Oregonian to OLCC: Allow Out-of-State Marijuana Business Investment


When crafting a marijuana legalization measure, it is necessary to balance several objectives, including: personal freedom and public safety; tax revenue and responsible use; free speech and advertising restrictions designed to keep marijuana out of the hands of minors; and out-of-state competition vs. protecting in-state mom and pops. When drafting Measure 91, we co-authors carefully considered these various interests and felt that we had developed a sensible law that would stake a moderate middle on these issues and move the state of Oregon forward with a cannabis industry that would follow in the footsteps of our successful microbrewery and winery industries, while most importantly ending the arrest and citation of thousands of people for marijuana offenses. Apparently, voters agreed, supporting Measure 91 with more than 56% of the vote.

To balance the need to bring in out-of-state capital and protect Oregon’s homegrown industry, we concluded that the best way to balance these interests was to provide for a low, barrier to entry and provide for transparency. With a $1,250 license fee for growers, producers and retailers, Oregon entrepreneurs could be vertically-integrated for just $3,750 and market themselves as true Oregon small businesses.

We didn’t include a residency requirement so Oregonians could bring in the resources from other states and Oregonians could compete effectively, just as Oregon’s world-class craft brewers and wineries have done. Unfortunately, the Oregon Legislature changed the taxing and funding mechanism for the Oregon Liquor Control Commission (OLCC), who now regulated adult cannabis commerce in the state, increasing licensing fees to more than $4,000,hurting the ability of mom and pops to vertically integrate, and imposed a residency requirement, making it harder to bring in out-of-state investors. The OLCC took the residency requirement passed by legislators to conclude that only businesses with a 51% Oregon owner could get a license.

The Oregonian Editorial Board believes that the strict residency proposal goes too far:

Oregon should not hobble itself by limiting out-of-state investment and involvement, which could bring innovation and operational efficiency as well as cash to a new agricultural/retail sector that OLCC projects will generate $130 million in retail sales in 2017. (That projection runs comparatively low, meanwhile, as the economist Beau Whitney of Greenpoint Oregon, in legislative testimony from June, scaled the likely marijuana market here to be far larger.)

The best new businesses are those capable of responding to market conditions adroitly and to their advantage: If it takes an out-of-stater with a financial position in the firm to manage an Oregon-based pot operation – from increasingly sophisticated grow fields to supervised distribution to the retail sales counter – let it be so. Jobs to Oregonians won’t be lost if such a business succeeds. Jobs could be fewer if such a business were to limp along or fail.

Prosperity for Oregonians comes first and foremost. It would be shortsighted if a promising new marijuana market, cleared at last by the passage of Measure 91, were to suffer growth constraints because of errant, if good-willed, provincialism.

If the OLCC prevents businesses with out-of-state ownership from obtaining marijuana business licenses, there could be lawsuits that could distract the agency, or even lead to an injunction that delays the issuance of licenses. The OLCC could consider grandfathering in existing out-of-state businesses, but then those businesses would have an unfair advantage against Oregon’s mom and pops, not having to worry about any other outside competition.

The best policy is to adhere as closely to the text of Measure 91 as closely as possible, as the voters intended. A majority of Oregonians want to regulate marijuana like beer and wine, and neither of those industries prohibit out-of-state businesses. Oregon craft brewers like Ninkasiand HUB can compete just fine with Busch and PBR, thank you. In time, Oregonians will support Oregon-grown marijuana businesses. Let’s not be fearful of competition, let’s let the cream rise to the top and I’m confident that the Oregon cannabis businesses and entrepreneurs are up to the task.

Shameless plug: I’ll touch on the text of Measure 91, how it has been altered by the Oregon Legislature and the latest regulations proposed by the state at the upcoming Oregon Medical Marijuana Business Conference (OMMBC) on September 12-13 in Portland.