Regulators ask legal staff to investigate slow launch of medical marijuana storefronts

Arkansas Medical Marijuana (MMC) commissioners on Wednesday (June 19) asked legal staff to investigate why there are still only a handful of cultivators and retailers in operation statewide and then peruse state law to find out if regulators can impose sanctions if further delays continue.

MMC Chair Dr. Ronda Henry-Tillman and other commissioners raised the issues at the end of the late-evening commission meeting where several Arkansas dispensary owners sought to change locations, ownership stakes and make other business alterations that will likely further delay the opening of more than 30 expected medical cannabis retail locations in eight quadrants across the state.

“We need an update on kind of where we are on products,” Henry-Tillman told Arkansas Beverage Control Director Doralee Chandler and the agency’s legal staff. “There’s been some concern on available [strains] for all chronic conditions in [Amendment 98 of 2016], and the availability across the state.”

Since the commission approved licenses in early January for dispensaries to begin selling medical marijuana, only two storefronts have opened in Hot Springs. Although each of the eight quadrants of the state was approved for four retailers apiece, Arkansas patients seeking medical grade marijuana must now travel to Zone 6 in Garland County to purchase cannabis products.

As of June 14, state health officials had certified nearly 14,400 patients who have at least one of the 18 medical conditions that qualify for treatment with medical marijuana, an increase of nearly 23%, or 2,700 from a month ago.

Over a year ago, the MMC board awarded marijuana-growing licenses to five cultivation startups, located mainly in the agriculture-rich Arkansas Delta region. To date, ABC’s enforcement division has given the thumbs up to grow cannabis first to Bold Team LLC of Cotton Plant in January, followed in subsequent weeks by Natural State Medicinals Cultivation in White Hall and Osage Creek Cultivation in Berryville.

On May 31, Natural State in Jefferson County delivered its first cannabis product to Hot Springs-based Doctor’s Orders RX, which was the state’s first medical marijuana dispensary. Natural State officials have said they can produce nine strains of the medical marijuana at the startup’s 35,000-square-foot facility in White Hall, with plans to have 20 different types ready for delivery in the coming weeks.

Chandler told commissioners that Northwest Arkansas will have its first cultivation facility by July 1 when Osage Creek is expected to deliver its first marijuana crop to market. The remaining two cultivators, Natural State Wellness Enterprises and Delta Medical Cannabis Company, are expected to open later this summer in Jackson and Jefferson counties, respectively, officials said.

“As you know we have three cultivators up and in operation, two who have harvested and a third (Osage) that will be ready by the end of the month,” Chandler said in response to questions from Henry-Tillman. “All three by the end of this month should be harvesting.”

Earlier this week, Department of Finance Administration (DFA) spokesman Scott Hardin told Talk Business & Politics that Chandler had also reviewed the ABC Enforcement staff’s inspection of the Arkansas Natural Products dispensary in Clinton and approved that north-central Arkansas location.

“The opening date is now at the discretion of ownership,” said Hardin, media liaison for the MMC and ABC boards that are quasi-agencies under the larger DFA . “We will continue to announce dispensary approvals as they are issued.”

VAN BUREN COUNTY DISPENSARY APPROVED
At Wednesday’s meeting, Chandler said the ABC staff is still waiting to hear from owners of the Clinton dispensary in Zone 2 in Van Buren County as to when they plan to open the state’s lone cannabis retail location outside the city limits of Hot Springs.

Chandler also noted that the ABC recently received three requests for final inspection from Fiddler’s Green in Mountain View, Native Green Wellness Center in Hensley and Greenlight Dispensary in Helena-West Helena, which respectively are located in Zones 2, 6 and 7.

At Wednesday’s meeting, at least 18 dispensaries came to the board seeking changes to their official names, locations, floor plans and ownership stakes. Although some of those changes were approved, the commission also denied or tabled several requests due to MMC rules, legal wrangling or not having enough available information.

When it became apparent that many of those requests will further delay the rollout of remaining dispensaries until the second half of 2019 or later, Henry-Tillman and Commissioner Travis Storey openly groused about that possibility.

“I wonder how long it will be until we have at least one dispensary in every one of the zones open,” Storey asked Chandler, who replied: “That is kind of up to the dispensaries. They have not communicated to me until they are ready for that inspection.

“We have asked the inspection request three weeks before their desired opening date so we can be sure we can get that up and running so there are no issues with software in advance,” continued Chandler. “But until then, I have not heard from any of them until they request an inspection.”

Both Henry-Tillman and Storey, who are the two remaining commissioners on the five-person regulatory panel that were first appointed by Gov. Asa Hutchinson and legislative leaders in late 2016, said they have heard concerns from people across the state about the lack of access and medical marijuana strains available to treat the 18 qualifying conditions approved by the state Health Department.

“Is there any we can hold them accountable for what they were stating in their application or how to encourage people to follow through with what they estimated or put into their application and promised to the people?” asked Storey, who participated in the meeting by conference call.

“I agree,” added Henry-Tillman. “A lot of people are looking for people to be held accountable, based on what they have stated. We’ve only got three cultivators and two dispensaries … and all of them said they would be open by now.”

DELAYED START AFFECTING RAMP-UP EFFORTS
Although several dispensary owners have not publicly challenged the commission, some have stated that the state’s two-year delay in adopting rules and launching the state’s first legalized marijuana industry has created financial setbacks in raising startup cash to fund new construction projects or to expand existing locations.

At a recent Arkansas Bankers Association (ABA) roundtable hosted by Rep. French Hill, R-Little Rock, several local cannabis exports said during a panel discussion that any Arkansas business affiliated with the state’s fledgling medical marijuana industry either are afraid or can’t approach Arkansas banks and use other traditional investment vehicles to access new capital.

At the roundtable, Dan Roda, co-founder of Little Rock financial technology firm Abaca, said federal regulations still prohibit cultivation, distribution and possession of pot, and establish significant penalties for these crimes. Today, Roda’s firm offers the state’s only cashless, closed-loop payment system for Arkansas marijuana dispensaries, cultivators and processors.

However, Roda still noted during the ABA panel discussion that the FDIC and other industry regulators are still warning banks that provide financial services to marijuana businesses that they could face charges of aiding and abetting money laundering and racketeering.

“That is the biggest challenge right now that we are seeing,” said Roda, who attended Wednesday’s MMC meeting and observed the commission’s discussion.

All 32 medical cannabis dispensaries approved by Arkansas regulators in early January to sell medical marijuana have paid the $15,000 licensing fee and posted the necessary $100,000 performance bond to sell cannabis after the ABC’s final inspection. However, at least two dozen dispensary applications reviewed by Talk Business & Politics indicate they are not expected to open until the second half of 2019 or early 2020.