The Oregon Liquor Control Commission has released its draft recreational marijuana rules, which can be found here. Many Washington marijuana business owners and investors are waiting to see if they will be able to participate in Oregon’s new recreational market.
The current draft rules require all license applicants demonstrate that they have been Oregon residents for two years prior to submitting the marijuana application (this residency requirement sunsets in 2020). License applicants include the following:
- Any individual or legal entity that has a financial interest in the business that is seeking licensure and who is directly involved in controlling the business to be licensed must be listed on the license application.
- The license application must also include the “legitimate owner” of the business to be licensed. A “legitimate owner” is any individual or entity that owns at least 51% of the business seeking licensure.
The draft rules also provide, however, that being a shareholder, director, member or limited partner of an entity will not in and of itself constitute involvement in the ordinary course of business for the business proposed to be licensed. The draft rules further state that the following factors in and of themselves do not constitute ownership:
- Preferential rights to distributions based on return of capital
- Options to purchase an ownership interest
- Convertible promissory notes
- Security interests in an ownership interest
Consequently, some minority shareholders, LLC members, lenders, and option holders may not need to meet Oregon’s residency requirement. Washington and other non-Oregon residents thus may in fact have an avenue for entering Oregon’s recreational marijuana market.
It is important to keep in mind that the Oregon’s rules are still in draft form. As residency and other licensing requirements continue to evolve, be sure to update yourself on current rulemaking before making any business decisions.
For more information on the regulation of recreational marijuana businesses, please contact Heather Wolf.