Here's the real booming business in Oklahoma

Cheap, easy entry leads to saturation of Oklahoma’s medical marijuana market
By: Sam Tabachnik The Denver Post August 17, 2021 0


Editor’s note: This is the second of a three-part series examining Oklahoma’s burgeoning marijuana industry.

When Oklahoma legalized medical marijuana, Louisiana native Jeff Henderson jumped at the opportunity to get in on the ground floor.

He and his partners, who had Oklahoma ties, didn’t have deep pockets, but after committing some savings and getting a bridge loan from a friend, the wide-eyed cannabis connoisseurs had themselves a boot-strapped business.

They worked 16-hour days, the four partners doing the work of 10 people.


“We’re the furthest guys from corporate,” Henderson said on a recent day inside his Jive Cannabis facility in Inola, a town 25 miles east of Tulsa. As he showed off his plants, pointing out the deep-purple coloring, Henderson took the tone of a proud father.

“We were just four guys with a hope and a dream,” he said.

Everything changed for Henderson and the state of Oklahoma on June 26, 2018, when 57% of voters checked the “yes” box on legalizing medical marijuana.

In the months leading up to the vote, a frenzied coalition of state medical and hospital associations, district attorneys, sheriffs, the State Chamber of Oklahoma and the state’s Republican governor lined up to oppose the measure.

“This is a bad public health policy that does not resemble a legitimate medical treatment program,” Dr. Kevin Taubman, former president of the Oklahoma State Medical Association and chairman of the opposition group, told the Associated Press after the vote passed.

Then-Gov. Mary Fallin feared the proposal was essentially legalizing recreational marijuana.

Many Oklahomans, including those in the cannabis industry, wouldn’t argue. Up and down the board, there were very few restrictions put in place on who could operate a grow, how many there could be and how easy it would be to obtain a medical card.

Unlike in many states, including Colorado, patients don’t need qualifying medical conditions in order to get a card. Doctors sometimes would set up outside dispensaries, offering their services. Websites with names like NuggMD and PrestoDoctor promised customers a medical marijuana card online in 15 minutes.

Business licenses cost just $2,500, a fraction of the price in other states, making it possible for nearly anyone with a bit of cash to start a grow or dispensary.

In Arkansas, on the other hand, a licensing fee runs $100,000 – plus a $500,000 performance bond. In New York, an application costs $10,000, with a $200,000 registration fee.

Colorado charges roughly $7,500 for initial recreational and medical shop licenses, and renewing that license annually will run an operator thousands more each time, depending on how many plants they want to grow.

Then there’s the “finding of suitability” fee – a state check to make sure someone is allowed to actually run a business. That’s another $800 per person, or $5,000 for a publicly traded company. Not to mention, of course, the local fees that come on top of the state’s, which can run thousands more per year.

The costs quickly add up.

Additionally, Colorado companies or individuals can’t just grow as many plants as they wish on their own – they must apply with the state in order to add or subtract plants.

Cities and counties in Oklahoma, meanwhile, aren’t allowed to outlaw dispensaries or grow operations – another major break from states like Colorado, where despite legalization, the drug is still barred from being sold recreationally in many local jurisdictions.

“These are unprecedentedly low barriers to entry” in Oklahoma, said John Hudack, a cannabis expert at the nonpartisan Brookings Institution, a Washington D.C., think tank.

With typical roadblocks and red tape shoved to the side, the industry has exploded.

Nearly 376,000 Oklahomans – roughly 10% of the state’s population – have medical marijuana cards, by far the highest share in the country, according to the Marijuana Policy Project.

New Mexico, by contrast, has the second-highest number at 5.35%, with Colorado at 1.5%.

Even at the height of Colorado’s medical marijuana boom in 2011, however, the state topped out at 128,698 patients, a third of Oklahoma’s total, and just 2.5% of the state population.

The cost difference between getting in the game in Colorado versus Oklahoma is stark.

“To even think about opening a (marijuana) business in Colorado, you have to have a million dollars liquid to get the ball rolling,” said Brent McDonald, marketing and sales director at Apothecary Farms/Apothecary Extracts.

In Oklahoma? You can be fully vertically integrated for $7,500, Henderson said.

Cheaper land prices, building costs and license fees mean “it’s easily 10 times cheaper here than in Denver,” he said.

Those factors, combined with the state’s hands-off approach, means it’s getting awfully crowded in Oklahoma’s cannabis space.

Some states that legalized marijuana created a small, set number of licenses. Arkansas, for example, allows for only 40 dispensaries in the state. Connecticut has just four cannabis producers and 18 dispensaries nearly a decade after legalizing medical marijuana.

But Oklahoma decided to let the free market run unencumbered. As a result, the state is now home to nearly 12,600 marijuana business licenses, including more than 8,600 growers and upwards of 2,300 dispensaries.

That’s more than double Colorado’s combined recreational and medical stores – despite the fact that Oklahoma has some 1.8 million fewer people. The Centennial State has more than 1,200 cultivation operations, per state data, nearly seven times fewer than Oklahoma.

The town of Bristow, a 4,200-person community nestled between Oklahoma City and Tulsa, used to thrive on oil and cotton. Its downtown strip along historic Route 66 has a few restaurants, a host of vacant buildings – and three dispensaries.

That’s the story all over Oklahoma, where small towns from the panhandle to the Missouri border boast more pot shops than grocery stores. Meanwhile, Oklahoma County, which is home to Oklahoma City, now sports 530 dispensaries – three times as many as Denver.

“People see this as an opportunity to enter a market that’s costly elsewhere and so there’s this rush of people who think they’re going to make it rich,” Hudack said. “We know how this story plays out. We saw a less permissive system operate in Oregon and they ended up with hundreds of thousands of pounds of excess inventory.”

McDonald called it the “Armageddon stage” for Oklahoma cannabis.

“There are serious windfalls that come with barriers being so low,” he said. “The market is so oversaturated in Oklahoma. What this has done is make it a true buyer’s market. Things are so competitive, it’s a race to the bottom.”

Industry watchers predict a bloodbath in the near future as companies peter out, selling for pennies on the dollar.

Also see: Out-of-state opportunists make Oklahoma ‘Wild West of weed’

 

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