Ohio cannabis summit focuses on possibilities, challenges of adult-use market

Ohio cannabis summit focuses on possibilities, challenges of adult-use market

This story was republished with permission from Crain’s Cleveland and written by Scott Suttell

Adult-use marijuana now is legal in Ohio, but lawmakers still are working on details of the law that will establish a functioning market in the state.

Panelists at the Crain’s Cleveland Business Cannabis Summit, held Thursday afternoon, Jan. 25, at Corporate College East in Warrensville Heights, grappled with the complexities – in areas of the law, operations, taxes and more – of what’s ahead. The inaugural event brought together key players in Ohio’s cannabis sector for panel discussions, breakout sessions, networking and a closing reception.

Last fall’s passage of Issue 2, the initiated statute legalizing recreational marijuana, “is a watershed moment for Ohio and the country,” said Tom Haren, partner and cannabis practice chair at Frantz Ward LLP, and, as a leader of the Coalition to Regulate Marijuana Like Alcohol, a key player in the legalization push in the state. He noted Ohio’s debut as a legal state means that a majority of adult Americans—52%, to be exact—now can use marijuana legally.

Haren was part of the event’s first panel, which also featured Caroline Henry, vice president of government affairs for Buckeye Relief; Jared Maloof, CEO of Standard Wellness Holdings LLC; and Jana Hrdinova, administrative director of the drug enforcement and policy center at Ohio State University. That panel was moderated by Jeremy Nobile, who covers the intersection of cannabis and public policy for Crain’s.

Henry noted that given the limitations of the state’s existing medical marijuana program, operators “have been hamstrung for years.” She said she’s “very optimistic” about possibilities for the adult recreational use market in Ohio, while acknowledging—as all panelists did throughout the day—that the state is still shaping rules and regulations that will be critical in determining how the market functions. (As an initiated statute, Issue 2 is a change in the Ohio Revised Code, and the General Assembly may amend the statute as needed.)

Maloof pointed to another Midwestern state that recently legalized—Missouri—which he said has had “tremendous success.” He said he believes that based on conversations he has had with Ohio officials, the state understands what’s needed to establish an appropriate regulatory framework that is safe for consumers and is “pro-business.”

Medical marijuana in the state has been “underwhelming,” he said, but he believes demand will be strong when the recreational market kicks in fully.

Haren agreed, noting the “resounding” nature of the victory of Issue 2, which won the support of 57% of voters. He, too, is confident that ultimately, the state will come up with a structure that works.

“The program is going to be successful,” Haren said. “We’re going to put the illicit market out of business.”

The quicker rules and regulations are in place, the better, Maloof said, adding, “We’ve been operating in uncertainly.”

That legal market up north

Crain’s Detroit Business senior reporter Dustin Walsh hosted a panel on what Ohio might learn from the experience of Michigan, which has had legalized recreational cannabis since 2019.

Michigan’s law, generally speaking, has fewer restrictions than Ohio, which has led to a flourishing of dispensaries around the state—more than 750 at present. And that, panelists said, has kept prices competitive and been a benefit to consumers.

Doug Hellyar, president and chief operating officer of Lume Cannabis Co., which has 38 dispensaries in Michigan, told guests that when Ohio’s program starts in earnest, “It’s going to get a lot more fun than it is now. … It’s an incredible industry. But it’s not easy.”

Lume now has more than 1,000 employees and offers full insurance benefits and a 401(k) match, he said. Banking restrictions are a challenge, though, both for the business itself—it’s important for cannabis companies to find lenders comfortable with the industry to meet capital needs—and for employees, who might not be able to get mortgages or home-equity loans from some institutions.

Michigan’s less-regulated approach means “you have to be an excellent operator,” Hellyar said. “You have to provide excellent value to the customer,” he said, adding businesses need to have “a relentless focus on premium product.”

Myles J. Baker, a member of law firm Dickinson Wright, said companies looking to apply for operating licenses should pay particular attention to background checks and must understand all areas of the law that affect the business.

“You’ve got to stay fluent in the rules as they’re developed,” he said.

All about the law

A sponsored breakout session featuring attorneys from law firm McGlinchey Stafford did a deep dive on what’s known about the status of Ohio’s law, what might be coming, and what operators in the state can learn from other states that already have legalized cannabis.

One challenge, noted Daniel Shortt, an associate at McGlinchey Stafford, is that legislators’ interest in the issue tends to be “a mile wide and an inch deep.”

“In Ohio, there’s obviously expectations that the law is going to change,” Shortt said. Rules likely will be “quite burdensome” for operators, he said, and applications for the limited number of licenses available will be complicated.

“Do it early. Don’t wait until the last minute,” he advised potential applicants for licenses.

Heidi Urness, a member (partner) at McGlinchey Stafford, said she’s “often called a dream killer” with respect to advising businesses on starting up marijuana operations. But she said it’s important that they enter the process understanding challenges ranging from the heavy cost of security (and potential security violations tagged by regulators) to banking limitations (cannabis is a largely cash business because of banking regulations) and the potential down the road for business breakups.

Because marijuana still is illegal at the federal level, Chapter 11 isn’t an option for failing operations, which have to use state courts instead.

“If you can’t talk about these things when times are good, you definitely can’t do it when they’re rough,” she said.

McGlinchey maintains a blog called Green Leaf Brief that provides updates on laws, regulations and trends for cannabis-related businesses

Questions of social equity

During a panel moderated by Debra Borchardt, co-founder and executive editor at Green Market Report, a Crain Communications brand, the topic of social equity as it relates to Ohio’s future in cannabis was examined.

Ally Reaves, owner and CEO, Midwest CannaWomen, and Jeane’ Holley, director of government affairs and public relations, Harvest of OH, tackled topics ranging from criminal record expungement and those disproportionately impacted by the War on Drugs to the importance of diversity within Ohio’s emerging cannabis industry.

“You want your companies to look like your customer base and within cannabis, it’s a very broad customer base,” Borchardt said.

How to incorporate social equity measures has been a point of debate as details are developed for Ohio’s cannabis industry post-issue 2.

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