initiative approved by voters in November 2023. Level I growers will be given up to 100,000 square feet of cultivation area, with Level II cultivators permitted 15,000 square feet once a non-medical license is issued.
Applicants for either dual-use or recreational licenses must pay a non-refundable $5,000 fee – businesses selected in a June 21 license lottery could then proceed to site selection starting on July 1.
Future licensing rounds will hinge, in part, on a cannabis social equity and jobs program outlined in Issue 2. The program, to be established and managed by the Ohio Department of Development, will eventually issue 40 Level III cultivator licenses - which permit 5,000 square feet of growing space – and 50 additional dispensary licenses.
In the meantime, the Division of Cannabis Control must review the number of permits in circulation. This process will take place on a biannual basis following 24 months from the date the first non-medical license is issued, said Crawford.
The state has not given a specific timeline for the social equity program, instead stating that it will “provide notice in advance of the application period for which preference will be given to participants.”
Playing catch-up
A two-year pause between licensing rounds for established and new businesses presents a mixed bag for Ohio’s cannabis landscape, noted Michael Mayes, Chief Executive Officer of Chicago-based cannabis consulting firm Quantum 9. In the short term, Ohio will avoid the type of oversaturation that has driven down prices in neighboring Michigan, a state with unlimited licenses.
As Ohio is a limited license state, a slow rollout will leave “meat on the bone” for up-and-coming cannabis entrepreneurs, Mayes said.
“If there was an unlimited amount of licenses available, then dispensaries would be popping up everywhere, and it would really monopolize the market,” said Mayes, whose company has navigated 10-20 Ohio medical businesses through the licensing process. “For cultivation and processing, you have infrastructure in place. These companies have gone through compliance and all their owners and operators have been vetted. From a state perspective, there’s trust there with current operators.”
Yet, future licensees will be challenged by state laws prohibiting new dispensaries from opening within a mile radius of an existing facility. Even with a license cap in place, recreational owners will also be playing catch-up with businesses that have been around for a couple of years, said Mayes.
Industry newcomers could buy a 10(B) license for multi-millions from existing companies, a price tag likely not reachable for most people, he added.
“It feels like to me if you didn’t get in on the medical round, you’re kind of at a huge disadvantage, because these businesses will plant their flags even before you get a chance to submit,” he said.
Ohio’s ‘waiting game’
Wesley Bryant, a Brookpark hemp manufacturing wholesaler who also sells CBD-infused drinks on the retail side, would rather purchase a recreational licensethan play Ohio’s “waiting game,” he said.
“What’s being discussed down in Columbus is, ‘Oh, we’re gonna wait two years for new licenses to be open,’” said Bryant. “Of course they want to do that, because that leaves all the capital on the table for the medical guys to take the majority of the market. When people are able to come in, they will be fighting a market that is saturated.”
Nor is Ohio doing itself favors economically by delaying release of a new batch of licenses, Bryant said. The state is already behind Michigan, a market that rivals California in terms of products sold – about 24.2 million items since June 2023, according to cannabis market intelligence firm, Headset.
“Any business you get into is a struggle, but if they make us wait two years, the struggle is going to be tenfold,” said Bryant. “You’ll have canna-tourism (in Ohio) until other states start opening. By the time these two years culminate, you’ll be surrounded by states that have a cannabis program, so all the tourism dollars you could have gotten are now to the wayside.”
Preparation in the meantime is key for future applicants, said Mayes, the Quantum 9 CEO. Entrepreneurs should be polishing their business plans while creating a clear-cut pecking order of owners and investors.
“I would say just be patient,” Mayes said. “Patience is huge, because even when licenses are provided, there’s potential lawsuits, and always something that delays programming. Things that kill companies and applicants are paying for real estate too early, and paying for (marijuana reform) lobbying you may or may not need.”
