A Comprehensive guide to Oklahoma’s new cannabis laws

Edited 6/12/23 to remove forecast information on SB 437. Gov. Stitt Vetoed SB 437 on 6/9/2023.

Oklahoma's cannabis industry prepares for a transformative era with the passing of eight bills by the 59th Oklahoma legislature. Among them is an omnibus bill currently awaiting the Governor's signature.

Oklahoma’s cannabis industry is under a magnifying glass. The Oklahoma legislature has passed a total of eight bills relating to cannabis this session, with the governor's signature now adorning seven of them. A few pieces of legislation in particular mark a significant turning point, shaping the future of the industry and instigating vital compliance measures that operators must now navigate. From amplified fees to surety bonds and a myriad of other regulatory adjustments, this blog aims to delve into the transformative impact of these new laws and offer a comprehensive understanding of the evolving landscape.

HB 2095

HB 2095 is one of the more loaded bills in the bunch and it underscores the gravity of adhering to upcoming and existing regulations for medical marijuana business licensees.

Under The Act, intentional non-payment of taxes can result in severe consequences. The OMMA will now have the power to permanently revoke the business license of tax delinquent licensees, rendering them permanently ineligible for any future medical marijuana licenses issued by the Authority.

The Act also makes it unlawful for licensed medical marijuana commercial growers to knowingly employ undocumented immigrants within their facilities or on their premises. Violations of this provision may result in misdemeanor charges, imprisonment, fines, license revocation and potential denial of future license applications.

The Act grants the Oklahoma State Bureau of Narcotics and Dangerous Drugs (OBNDD), the Oklahoma State Bureau of Investigation (OSBI), and the Oklahoma Attorney General full authority to investigate and enforce any violations of the laws regarding medical marijuana. While this increased oversight aims to enhance compliance and deter illicit activities, granting such broad authority to law enforcement agencies could lead to overreach and disproportionate enforcement actions.

Ensuring investigations and enforcement actions are led by knowledgeable individuals with clear communication is vital to prevent misguided efforts that could harm legitimate businesses.

It is worth noting, that while other bills we’ll talk about later introduce continuing education requirements for individuals working within the industry, no such requirements or trainings have been mandated for enforcement agencies to expand their understanding of the unique nuances and complexities of the medical marijuana industry. The historical nature of these agencies introduces inherent biases toward marijuana, potentially leading law-abiding business owners to be treated as potential criminals. We’ve already seen this, when the OBNDD caused substantial damage to an entire farm, amounting to ten million dollars, due to their failure to conduct proper interagency checks. Striking a balance between effective regulation and safeguarding the rights and interests of medical marijuana businesses and individuals is imperative for a fair and thriving industry.

OMMA, OBNDD, OSBI and the AG will be able to subpoena documents to establish the identities of business owners and individuals with ownership interests, particularly when there are reasonable suspicions of illegal activities related to cultivation, processing, transfer, sale, disposal, or diversion of marijuana. A provision open to such subjective application may result in disparate outcomes for similar violations, undermining the fairness and integrity of the regulatory framework.

HB 2095 allows unannounced, on-site inspections of medical marijuana research and education facilities by the OMMA, OSBI, OBNDD and Attorney General. Failure to permit inspections or noncompliance with inspection requests can lead to penalties, including non-renewal, suspension or revocation of licenses.

Another notable change is requiring the submission of a national fingerprint-based background check for all business applicants. The legislation also restricts the issuance of multiple commercial grower licenses for a single property.

While HB 2095 aims to address regulatory gaps within Oklahoma's medical marijuana industry, it has potential drawbacks and raises concerns about the legislation's impact on businesses, privacy and market competition. The never-ending prospect of heightened scrutiny and aggressive enforcement by multiple agencies generally creates an atmosphere of uncertainty and can deter potential legitimate investors and entrepreneurs from entering Oklahoma’s market. As we go on, you may conclude that’s the goal.

HB 2095 goes into effect November 1st, 2023.

HB 2282

HB 2282 grants the Director the authority to issue written orders, impose disciplinary actions and assess penalties to cannabis business licensees with potential consequences ranging from monetary penalties to registration annulment or revocation.

The law provides a process for the Director to issue written orders to annul, condition, suspend, or revoke a registration if there is reason to believe that the licensee is operating in violation of the law.

The written order must specify the nature of the violation or basis for the action, and the Director has the power to impose disciplinary actions, including monetary penalties, as authorized by the Uniform Controlled Dangerous Substances Act or the rules of the OBNDD. Licensees have the option to request an administrative hearing within 30 days of receiving the written order.

The Director can delegate the authority to initiate individual proceedings to the Deputy Director or the general counsel of the Bureau. Additionally, the Director may authorize administrative hearing officers to conduct hearings and recommend action for final agency orders, in accordance with the rules and regulations of the Bureau.

In cases where there is an “imminent danger to public health or safety,” the Director can issue an immediate suspension of a registration without notice or a hearing. The suspension remains in effect until the conclusion of administrative proceedings, unless withdrawn by the Director or dissolved by a court. The Director may also assess penalties, not exceeding $10,000 per day of noncompliance, and consider the seriousness of the violation and efforts to comply. While this provision may seem necessary to an extent, unfortunately some of what OMMA has deemed an “imminent danger to public health or safety” thus far with temporary suspension orders has been a real stretch. In one case, the summary order explicitly said the observed violations on their own would not amount to an imminent danger, but the combined effect still resulted in suspension and ultimately revocation.

If a registrant is found to have committed acts in violation of federal law, the Uniform Controlled Dangerous Substances Act, or the Bureau's rules, the Director has the authority to assess administrative penalties not exceeding $5,000 per day for each violation.

In cases where a judge finds probable cause a registrant possessed, transferred, sold, or offered for sale any controlled dangerous substance in violation of the Uniform Controlled Dangerous Substances Act, any controlled dangerous substance that is not in properly labeled containers then in the possession of the registrant will be deemed contraband, seized and summarily forfeited. The Director is also authorized to impose an eradication or destruction fine, not exceeding $50,000, on the registrant.

Following an annulment, revocation, or denial of a registration, the Director may prohibit the registrant or applicant from reapplying for registration for a period of up to five years. The probationary period cannot used as grounds to contest the validity of the annulment, revocation, or denial of a registration.

HB 2282 brings up many of the same concerns related overreach and subjective application as HB 2095. Both highlight how crucial it is for cannabis business licensees in Oklahoma to be aware of these provisions and ensure strict compliance with federal and state laws, DEA regulations and the rules and regulations set forth by the OBNDD. Understanding the potential consequences, including disciplinary actions, monetary penalties and even registration annulment or revocation processes can help licensees navigate the regulatory landscape and operate their businesses responsibly and within the bounds of the law.

HB 2282 is in effect now.

THe Tax BILLS: HB 2289, SB15x & 18x

SB 15X introduces a significant change in the fees imposed by the OBNDD on cannabis business licensees in Oklahoma. The Act raises the annual OBNDD fees from $500 to $2,500, marking a 400% increase. While this increase aims to generate additional revenue to support OBNDD’s regulatory and administrative efforts, it poses a challenge, particularly for many small businesses operating on narrow profit margins. For these businesses, the substantial fee hike is an additional financial burden, potentially affecting their sustainability and ability to comply with regulatory requirements. While Oklahoma’s industry remains one of the most affordable to operate within, striking a balance between reasonable fees and administrative burdens is crucial to support the growth and sustainability of existing small cannabis businesses while fulfilling the regulatory objectives of the OBNDD.

SB 15X is in effect now.

SB 18X creates the Medical Marijuana Tax Fund. The funds credited to the account will be allocated at the Legislature's discretion to support the operations and initiatives of the Oklahoma Medical Marijuana Authority and for the purpose of funding substance abuse programs and common education, including redbud school grants.

SB 18x goes into effect July 1st.

While SB 18X doesn’t directly impact businesses like SB 15X it’s important to be aware of the entire financial landscape your cannabis business interacts with. Regulatory overhauls and fee increases can be call to action for cannabis businesses to carefully evaluate their existing strategies and develop new ones to adapt to the changing financial landscape. In this volatile industry, that’s already imperative. Being aware of the upcoming fee increase, small businesses should begin to proactively refine their financial plans, explore cost-saving measures and identify potential revenue streams to ensure long-term sustainability and success. Proactive steps and awareness can help businesses navigate these regulatory changes and position themselves for growth in a competitive market.

HB 2289 brings several updates to the Oklahoma tax code. The only one directly relating to the marijuana industry, is that it replaces references to OSDH with OMMA in regards to the contract with the Oklahoma Tax Commission (OTC). The primary changes to be aware of in general address event sales tax, response deadlines and reconciliation fees.

The amended law adds that in preparation for a special event, organizers or promoters are required to submit a list of all registered vendors to OTC at least ten days prior to the event. The list should include the permit numbers of vendors holding an Oklahoma sales tax permit issued under Section 1364 of the tax code. Oklahoma tax code already required application for special event permits 20 days prior to the event. This section of Oklahoma tax code may become more relatable to cannabis events if and when SB 437 is signed into law.

Additionally, employers filing a late annual reconciliation for withholding taxes will now face a $1000 fee. And taxpayers will now have to adhere to the response deadline based on the date indicated on the notice received from the OTC, rather than the mailing date of the notice.

Any changes in tax code should prompt taxpaying cannabis businesses to review their obligations and adjust their practices accordingly, ensuring compliance, efficiency, and adherence to the updated regulations, especially since you can now be revoked and permanently barred from future licensure for “intentionally” failing to remit your taxes as a cannabis business.

HB 2289 is in effect now.

SB 913

SB 913 introduces a requirement for applicants seeking or renewing a medical marijuana grow license to submit a surety bond when with their application. The bond will serve as a form of financial security and applies specifically to the land area designated for commercial growing operations. In cases where the property is abandoned or the license is revoked by the Authority, the appropriate agency is empowered to recall the bond. The funds from the bond will be utilized to cover the expenses associated with restoring the property to its original condition. The minimum bond amount for each license is set at $50,000, but OMMA may require a higher amount depending upon the reclamation requirements of the approved application.

A commercial grow business is exempt from obtaining the bond only if it can demonstrate land ownership for a minimum of five years prior to applying.

It is crucial for potential license applicants and current licensees to understand the dynamics of bonding. The initial bond amount stated does not necessarily reflect the initial cost a business will incur, just as a bail bond doesn’t equal the full bail amount. However, with so many new ways to get your licensed revoked, business owners should be careful about the collateral and financial impacts of their bonding agency being called to compensate the state.

HB 913 is in effect now, but OMMA still has not released the bond form so there is currently no way for a commercial grower to comply with the law.

SB 813

SB 813 authorizes OMMA to operate a quality assurance laboratory or partner with a private lab to conduct compliance testing for medical marijuana. OMMA's quality assurance laboratory will provide recommendations for equipment and standards, develop standardized operating procedures, handle sample procurement and testing, implement the secret shopper program, and analyze compounds that may pose health risks. The Act allows OMMA staff to handle, procure and transport samples, and conduct parallel testing on failed batches. An annual report will be submitted to the Legislature on quality assurance activities and results.

The QA laboratory is expected to conduct 100 full compliance tests a week. This number is expected to be relatively constant as licensees undergo the voluntary process of “process validation” (HB 3929) and the agency implements the secret shopper program (HB 3971), as these required tests would be conducted from the 100/week total compliance tests. We also anticipate using the QA laboratory to perform proficiency testing, auditing laboratory results, and developing and implementing lab standardization (HB 4056).

-Stacy Johnson, House Fiscal Staff | CCR Report FAQ

This is a necessary piece of legislation. Just last year four Arkansas companies were hit with a RICO suit for alleged inflated THC labs. The measure addresses our own alarming inconsistencies circulating in the market, and will hopefully provide more confidence and peace of mind to patients.

SB 813 is already in effect. The projected timeline for completing and operationalizing the QA laboratory is approximately nine months from now.

The secret shopper program goes into effect January, 1st 2024.

The passing of these cannabis-related bills in Oklahoma marks a significant turning point for the industry. The evolving regulatory landscape brings both challenges and opportunities for medical marijuana businesses. As a leading cannabis law firm in Oklahoma, we understand the intricacies of these new laws and their potential impact on your operations. Our team of experienced attorneys is here to help you navigate the compliance nuances, protect your interests and ensure a fair and thriving industry. Whether you need assistance with licensing, regulatory compliance, or any other legal cannabis matters, we’re ready to provide you with expert guidance and support. Consult with our firm today to stay ahead in this ever-changing industry.