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Oklahoma Cannabis Market Outpaces That of Most States – New Cannabis Ventures

January 29, 2020

Its been less than two years since Oklahoma legalized medical cannabis, but already the number of card-carrying medical cannabis patients has exceeded those in many states that have had programs much longer. That is due, in part, to the fact that Oklahoma has one of the most liberal medical cannabis laws in the country. Recognizing this, there are now efforts underway by some state lawmakers to reign in the burgeoning industry through legislation, while, at the same time, efforts are underway to expand legalization to adult-use cannabis. In this review, we take a look at the history of Oklahomas cannabis program, the existing marketplace and potential for future growth.

History

Passed by a vote of 57% to 43% in June 2018 via a ballot initiative (SQ 788), the Oklahoma Medical Marijuana and Patient Protection Act legalized the licensed use, sale and growth of marijuana for medicinal purposes. Unlike other states that created limits on what conditions qualified for use, Oklahomas law allows doctors to prescribe cannabis for any condition.

In addition, the amount and forms of cannabis that licensed patients can possess in Oklahoma is also considerably more liberal than most other states. The law allows patients with a license to legally possess up to three ounces on their person; up to six mature marijuana plants; six seedling plants; one ounce of concentrated marijuana; up to 72 ounces of edible marijuana; and up to 8 ounces in their residence. Possession of up to 1.5 ounces by those who can state a medical condition, but who do not have a state-issued license, are considered to have committed a misdemeanor offense and can be fined up to $400.

Existing Market

It is estimated that about 5 percent of Oklahomas nearly 4 million residents has a medical marijuana license, a rate of participation that far exceeds the experience in other states due to the ease of obtaining a medical card and the large number of dispensaries, as detailed below. Oklahomas Medical Marijuana Authority has approved an average of 3,500 patient applications since the program began accepting them in August 2018. As of Jan. 20, the Authority reported having approved the following licenses:

Oklahoma is No. 2 in the nation with 15.6 cannabis dispensaries per 100,000 residents, second only to Oregon, according to Verilife. There are few barriers to entry. Nearly anyone with $2,500 for a license can open a dispensary and every form of cannabis can be sold: from raw flower to topical creams, oils and gels to vaporization and patches.

Retail sales reached more than $345 million last year, and state tax revenue was $55 million, according to the Oklahoma Tax Commission. The state assesses a seven percent excise tax on medical marijuana, in addition to state and local sales taxes.

While many of the players who entered the Oklahoma cannabis market are small private companies with dispensary names ranging from Doobies Dispensary to simply Dragon, there are some public companies either already doing business there, or planning to enter the market. Among them are:

GrowGeneration (NASDAQ; GRWG), a chain of specialty retail hydroponic and organic garden centers has three, soon to be four, locations in Oklahoma. In the quarter ending September 30th, the company generated sales of $3.4 million in Oklahoma, representing 15% of its revenue for the quarter and accounting for 40% of its overall growth from a year ago, when it had no revenue from the state.

Growgeneration’s Oklahoma City Store

Curaleaf Holdings, Inc. (CSE: CURA) (OTC: CURLF), will, through the planned acquisition of GR Companies, (dba Grassroots Cannabis) get a foothold in the Oklahoma market. GR Companies Oklahoma has 12 locations in the state, with some of them operating under the “Herbology” banner. That deal is expected to close this spring.

Interior of Herbology dispensary (Grassroots Cannabis) in Oklahoma City

Acreage Holdings (CSE: ACRG) (OTC: ACRGF) is another public company looking for a presence in Oklahoma. It has described plans to open one retail location in Tulsa, for which it has a license. The company stated in SEC filings it also has been approved for one grower license and one processor license in Pocasset, Oklahoma.

Earlier this month, Dixie Brands (CSE: DIXI) (OTC: DXBRF) announced that it will enter the market with an unnamed manufacturer.

In June, SLANG Worldwide (CSE: SLNG) (OTC: SLGWF) announced plans to enter the market by licensing its branded products to Elite Cultivation, includingO.penVAPE, Pressies, District Edibles, Bakked, and Magic Buzz. Elite Cultivation is run by Richard Freeman of drag racing firm Elite Motorsports.

Redbird Bioscience, a cultivation and processing facility in Stilwell, Oklahoma is ramping up for cultivation, processing, distribution and warehousing there. In an interview with New Cannabis Ventures in January, Redbirds Chairman and CEO Bill Thurman said Oklahomas referendum model has allowed for a market with broad distribution opportunities.

Future Growth

The Oklahoma medical cannabis market began with a bang. Whether that will continue is contingent upon a number of factors. First, there are efforts underway to legalize adult-use cannabis via a proposed ballot which would, of course, build on an already robust market. At the same time, those who support medical cannabis fear it would cut into their market share.

In addition, some lawmakers are looking to reign in the existing law with so-called trailer bills. For example, SB 1257 would prohibit medical marijuana from being advertised on billboards, while HB 2779 would prohibit future medical marijuana dispensaries from being located within 1,000 feet of a church or other places of worship.

Overall, the Oklahoma cannabis market is still young and the landscape is changing rapidly. Competition from, and consolidation by, some of the larger players, along with additional changes in the law likely will impact future growth, but for now it continues to be full steam ahead in Oklahoma.