Walter Haverfield recently reported on the passage of Ohio’s Issue 2 as part of the November 7th general election. The full text of Issue 2 went into effect on December 7th, 2023, legalizing adult use of cannabis across the state. Since then we have received a large volume of inquiries regarding what the new law means for both consumers and businesses. Below is a detailed breakdown of the new law’s impact and the next steps that aspiring adult use businesses should pursue. Interested parties should bear in mind that all information below is based on the initiated statute passed in November. The Ohio legislature is actively considering updates to the law, which means all of this is subject to change at any time.
What does the new law mean for consumers?
As of December 7, 2023, it is legal for anyone age 21 or older to possess and consume cannabis for adult use within the state of Ohio. Possession is limited to 2.5 ounces of cannabis (or 15 grams of cannabis extract). Consumers may transfer their personal cannabis to other persons age 21 or older, as long as nothing of value is exchanged.
The new law also allows for home growing of up to 6 plants per adult (with a maximum of 12 plants per household). Plants may only be grown at the consumer’s primary residence, and cultivation may only occur in areas that are not visible from any public space. Further, home grows must be secured to prevent access to cannabis by anyone under age 21. Like with other forms of cannabis, consumers may transfer plants to other persons age 21 or older, as long as nothing of value is exchanged. Once adult use dispensaries open for business, consumers will be able to purchase seeds and plants for personal use at home.
Per the new law, authorized products are limited to: plant material and seeds, live plants, clones, extracts, drops, lozenges, oils, tinctures, edibles, patches, smoking or combustible product, vaporization of product, beverages, pills, capsules, suppositories, oral pouches, oral strips, oral and topical sprays, salves, lotions or similar cosmetic products, and inhalers. The new law does not expressly limit the amount of psychoactive tetrahydrocannabinol (THC) that products may contain; however, the new Division of Cannabis Control is authorized to promulgate regulations limiting THC content. In such case, the maximum THC level established by the agency shall not be less than 35% (or 90% for cannabis extracts).
While Ohio’s adult use law is quite permissive in terms of what it allows, there are still limits. For example, employers can still prohibit workers from consuming adult use cannabis, even if the use occurs off-the-job. The law also prohibits operation of any vehicle, motor vehicle, streetcar, trackless trolley, bike, watercraft, or aircraft while using or under the influence of adult cannabis. Additionally, smoking, vaporizing, and other combustion are completely prohibited while within any vehicle, even if the vehicle is parked and turned off.
Despite Issue 2 going into effect, there are still several hurdles that need to be cleared before the law will be fully operational. Namely, there are currently no businesses in Ohio that are authorized to sell or otherwise dispense adult use cannabis. On top of this, acquiring cannabis in another state and transporting it across state lines remains illegal under federal law. This means that although possession and consumption of adult use cannabis is now legal in Ohio, consumers currently have no fully legal means by which to acquire cannabis.
What does the new law mean for entrepreneurs and businesses?
While it is never too early to begin planning for your new business, interested parties should note that it will be many months until license applications and regulations for new adult use businesses are made available to the general public. Issue 2 created a brand new state government agency to manage the adult use cannabis program: the Division of Cannabis Control, under the state Department of Commerce. The agency will need to promulgate formal regulations and application forms for the adult use cannabis program, a multi-step process which will take several months. The new law establishes a deadline of September 7, 2024 for the Division of Cannabis Control to adopt final regulations.
In addition to rules for business’ operations, the new regulations will also contain details on the application process, licensing fees, and required application contents. Issue 2 limits the number of licenses that will be made available, however, it does not provide any insight as to how the state will decide who gets a license and who does not. The 2017 licensing round required applicants to submit detailed narrative applications, often hundreds of pages long, which were then scored and competitively evaluated against other applicants. More recently in 2021, the Board of Pharmacy used a lottery system for dispensary applications, where winners were selected at random. At this time, it is unclear which process state regulators will select for the new adult use business licenses, and we likely will not know for several months.
As required by Issue 2, the first round of adult use business licenses will be issued only to existing medical marijuana operators. These licenses must be issued by no later than August 7, 2024. This will be quickly followed by issuance of up to 40 adult use cultivator licenses and up to 50 adult use dispensary licenses, primarily intended for new “social equity” operators. The application window for this second round of licenses could open as early as June 2024, although this will almost certainly be subject to delays. Notwithstanding, this timeline is subject to change based on any future action by the Ohio legislature.
For the second round of new business licenses, the Division of Cannabis Control will provide “preference” to applicants who meet certain requirements under the new cannabis social equity and jobs program. That program requires that owners show both social and economic disadvantage, as determined to be sufficient by the Ohio Department of Development. This may include: wealth certification; social disadvantage based on race, ethnicity, gender, physical disability, or long-term residence in an area of high unemployment; or, previous criminal arrests or convictions of owners, their spouses, children, or parents for marijuana related offenses. While the law states that social equity applicants shall be given “preference,” our observation from other states with similar provisions is that any applicant who does not meet the social equity requirements faces meaningful hurdles to receiving a license.
Once the application window closes, final decisions on which applicants will receive a license should be available fairly quickly. The new law provides that the Division of Cannabis Control must render a decision on each license application no later than 3 months from submission to issue licensing decision.
Applicants are not completely out of luck if they do not meet the social equity prerequisites or otherwise fail to obtain a license. The Division of Cannabis Control is also authorized to issue a third round of licenses 24 months after the first adult use license is issued, with the exact number of licenses available to be determined by the Division at later date. We anticipate this licensing round will occur no earlier than summer 2026.
Interested parties should contact the cannabis attorneys at Walter Haverfield immediately to begin planning for the upcoming regulations and licensing applications. Many activities can and should be completed ahead of time, including entity formation and structuring, financial planning, and locating real estate. In particular, identifying suitable real estate for a cannabis business is a major challenge that can take many months, and was an insurmountable hurdle for many aspiring applicants in the recent 2021 dispensary licensing round. As such, prospective license applicants would be well advised begin their business planning and property search as early as possible.