Anyone familiar with the Oregon cannabis industry knows that the secondary market for its cannabis producer license is both unfamiliar and lucrative. In the past few years, especially last year, we have helped many farmers buy and sell these permits (or more accurately, the “rights to succession permits”). What needs to be clear is that most of these sales do not involve equipment, inventory, name rights, and nothing. It is the right to obtain a license instead of other producers. We even “pre-sold” some of them, and as I typed, there are four such sales in progress. What I mean by “pre-sale” means that we have customers in the application queue, and the buyer has promised to obtain up to 300,000 US dollars after the release of our customer’s license to apply for the right to apply for a follow-up license. This is a very hot market.
You might be asking why people pay $250,000 or more for the Oregon Alcohol and Cannabis Commission (“OLCC”) for licensing rights that spend approximately $5,000 a year on the secondary market. This is a very good question. The answer is because OLCC does not currently issue producer licenses (or licenses of any kind) to most new Oregon cannabis applicants—whether the applicant is an existing licensee seeking to expand its holdings or new market entry By. The only way to obtain one of these licenses is to find someone willing to give up their license, usually through an asset purchase agreement. In this type of transaction, the buyer purchases all rights, ownership, and interest in the inheritance license at the seller’s premises or elsewhere. OLCC will process these buyer applications and the seller’s license refunds.
This strange situation has been brewing for a long time.From an administrative point of view, it all started with the famous License processing “suspended” June 15, 2018-For better or worse, this is still in progress. But the law that really stimulates the secondary producer market is Senate Bill 218, which was promulgated in the 2019 legislative session.You can read my summary of SB 218 here. The bill was enacted in response to well-documented Oversupply of cannabis In the regulated Oregon market, and provide:
“OLCC may, based on the supply and demand of cannabis… refuse to issue a production license… within the time the committee deems necessary.”
A big question when SB 218 was passed was: How long will OLCC “reject the issuance of production licenses”? Today, the answer seems very clear, at least until January 2, 2022, when SB 218 sunsets.
The next question is what will happen on January 2, 2022. In our conversations with OLCC staff, they generally acknowledged that the committee will be forced to accept new manufacturer applications on January 2, 2022. Whether OLCC will process these applications at any time in the near future, however, this is a question of one million dollars (or maybe 250,000 dollars). Here are some things to consider:
- There are currently 450 “new” (non-ownership change) applications pending in the OLCC hopper.
- About 250 of these applications were submitted before the 2018 suspension. OLCC must process these applications to avoid prosecution. Some of these applications are used for producer licenses.
- After the suspension, another 220 or so unprocessed applications were added one after another. Due to SB 218, these suspended applications are not for the producer.
- The new law SB 408 stipulates that OLCC shall not unreasonably delay “processing, approving or rejecting license applications”, except in limited circumstances (you can read my summary here).
- Generally speaking, when processing OLCC licenses, the agency’s goal is to allocate unboxed applications to investigators within 30 days (currently slightly longer), and issue licenses within 60 days thereafter.
So, where does this take us? Well, for anyone looking to start licensed Oregon cannabis cultivation, the fastest way to obtain a license is still the secondary market. This situation may continue for some time. Even if OLCC cancels the suspension tomorrow, there are still 450 pending applications before new applicants. There is also no guarantee that the agency will process these applications in the order received. For example, at different times in the past few years, OLCC placed certain types of applications on top of other applications and focused on market factors.
The next question may be whether it is worth paying $250,000 to plant early, especially when the market is very tight. Assuming the buyer’s intention is not to use the license as a cover for more profitable illegal activities, and assuming the buyer is organized and well-funded (please don’t try to start one of these businesses for less than $1 million), this is indeed A timeline issue. The following are some relevant factors related to OLCC’s processing of submitted applications for qualified manufacturers and applications that may be submitted after January 2, 2022:
- OLCC and everyone else don’t know when the committee will lift the suspension.
- When OLCC does release the suspension, it is not known whether it will continue to slow down certain types of applications, subject to SB 408 constraints. The Commission may be particularly inclined to do this to manufacturers in order to protect existing licensees (including outbound sellers).
- It is not clear what measures the Oregon Legislature will take at its short meeting in February to affect this situation. I want to say that the probability that we see relevant legislation is more than 50%.
- It is not clear what will happen to the federal legislature and when farmers in Oregon will finally be allowed to transport cannabis interstate.
- If you are buying on the secondary market, it is unknown whether the current OLCC “change of ownership” timeline will remain (although it has been very stable since then) Simplified licensing Has been implemented; currently OLCC is About six weeks later Change from allocation).
- If you buy on the secondary market, you may have sales problems due to various reasons (violation of the seller’s license, seller’s dishonesty or confusion, landlord issues, etc.).
In the short term, people will continue to pay each other for what they usually get directly from the state. If you are an aspiring Oregon cannabis producer and need to enter early, the only thing you can do is to find a willing seller. Or, you can watch things change, plan to apply on January 2nd, and hope that the dominoes will benefit you. With any luck, you may get a permit this time next year. or not.