OKLAHOMA CITY — Oklahoma has 32 times more regulated medical cannabis than is necessary to meet the demand of licensed patients, a comprehensive third-party study of supply-and-demand within the state’s medical cannabis industry discovered.
“Oversupply is so significant that it is likely to pose an immediate threat to public safety,” the study commissioned by the Oklahoma Medical Marijuana Authority concluded.
The study performed by Cannabis Public Policy Consulting found the supply-and-demand ratio in Oklahoma is 64 grams of regulated medical cannabis supplied for every 1 gram of demand for a licensed patient. The study states a ratio of 2 grams of supply for every 1 gram of demand is a healthy market, putting Oklahoma’s functional supply-and-demand ratio at 32:1.
Research indicates 110,270 pounds of cannabis, or 328,604 plants, are needed to meet the yearly demands of the state’s medical marijuana patients, who numbered 355,835 as of June 1. But the total yearly cannabis demand, which factors in regulated and illicit marijuana for all consumers (not just licensed patients) amounts to 750,880 pounds of cannabis, or 2.2 million plants, according to the OMMA report.
Key findings in the 24-page report also included:
• The exponential oversupply of regulated cannabis suggested that licensed medical cannabis businesses are most likely contributing to an illicit market, both at the point of cultivation and retail sales.
• The volume of oversupply and low barriers to market entry suggest the illicit market may be “hiding in plain sight.”
• Approximately 43% of cannabis consumed by Oklahomans is derived from illicit sources.
The huge oversupply observed in the regulated systems suggests that licensed operators are very likely adding to an illicit market both at the point of cultivation and the point of retail sale, according to the study.
The volume of oversupply within the regulated system, coupled with low barriers to market entry, suggest unlicensed/illicit cannabis cultivation operations are unlikely to be observed across the state, and that this illicit market may, in fact, “be hiding in plain sight.”
“What’s important, particularly to me as a rural Oklahoman, are the illegal grows,” State Attorney Gentner Drummond told members of the Oklahoma Press Association earlier this month. “There are a lot of honest, law-abiding individuals in Oklahoma who are in the medical marijuana industry,” he said. “But there are a whole bunch that don’t.”
Drummond said there are approximately 12,000 marijuana grow operations in Oklahoma and about a fourth of them are unlicensed. “My investigation and insider information indicate that about 3,000 of those are illegal,” he said.
The OMMA reported 6,563 licensed growers as of June 1.
The state Legislature, the OMMA, and the Oklahoma Bureau of Narcotics and Dangerous Drugs Control have all taken steps to “address the main issues” identified in the study.
Moratorium extended
State lawmakers enacted a moratorium last year that prohibited regulators from issuing licenses for any new medical cannabis dispensaries, processors, or commercial growers. That moratorium was set to expire on Aug. 1, 2024, but a new law enacted this year extends the ban until Aug. 1, 2026.
Also, in 2021 the Legislature required the OMMA to hire more investigators and compliance officers. Today the agency has approximately 280 employees.
Drummond said that previously the OMMA’s protocol was to inspect every marijuana grow operation once a year, providing 24-hour advance notice.
“If you’re an illegal actor,” the attorney general said, “you would say, ‘thank you very much,’ get all the illegal guys out, put all the seed sales up, everyone brushes their teeth, changes their shirt, and they’re sitttin’ there like we’re in church.”
But that doesn’t work, Drummond said.
“What we do now is, in concert with OBNDDC, we inspect every single grow without notice.”
Drummond said state officials also discovered that growers might have multiple licenses associated with one location.
Investigators “would come in and there might be four or five licenses associated with that facility, and they would find, ‘This license is illegal, and this license is illegal and so is this one, but these two are OK’. And all those plants are there for just two licenses,” he said. “How can I enforce that?”
In response, the Legislature “has limited it to one licensed grow per facility,” Drummond related. “They can be vertically integrated with the distribution and processing, but only one legal grow per location.”
New tools for exerting pressure on ‘bad actors’
In addition, Drummond said the Attorney General’s office “has been empowered to do all the things we need to do to shut down” illicit grow operations, including seizure of business records, asset forfeiture, computer forensics, “prosecution – use all that in front of a grand jury – so that we can really bring the brunt of law to bear on those that are illegal.”
The OMMA issued almost 100 shutdown orders in the first five months of this year, compared to just one last year, The Oklahoman newspaper reported.
It is illegal for non-U.S. citizens to acquire or own land in Oklahoma, and if they acquire it “by devise or descent,” they must dispose of it within five years.
Senate Bill 212, which Governor Kevin Stitt signed earlier this month, addresses the practice of foreigners using “straw owners,” which can be individuals, businesses or trusts, to fraudulently complete real estate transactions to sidestep the law.
The new statute, which goes into effect Nov. 1, prohibits foreign ownership of land except for businesses engaging in interstate commerce.
A related measure, House Bill 2281, defines the terms “straw person” and “straw party.”
A “straw” person/party is a “front” and refers to a third party who:
• Is put up in name only to take part in a transaction or otherwise is a nominal party to a transaction.
• Acts on behalf of another person by executing documents and instruments to obtain title to property; or
• Purchases property for another for the purpose of concealing the identity of the real purchaser “or to accomplish some purpose otherwise in violation of Oklahoma Statutes.”
That law went into effect May 11 with the governor’s signature.
The OMMA research report used data from a series of two survey timepoints conducted in March and April this year by Cannabis Public Policy Consulting. A total of 1,322 past-year cannabis consumers from 68 of Oklahoma’s 77 counties participated in the survey. The group also estimated the amount of regulated marijuana in the state through the OMMA’s seed-to-sale tracking system, which is intended to ensure that cannabis plants are grown, processed and sold in accordance with state law.
“It is essential that we address this oversupply head-on, not only to ensure the integrity and sustainability of our medical marijuana market for our patients but to promote public safety and mitigate dangers that coincide with illicit marijuana activity for all Oklahomans,” newly appointed OMMA Executive Director Adria Berry said.
M. Scott Carter contributed to this report.