Week in Review: Ohio’s odd ban on CBD sales, California acts on illicit firms & Nevada MJ market sizzles

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(This story has been updated to clarify the additional number of licenses that will be available in Nevada in the next licensing round.)

Ohio bans CBD sales outside of marijuana stores – which aren’t even open yet – California regulators take legal action against two unlicensed MJ businesses, and the Nevada cannabis market tops half a billion dollars in sales during its first year.

Here’s a closer look at some notable developments in the cannabis industry this week.

Goodbye, Columbus

Ohio doesn’t have medical marijuana dispensaries currently, but the state says that’s the only place consumers can buy CBD products.

The state’s Board of Pharmacy ruled that CBD goods are legal only when sold through that state’s still-in-development medical marijuana dispensary system.

The ruling came despite the widespread availability of CBD at conventional retail outlets throughout Ohio, including grocery stores.

Ohio joins California and Michigan in stipulating that hemp-derived CBD should be regulated as intensely as marijuana. It’s a chilling prospect for many in the CBD industry, which frequently gets less oversight if the cannabidiol is derived from hemp.

What does this mean for businesses already selling CBD in Ohio? At least one entrepreneur said she’d back out of the state.

Erika Valentina Doria, CEO of Cannimal – a California-based company that makes CBD topicals, tinctures and pet treats for animals – got a call this week from an Ohio official informing her of the rule, and she immediately dropped her current account with a dog-rescue group in the Buckeye State.

Doria said the merging of marijuana and hemp-derived CBD is certain to happen, but she’s just not ready for it quite yet.

“We are going to have regulation, and I’m trying to set myself up as a company to be part of that game,” Doria noted. “And if that means I don’t go to Ohio right now, I won’t go.”

‘Carrots, not cannons’

California’s marijuana regulators have begun legal action against unlicensed cannabis businesses that, until now, have had to mostly worry only about local law enforcement.

In the past week, the California Bureau of Cannabis Control (BCC) announced a pair of warrants served against businesses operating without permits – a storefront in Costa Mesa and a delivery service in Sacramento.

But some MJ industry watchers believe these moves probably aren’t going to do enough to stamp out illicit companies and alleviate the fact that licensed firms are losing business to the black market.

Salinas-based attorney Gavin Kogan – who also serves as chief branding officer for Grupo Flor, a company with real estate and cultivation cannabis interests – questioned the potential sentence faced by the defendant in the Costa Mesa case.

It’s a maximum of two years in jail and a $4,000 fine, and it’s far too lenient to be an effective deterrent, Kogan said.

“Threat of prison has not been enough to shut down this industry, and enforcement actions (like this are) hardly going to be a deterrent to participate in the black market,” Kogan observed.

“That hasn’t worked for generations. … It’s going to take a policy of carrots, not cannons.”

A more realistic solution, he suggested, would be to lower the barriers to entry for marijuana businesses, particularly retailers, and for the state to “aggressively combat” organizations like the California League of Cities, which he said is urging municipalities to bar MJ companies.

Kogan labeled as “an absolute failure” the state’s requirement that companies first obtain local authorization before they can be granted a  license.

He advocated tweaks to the law to overrule local officials’ opposition to marijuana companies.

“When you have a population base over a certain volume, you should not have a choice. Fresno, Bakersfield … should have no choice. Your population is too huge,” Kogan said, pointing out two California cities that have nearly 900,000 residents combined but no licensed MJ retailers, either medical or recreational.

Proceed with caution

Recreational marijuana sales in Nevada blew away expectations during the first year – totaling $424.9 million in the 12 months ended June 30. But regulators plan to be cautious when issuing additional business licenses.

The state wants to wait on adding cultivation and production licenses until it sees what the market looks like after a current round of licensing, Stephanie Klapstein, spokeswoman for the Nevada Department of Taxation, told Marijuana Business Daily.

Klapstein reported the department will assess supply to “make sure we don’t end up with an oversupply and the issues that go along with that.”

Oregon is an example of a state where a massive glut of cannabis has led to problems tied to the black market.

Here’s an overview of the current situation in Nevada:

  • The state opened a licensing round in June allowing existing medical marijuana businesses to apply for adult-use permits of the same license type.
  • Nevada received 76 applications, is in the process of reviewing them and plans to issue licenses in September.
  • Nevada will hold another licensing round for medical marijuana permit holders Sept. 7-20.

Initially, the September phase was to allow current MMJ businesses to apply for any type of adult-use license – retail, cultivation, etc. But the state, wanting to avoid a product glut, decided to offer only retail licenses.

It’s possible, according to Klapstein, that Nevada will hit its retail license cap during this round. The state has 64 available retail store licenses, including 10 in Las Vegas, before reaching the cap.

However, only 41 of the available licenses are in counties that currently allow adult-use marijuana licenses. An individual or business could win a state conditional license for a county that doesn’t now permit rec MJ, hoping that it will in the future. But the conditional license is good only for a year.

On Nov. 16, regulators will open up the licensing process to a far larger pool: Any person – regardless of whether he or she is already a part of Nevada’s marijuana industry – will be eligible to apply for any adult-use license type.

At that point, the state will analyze market supply and demand before deciding whether to issue additional licenses, Klapstein said.

Kristen Nichols can be reached at kristenn@hempindustrydaily.com

John Schroyer can be reached at johns@mjbizdaily.com

Jeff Smith can be reached at jeffs@mjbizdaily.com