Oklahoma's Cannabis Market: What Investors, Entrepreneurs Need To Know

Oklahoma’s medical cannabis market is one of the more unique. With lax regulations and a simple pathway to licensing, the state created a market with over 10,000 actively licensed dispensaries, growers, and processors for a state with approximately 644,000 registered patients as of 2019-2020.

At the same time, the state’s land is cut in half due to a 2020 Supreme Court decision ruling that the land belonged to Native American reservations already on the land prior to Oklahoma’s founding. Tribes are not included in Oklahoma’s laws and must create regulations for their land.

Oklahoma stands out for its unique regulations but also for its strong cannabis performance so far. Sales more than doubled in 2020 compared to 2019, totaling $831 million.

The pandemic didn't slow the state down much either, with dispensaries reporting a rush of new and returning patients.

However, with reports of licenses declining for the first time, Oklahoma's market is showing signs of saturation, a fact that investors and entrepreneurs should study before deciding if the state is worth pursuing.

At the same time, outside investors remain in limbo as residency stipulations continue to be contested.

Booming Market Potential Attracts Operators

Oklahoma's booming potential attracted the attention of operators of various sizes across the country. Since the program's launch, operators have flocked to the state to get in on the market despite its high level of competition.

Jacob Gurley, national sales director of cannabis vaping brand Spherex, said the state's high number of registered patients is a key factor.

May 5th 2021 data from the Oklahoma Medical Marijuana Authority reported over 368,000 active patient licenses in the state, up from roughly 295,000 the year before.

Spherex, a Colorado-based company, said that sales for the state are another positive reason for entering the space. Gurley noted the mandatory use of Metrc seed-to-sale tracking as a positive sign for the market.

“This will clean up a lot of the issues that the state has dealt with since sales started in 2018,” Gurley said. He added that the implementation creates “a legitimate and trustworthy list of investment opportunities.”

On April 30, a state judge issued a 60-day suspension of the requirement as its legal authority is questioned.

Another national brand entering the market is Platinum Vape, a Red White & Bloom Brands, Inc. RWBYF portfolio brand that sells gummies and cartridges.

Brad Rogers, Red White & Bloom chairman and CEO, said recently that the company saw an opportunity to enter the market as a brand rather than bring the MSO into the state.

Rogers called Oklahoma "a very attractive market, just doing a lot of revenue."

He said MSOs with brands can enter the market while avoiding the regulatory pitfalls that come with launching a full venture in an uncapped market.

Smaller brands are looking to expand into Oklahoma as well. Oakland, California-based delivery brand Road Runner Co. wants to expand into Oklahoma to tap into the growth potential despite opening into another saturated market.

"It’s a lot cheaper for buildings compared to the Bay Area and eventually when federal is legal we think Oklahoma is going to be a hotspot," said a company representative through Twitter direct message.

They also credit state officials for helping the brand complete its paperwork and other tasks in an effort to launch in mid-May 2021.

A Saturated Market Searching for Solutions

Like many in Oklahoma's market, Gurley feels that the state is saturated. Noting the 10,000 licensed operators, he said patient-to-store averages hover around 200 as of late.

"Oklahoma opened the door for this scenario by making the barriers to entry so minimal that almost anyone with a few thousand dollars could buy any type of license: grower, processor or dispensary," Gurley said. He added that the current situation makes it unsustainable for many shops to survive.

Gurley supports HB 2272, a measure that would limit commercial licenses for the next two years. The bill passed the state House in March 2021 and would take effect this September if enacted.

Other hurdles in Oklahoma continue to be resolved in the courts. In March, a federal judge rejected a case contesting the two-year residency requirement for would-be owners. The decision marks the latest in a number of lawsuits brought by state operators.

Under the current rules, nonresidents are permitted to own up to 25% of a venture in Oklahoma.