South Dakota medical cannabis operators hope adult-use legalization would bring sales plan

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South Dakota voters have a unique opportunity on Election Day.

Already the country’s first electorate to see adult-use cannabis legalization measures in three straight election cycles, state voters could become the first to legalize recreational marijuana possession and cultivation without setting up a market for regulated sales.

That half-measure is all that Initiated Measure 29, funded by South Dakota’s medical marijuana industry, offers after a more expansive adult-use legalization initiative approved by voters in 2020 was later declared unconstitutional by a state judge.

To avoid the same fate, IM 29 is limited by design to legalizing marijuana possession and small-scale home cultivation for adults 21 and older.

It’s understood that individuals who grow cannabis could give it away without compensation, but even this strictly “gifting economy” appears to be a tough sell for voters.

Recent polling suggests a close race, with a South Dakota News Watch survey released Monday showing 51% of voters opposed to the measure, 44% in support and 5% undecided.

Matthew Schweich, chair of the South Dakotans for Better Marijuana Laws campaign, said in a statement he is “cautiously optimistic” the measure will pass and “end the unjust and failed policy of marijuana prohibition that criminalizes our people and sustains the criminal market.”

Patient count decline

IM 29 has a narrow scope to fend off the kind of politically charged constitutional challenge that nullified a successful legalization measure passed in 2020.

But it’s also part of an unofficial understanding that South Dakota’s MMJ industry has with legislators, who would be responsible for passing subsequent laws to create a commercial industry.

In fact, operators in South Dakota’s medical marijuana market say they need adult-use legalization to reverse a troubling trend among their consumers.

The number of patients registered in the state’s MMJ program dipped from 13,500 in March to 12,500 as of September, the most recent data available.

Lawmakers needed to legalize marijuana sales

Though there’s no guarantee they’ll do so, state lawmakers will be under public pressure to pass laws legalizing and regulating commercial cannabis activity if voters say yes (again) to legalization.

If IM 29 passes, “I’m very optimistic” that’s exactly what lawmakers will do in 2025, said Kittrick Jeffries, the founder and CEO of Puffy’s Dispensary in Rapid City.

“Leadership in the Republican Party has already come out and said that was the right thing to do if it passes, whether they believe it or not,” Jeffries told MJBizDaily.

“I believe that the intent is very clear from the voters that it’s up to the Legislature to create guardrails.”

After all, Jeffries and other industry operators point out, there’s already plenty of cannabis available for sale in South Dakota – it’s just the unregulated and illicit kind.

Limited hemp-derived cannabinoid ban unenforced

One theory to explain the shrinking patient count is the steady growth of intoxicating hemp-derived products.

A law banning “synthetically produced” cannabinoids went into effect in South Dakota earlier this year, but the statute doesn’t impact the sale of hemp-derived delta-9 THC.

In any event, enforcement of the ban is lacking, licensed MMJ operators say.

They believe the proliferation of unregulated hemp in South Dakota will put more pressure on state lawmakers to legalize commercial marijuana sales, should IM 29 pass.

Hemp competition “is something we’re battling on a daily basis,” said Joe Stavig, the chief financial officer of Sioux Falls-based dispensary Dakota Herb.

Stavig noted that MMJ patients who reach a purchasing cap of 3 ounces every two weeks often resort to THCA flower from unregulated hemp shops.

In seeking enforcement of the intoxicating hemp law, South Dakota MMJ operators share common cause with legalization opponents, Stavig noted.

“We’re all trying to get this out of kids’ hands,” he said. “It’s just a matter of how we do it.”

The best-case scenario for medical marijuana operators – an IM29 win – still puts them in a “weird holding pattern,” Stavig said.

“It’ll be status quo for us until we hear something different.”

The same goes for the other MMJ operators in the state.

According to state officials’ recent presentation to lawmakers, South Dakota is home to:

  • 68 licensed dispensaries.
  • 38 licensed cultivators.
  • 18 licensed product manufacturers.
  • 2 licensed independent testing labs.

South Dakota marijuana history

To date, South Dakota is the only state to have legalized medical and adult-use marijuana simultaneously, as it did in 2020.

In that November election, 54.18% of voters defied polling and approved Amendment A, which changed the state constitution to legalize recreational cannabis – and required the state Legislature to pass laws legalizing medical marijuana and hemp sales by April 1, 2022.

On the same ballot, 69.9% of voters also approved Initiated Measure 26, which legalized medical marijuana in the state starting on July 1, 2021.

Both measures drew near-immediate challenges from staunchly anti-cannabis Gov. Kristi Noem, a Republican.

In early 2021, Noem asked lawmakers to significantly curtail the voter-approved MMJ program.

She also directed a state highway patrol official to file a lawsuit challenging Amendment A on the grounds that it violated South Dakota law limiting voter initiatives to a single subject.

A Noem-appointed state judge later agreed, though MMJ was allowed to proceed.

Voters rejected a 2022 follow-up measure that adhered to the single-subject rule – and, like IM 29, would have legalized possession and home cultivation – by a margin of 53%-47%.

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MMJ industry banking on legalization

This year, South Dakotans for Better Marijuana Laws raised $207,000 in support of IM 29 through May, the most recent data available.

That total included a $10,000 check from Jeffries’ Puffy’s Dispensary.

Preelection campaign finance filings were due Monday, but they were not yet posted to a state website Wednesday.

Opponents, including the Catholic Church as well as law enforcement and business groups, are running a series of ads that lump marijuana with unregulated hemp as well as fentanyl, Jeffries said.

But he is uncertain whether that message will resonate with voters in 2024.

“I think our base in South Dakota is waking up to the idea that the doom and gloom, ‘Reefer Madness’ of the marijuana industry is not what it’s made out to be,” he said.

“People are starting to recognize that regulation is the way to do it.”

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.