The State of Oregon has commenced the operation of its recreational marijuana market. The Oregon Liquor Control Commission) recently approved eight recreational marijuana producer licenses – the first in the state. Oregon’s regulatory system differs from that of Washington State in significant ways that may lead to a more robust legal marijuana market in Oregon.
The primary differences between Oregon and Washington’s regulatory systems are as follows:
- No residency requirement in Oregon for owners and/or investors in marijuana businesses (vs. Washington’s six month residency requirement)
- Vertical integration is allowed in Oregon (vs. no vertical integration in Washington)
- No cap on the number of licenses in Oregon (vs. Washington’s cap on total marijuana canopy to be grown in the state and cap on number of retailers statewide)
- The tax rate in Oregon ranges from 17 to 20% (vs. Washington’s tax rate of 37%)
- Oregon will be issuing Wholesaler Licenses in addition to Producer, Processor and Retailer Licenses (vs. no wholesaler license in Washington)
Oregon obviously has the benefit of seeing what has and hasn’t worked in other states that have existing legal recreational marijuana industries including Colorado and Washington; and Oregon’s approach appears to ease entry into the marijuana market.
Washington’s residency requirement for both marijuana business owners and equity investors has proven to be a big hurdle for those wanting to operate in the state. Allowing non-resident ownership and investment eases the financing burden for licensees since virtually no commercial lending is available for marijuana businesses.
The choice not to place a cap on the number of licenses to be issued, allows the marketplace to decide how much marijuana is needed in the market place. This seems wise given that there doesn’t seem to be any clear answer on how much marijuana will need to be produced to satisfy the legal market.
Keeping the tax rate low should keep the price of legal marijuana competitive with that of the black market. It should be noted, however, that even with Washington’s higher tax rate, the price of legal marijuana continues to drop.
The addition of a wholesaler license allows more participation in the legal marijuana market and takes the burden off of producers and processors who don’t wish to negotiate the distribution of their own products. The one change that could have mixed results in Oregon is allowing vertical integration as this could lead to a few players dominating the marijuana marketplace or it could lead to more efficiencies in the industry.
An important thing that Washington and Oregon do have in common, however, is the ability for local jurisdictions to opt-out. In other words cities and counties in both states can choose to ban marijuana businesses. As I have discussed in prior posts, the ability to opt-out may be the biggest obstacle to the success of the legal marijuana market in any state.
For more information on the regulation of marijuana businesses, please contact Heather Wolf.