The Ohio Division of Cannabis Control (“DCC”) recently published proposed rules for adult-use cannabis license applications. In November 2023, 57% of Ohio voters approved the legalization of adult-use cannabis production and sales, making Ohio the 24th state to greenlight an adult-use market. As we reported in late November, the new adult-use cannabis law tasked DCC with promulgating rules. This post summarizes major elements of the proposed rules promulgated by DCC applicable to an initial license application round.

In brief, the proposed rules contemplate two initial application rounds: 

• A relatively simple application to convert existing medical marijuana facilities to dual-use facilities of the same type. A dual use license allows the licensed entity to participate in both the medical and adult-use cannabis market at their current location; and 
• A drawing-based, two phased “10(B)” dispensary license process. 

Applicants for these rounds must hold an existing medical marijuana license and comply with other eligibility requirements discussed in greater detail below. Applications for these initial application rounds will be available by June 7, 2024, and provisional licenses will be granted by September 7, 2024. 

Entities that don’t hold a current medical marijuana facility license will be able to apply for a license in a future application round. The adult-use cannabis law contemplates that, in addition to issuing adult-use licenses to existing medical licensees through the initial application rounds discussed in this post, the DCC will issue up to 40 level III adult-use cultivator licenses and up to 50 adult-use dispensary licenses in a future application round. Preference in that application round will be given to applicants that are certified participants in the state’s to-be-established Cannabis Society Equity and Jobs Program. According to the adult-use cannabis law, eligibility for the Cannabis Society Equity and Jobs Program is based on several factors including social disadvantages based on membership in a racial or ethnic minority group, disability status, gender, and/or long-term residence in an area of high unemployment. The proposed rules do not directly address this future application round, specific criteria for eligibility to participate in the Cannabis Society Equity and Jobs Program, or how a preference for participants in that program will be administered.

Eligible Applicants and Number of Licenses for Initial Application Round
For this initial application round, applicants must be either be: 

• A currently licensed medical marijuana cultivator, processor, testing laboratory, or dispensary seeking to convert its current medical facility and site to a dual-use facility of the same type, or 
• An entity eligible for a “10(B)” dispensary license, which include:
  • Level 1 medical marijuana cultivators with a certificate of operation or provisional license;
  • Level II medical marijuana cultivators with a certificate of operation or provisional license; or
  • Medical marijuana dispensaries that are not commonly owned or controlled by a cultivator or processor.

With respect to the types and number of licenses granted during this initial application round:

• Each medical marijuana dispensary, cultivator, processor, and testing laboratory is eligible to receive a dual-use dispensary, cultivation, processor, and testing laboratory license, respectively. 
• For entities eligible for a “10(B)” dispensary license:
  • Each medical marijuana level I cultivator is eligible to receive three adult-use dispensary licenses.
  • Each medical marijuana level II cultivator is eligible to receive one adult-use dispensary license.
  • Each medical marijuana dispensary that is not commonly owned or controlled by a cultivator or processor is eligible to receive an additional adult-use cannabis dispensary license.

Requirements for Dual-Use License Applications 
For current medical marijuana facilities, application for dual-use licenses must minimally demonstrate that the applicant:

• Does not have an ownership or investment interest in, or compensation arrangement with, an adult-use testing laboratory or an applicant for an adult-use testing laboratory license;
• Complies with all applicable state tax laws; and
• Is not also employed by a regulatory or government agency that may provide oversight of medical or adult-use licensed entities.

There is no application fee to convert a current medical marijuana facility license to a dual-use license.

Upon submission of a complete application, DCC will either approve or deny the application, or provide the applicant with a notice of deficiency. The applicant will have ten business days to correct all deficiencies. The proposed rules do not address additional evaluation criteria.

Requirements for “10(B)” Dispensary License Applications 
The proposed rules provide a two-phase site selection process for “10(B)” dispensary licenses. Prior to publishing application materials for “10(B)” dispensary licenses, the DCC will notify all eligible entities on their ability to apply for a “10(B)” license, the total number of licenses for which the entity may apply, and the number of licenses that the entity may apply for through a phase one and phase two site selection process.

Applicants for “10(B)” dispensary licenses in must minimally:

• Disclose all current and proposed owners, board members, investors, and any individual with a financial interest in or significant influence or control over the applicant;
• Attest that applicant does not:
  • (a) have any ownership or investment interest in, or compensation arrangement with an adult-use testing laboratory or an applicant for an adult-use laboratory testing license; or 
  • (b) share any corporate offices or employees with an adult-use testing laboratory or an applicant for an adult-use laboratory testing license.
• Attest that all individuals responsible for the operation of the proposed facility, owners, board members, employees, and agents do not have a disqualifying offense;
• Attest that applicant will not operate within 500 feet of a prohibited facility, which include a church, public library, public playground, public park, or school;
• Demonstrate compliance with state tax laws; and
• Attest that applicant is not also employed by a regulatory or government agency that may regulate medical or adult-use licensed entities.

Applicants for a “10(B)” dispensary license must pay a non-refundable $5,000 application fee. Upon application submission, the DCC will determine whether any deficiencies in the application exist and provide the applicant with ten business days to correct any deficiencies.
The DCC will then use a random drawing to rank all “10(B)” dispensary license applications. Applicants will then proceed through a two-phase site selection process.

At the time of application, applicants must choose between applying for a dual-use cannabis dispensary or an adult-use only dispensary license. Applicants who select a dual-use license will be given two times the number of opportunities to be selected in the drawing. 

Phased Site Selection¹
In phase one, all eligible entities may apply for one “10(B)” license. In phase two, the entity may apply for additional licenses based on their eligibility to do so.

During phase one site selection, applicants will submit a facility site location application that demonstrates compliance with certain geographic and land use criteria, discussed below. If applicants propose a location within a mile of existing licensed facilities or other higher ranked “10(B)” applicants, the applicant will be required to identify an alternative location and submit an additional facility site location application. 

During phase two site selection, the DCC will establish regional districts, and entities eligible for additional “10(B)” licenses not selected through phase one will submit a ranked preference of regional districts for the location(s) of their proposed “10(B)” dispensary. Applicants who ranked higher in the drawing will be assigned their first choice of a regional district. The applicant then must submit a facility site location application demonstrating compliance with certain geographic and land use criteria, discussed below, and consistency with their assigned regional district. Similar to phase one, if applicants propose a location within a mile of existing licensed facilities, a “10(B)” facility site selected in phase one, or other higher ranked “10(B)” applicants, the applicant will be required to identify an alternative location and submit an additional facility site location application.

With respect to geographic and land use criteria, applicants may only propose facility locations that are: 

• not within one mile of an existing dispensary or the location proposed by another “10(B)” dispensary applicant; 
• not within 500 feet of a prohibited facility; not subject to any local ordinances or prohibitions from operation; and 
• in compliance with all zoning or other local requirements.

The DCC will issue a provisional license to the applicant for the facility site selected through phase one or phase two. Holders of provisional licenses must obtain a certificate of operation within twelve months.

We will continue to monitor the DCC’s progress in drafting and promulgating adult-use cannabis regulations.

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 [1] 1301:18-2-06 10(B).