West Virginia’s medical cannabis delays test patience of marijuana business owners

A likely yearslong delay in the launch of West Virginia’s medical marijuana program reflects the uncertainties cannabis entrepreneurs face when vying to enter certain conservative states.

State officials blame the holdup on a struggle to provide banking services for the program.

But the advocacy group Marijuana Policy Project recently noted that a leading federal prosecutor in the state “has exacerbated the problem by threatening to prosecute businesses that enter the medical cannabis space.”

Consider the following:

  • The delay could eventually make West Virginia, which passed medical cannabis legislation in April 2017, the slowest state in the country to allow MMJ companies to open for business.
  • The state also has limited business licenses and banned smokable flower and edibles – the leading sales drivers in other markets.
  • According to the Marijuana Business Factbook, the restrictions “will likely keep patient counts from reaching their full potential.”

Interest remains solid

Nevertheless, business opportunities exist and West Virginia has attracted plenty of interest for the licenses that eventually will be up for grabs.

Chicago cannabis consultant Michael Mayes said his firm, Quantum 9, worked with two West Virginia clients on investor presentations and business plans, including pro formas that contain projected financial statements and, often, “what-if” scenarios.

While it’s unclear what will happen now to those efforts, Mayes said his firm steers clients away from making big financial commitments before a market’s licensing process gets underway.

“We always advise our clients to avoid recurring expenses (i.e., government relations, rent, consulting fees),” Mayes wrote in an email to Marijuana Business Daily.

“These month-over-month costs could sink a great company before they start.”

Time to prepare

Florida cannabis attorney Sally Peebles, who examined West Virginia for a presentation on MMJ markets at the recent MJBizConNEXT in New Orleans, said potential applicants can use the delays to prepare for what she expects to be an “incredibly competitive licensing round.”

“While it is unfortunate that the program is facing further delays,” Peebles wrote in a recent email, “potential applicants can certainly choose to use this extra time wisely.”

Peebles said potential applicants can:

  • Put together their teams.
  • Nail down real estate locations.
  • Learn what they can from successful cannabis industry operators elsewhere.

“With only a limited number of licenses available, we can expect this process to be incredibly competitive, so preparation and education is key,” Peebles wrote.

West Virginia legislation passed in May calls for:

  • Up to 10 growers, with each able to have two locations.
  • Up to 10 processors.
  • Up to 100 dispensaries. An individual isn’t permitted to hold more than 10 permits.

Before a permit is issued, the applicant must get written approval from the board of health in the county where the business is going to be located.

State blames banking for delay

West Virginia officials estimate medical cannabis sales are two to three years away from launching.

They said that is primarily because state-legal marijuana companies have difficulty obtaining banking services since many banks and credit unions fear punishment by federal financial regulators if they did so.

West Virginia lawmakers passed legislation earlier this year to try to fix the problem.

The legislation, HB 2538, acknowledged that the implementation of the state’s MMJ program was being delayed by the “inability to provide banking services needed to collect and remit the fees, penalties and taxes authorized” by the MMJ program.

But according to Matt Simon of the Marijuana Policy Project, a contributing factor has been a “particularly aggressive” U.S. attorney “who created a situation where no banks were willing to risk dealing with any aspect of the industry or the state’s program.”

Simon, an MPP legislative analyst, noted that the U.S. attorney in West Virginia’s Southern District, Mike Stuart, hosted an anti-reform symposium in late 2018, wrote an anti-legalization op-ed earlier this year and has expressed hard-line marijuana enforcement views in tweets.

The state banking legislation included language to protect financial institutions that serve legal cannabis businesses and authorized the state treasurer to take bids from institutions interested in providing banking services to the MMJ industry.

But that process also has proved slow.

State Treasurer John Perdue issued a request for a cannabis banking vendor in March but reissued the request in June after saying that none of the applicants had met all the requirements.

The deadline for submissions was July 31.

Allison Adler, director of communications for the West Virginia health department, which oversees the MMJ program, told MJBizDaily the cannabis banking proposals will take time to evaluate and implement.

She noted there’s a number of additional steps that must take place before the MMJ market launches, including rulemaking, licensing and patient/doctor registration.

While the current issue with West Virginia is primarily banking, Peebles wrote that businesses can expect further delays because of the state’s decision to limit the number of licenses.

West Virginia, Peebles wrote, “would be wise to take note of what has recently unfolded in other southern states like Florida and Arkansas, where limiting licenses and creating a merit-based application process has placed the regulators in the unfortunate position of being the primary target for litigation.”

Karen O’Keefe, MPP’s director of state policies, noted that “it’s been clear for some time that implementation was moving painfully slowly in West Virginia.”

Most states launch their medical cannabis programs within two to three years after laws are enacted, although it took Rhode Island nearly four years, according to implementation timelines compiled by MPP.

Before it’s done, O’Keefe said, “West Virginia may become the slowest state to implement.”

Jeff Smith can be reached at [email protected]

7 comments on “West Virginia’s medical cannabis delays test patience of marijuana business owners
  1. CLIFTON MIDDLETON on

    Conservative prosecutors always support punishment for marijuana because pot is seen as a symbol of anti war, anti government political movements, pro civil rights, anti racist, pro immigration and they are right. Fear not because the Marijuana Movement is on a roll and even in propaganda saturated West Virginia the people will win. It is a shame because thousands of folks in that state could make lots of money which they would invest in their community but the republican led anti marijuana movement is preventing progress where economic progress is needed the most. A political pox on any politician who supports the racist inspired pot laws, they are not worthy to serve.

    Reply
  2. SCOTT HENDERSON on

    It’s time to weed every “official” out of federal and state positions who continue the antiquated line of Cannabis prohibition. Get ’em out of here.

    Reply
  3. james m damiano on

    this prostitute prosecuter in west virginia is in the pockets of pharma he is obviously an idiot since I cannot think of another state that needs the tax revenue more he should be fired

    Reply
  4. Maxcatski on

    These issues can only be resolved once the United States legalizes cannabis at the federal level.

    And you are a long way from that with your Republican government. Good luck.

    In the meantime, come to Canada for vacation. Our cannabis is legal at all levels.

    Reply
  5. Praxis on

    The author hits the nail on the head when describing the efforts of our state’s US Attorney for the Southern Region of WV, King Mike the First Stuart. Several years ago the state Republican Party put out a platform that stated MMJ was a sham designed to bring in recreational, and guess who was the head of the state Republican Party at the time. Yep, you guessed it, King Mike…so without a doubt, he was the one who authored the platform hit piece.
    King Mike is so bad he went after a legitimate Hemp farm last year, seized all of their plants and charged them with growing Marijuana.
    Naturally all the charges were bogus, none of the plants were Marijuana, they all fell withing the states guidelines. What King Mike was trying to do was kill the Hemp industry in the state, even before it got off the ground.
    It’s so sad this state has this guy. He was a Trump appointee and this states loves Trump, but I’m afraid now we’re seeing what that support sometimes means at the state level, and in this case it means the most rabid anti Cannibus Federal crusader in the country.
    State residents are going to have to separate their love for Trump and the WV Republican party and stop voting straight party ticket the next election.

    Reply
  6. Joyce Armstead on

    People in WV need to start making some noise about this. It is just passive-aggressive bu;; They don’t like marijuana, they think it is “evil,” and they don’t want it in this state. I think there are some who are still in that racist mindset that started marijuana prohibition in the first place. However,they like their alcohol and opioids. There’s no excuse for these delays. They need to be held accountable and made to take this seriously. West Virginians are all too used to getting the short end of the stick. It is time for that to change.

    Reply
  7. Joe Vickers on

    While suffering from severe depression, anxiety, chronic pain, fibromyalgia, and severe panic attacks disorder. The legislation should consider what’s best for the individual’s that are affected by this instead they are “passing the buck.” While showing no Interest of correcting the problem they are just setting on it! MMJ has been proven to help these symptoms. Most of people would agree that the flower would be a all natural choice instead of being a chemical enhanced drug. Truth is if it’s not broke why fix it! Legislation has had more than enough time to address this ongoing process. MMJ has already proven to be a very good source of revenue that this State desperately needs.

    Reply

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