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Oregon Sets the Stage for Legalization in 2016 with New Rules

Ryan Allway

October 23rd, 2015

Policy, Top Story

The Oregon Liquor Control Commission (“OLCC”) approved new rules for its recreational marijuana program that’s set to launch next year. From security to labeling requirements, the 77-page document were reviewed by attorneys for the commission and the Oregon Department of Justice before being approved. The regulations will officially go into effect in January when the state begins accepting licensing applications.

Production Limits

The new rules establish a number of different tiers governing how much marijuana may be cultivated by a single organization, which has caused a stir among both government officials and businesses that must abide by the new laws.

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According to some marijuana growers, these limits are too low with the largest outdoor producers only able to cultivate roughly an acre of land. These limits could inhibit their ability to reach economies of scale and could keep costs elevated for consumers.

Regulators countered by saying that they don’t have enough data to make an informed decision, adding that they would revisit canopy size each year. In addition, the commission added a provision that allows local governments to approve larger production sites, while forbidding them from imposing limits smaller than the commission’s guidelines.

Residency Requirements

Residency requirements have also become a hot-button issue for both regulators and marijuana businesses that are just getting started in the state.

As they are written now, the new rules require Oregonians to make up the majority ownership of any marijuana business. The requirement is designed to support the growth of the marijuana industry in a way that benefits the state rather than out-of-state investors or larger multinational corporations that may someday enter into the fold.

Several lawmakers have indicated interest in reversing these requirements next year, however, when the Oregon Legislature reconvenes. In anticipation of these changes, the commission permitted non-Oregonians to apply for a license, and if the legislature changes the law, they won’t lose their place in the licensing process. If the law remains the same, then they would be disqualified and unable to open a marijuana business.

Opportunities Ahead

Oregon’s new recreational marijuana rules could create significant opportunities for a number of companies in the industry.

The new laws require licensed producers to regularly submit marijuana samples to be tested to ensure that they are free of harmful materials. With these testing requirements, cannabis testing companies like DigiPath Inc. (OTC: DIGP) and CannLabs Inc. (OTC: CANL) could expand into the state to help meet these requirements. Nationwide, cannabis testing is projected to become a $850 million market by 2020, according to GreenWave Advisors.

In addition to testing requirements, the new rules require a licensee to utilize seed-to-sale tracking systems to ensure proper inventory and record keeping. While there are few publicly-traded marijuana companies in the space, there are a number of private companies that could benefit, including Bio-Tech Medical Software’s BioTrackTHC, MJ Freeway, and Flowhub, which could yield opportunities for venture capital and angel investors.

Of course, there are many companies that could also benefit from the licensing decisions made in January (especially if residency requirements are eliminated), the delivery of marijuana that’s permitted by law, and companies that provide branding, consulting, or similar services.

Looking Ahead

Oregon’s recreational marijuana industry could reach $200 million during its first year, according to ArcView Market Research. In addition to the sizable tax revenue gained by the state, these sales could create opportunities for companies in the space and jobs for Oregonians. The passage of the new rules helps set the stage for next year, when investors will be closely watching the next major recreational marijuana market.

Image courtesy of Tony Webster used under Creative Commons.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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