Ohioans are getting a preview of how the process for awarding initial adult-use marijuana business licenses might look later this year. The Division of Cannabis Control (“Division”) has released a proposed rules package for applications related to those licenses and is seeking stakeholder feedback through Friday, February 9, 2024.
Why it matters
The proposed rules seek to establish a two-phase lottery system which will determine the order and manner in which provisional licenses will be awarded.
The two phases will happen in sequence and have important distinctions. Phase One will allow all applicants the opportunity for one location anywhere in the state, subject to some fairly complicated limitations. Phase Two seeks to allocate all other licenses among regional districts in a ranked lottery process.
The Division is seeking feedback from stakeholders on these proposed rules as part of a state-mandated rulemaking process.
Application process
Existing current medical marijuana facilities can apply for a dual-use license (medical and adult-use) to add adult-use licenses to their existing facilities. There is no fee for this application. These licenses will be made available by June 7, 2024, and will be awarded by September 7, 2024.
Additional bonus adult-use dispensary licenses – referred to as “10(B) licenses” in the proposed rules – will be awarded to existing medical license holders through a two-step process that begins with a random drawing to determine a priority ranking. Those license applications will be made available by June 7, 2024.
After the Division reviews records pertaining to common ownership and control among currently licensed medical marijuana businesses, it will determine each entity that is eligible to apply, the number of licenses each entity will be eligible to receive, and the total number of licenses that will be available for application. This information will be released well in advance of the application period. There is a $5000 application fee for this license.
The drawing
After eligible applicants have submitted a completed and viable application, a third-party operator will conduct a drawing to establish a priority ranking. Prior to the drawing, each applicant will be required to indicate whether they will be applying for a dual-use license or adult-use only. Applicants applying for an adult-use only license will receive one entry in the drawing. Applicants applying for a dual-use license will receive two entries in the drawing. Applying for a dual-use license, as opposed to an adult-use only license, does not affect the total number of licenses eligible – but it does improve the applicant’s chances of obtaining a higher ranking in the drawing.
Phase one
Each applicant will be able to apply for one 10(b) license in Phase One, regardless of how many licenses they are eligible to receive. Applicants eligible to receive multiple 10(b) licenses will be required to select one of those licenses to be entered into Phase One, while any additional licenses to which they are entitled will be moved to the Phase Two process.
After applicants are notified of their ranking number, the Division will commence the Phase One selection process. One key component of the proposed rules is the addition of a one-mile buffer between dispensaries. No proposed dispensary may be located within one mile of the boundaries of an existing licensed medical dispensary, or another proposed 10(b) facility site.
If any proposed facility site submitted in Phase One is within one mile of an existing medical marijuana dispensary, the application will be rejected, and the applicant will be permitted to submit another facility site selection within the Phase One window (the dates and length of which are yet to be determined). If two or more facility sites are submitted on the same site or within one mile of each other, the applicant with the higher ranking in the drawing will prevail, while any conflicting lower ranked applicant will be permitted to submit another facility site selection within the Phase One window.
Once a Phase One application has been approved, the applicant will be granted a provisional 10(b) license. The proposed rules require the applicant to obtain a Certificate of Operation within one (1) year from issuance of the provisional 10(b) license.
Once the Phase One window closes, any applicant that was not able to obtain a provisional license in Phase One will be moved to Phase Two.
Phase two
Phase Two is aimed at taking the remaining adult-use dispensary licenses not awarded in Phase One and allocating them throughout the state.
The Division will establish and make public regional districts throughout the state, as well as the total number of licenses available in each district. Phase Two applicants will then be asked to identify their preferred regional district(s), after which the Division will assign applicants to regional districts based on their preferences and ranking number.
Once applicants are notified of their assigned district(s), they will then be permitted to submit facility site applications to the Division. Conflicts or deficiencies pertaining to facility site applications on the same site, or within one mile of an existing medical dispensary or 10(b) provisional license awarded in Phase One, will be resolved according to the applicants’ ranking number. Once all applicants have submitted a viable application and have an approved facility site, they will be granted a provisional 10(b) license.
Social equity licenses
The proposed rules do not shed much light on the timing of the application process for licenses to be provided pursuant to the Social Equity and Jobs Program established by Ohio’s new adult-use law, only that the Division will provide notice in advance of the application process being launched. Expect a similar rules package to be introduced in the future.
Final notes
Other than awarding 10(b) and social equity licenses, it will be some time before the Division opens up any new license application processes for adult-use licenses. Pursuant to O.R.C. 3780.10, the Division will review the number of cannabis operator licenses 24-months after the first adult-use operator license is issued, and biannually thereafter. Accordingly, such a review will not begin until late 2026.
We’re here to help! If you would like to speak with an M&S cannabis attorney about the proposed application process, need assistance providing feedback to the Division, or have questions regarding other cannabis licensing and compliance matters, send us a message at mslawgroup.com/contact or call 614-939-9955.
Greg works with Cannabis, CBD, and Hemp clients, advising both licensed operators and ancillary businesses on how to navigate the complex, highly regulated, emerging cannabis and hemp industries.