The deadline to apply for a medical cannabis application with Kentucky’s Office of Medical Cannabis (“OMC”) has now closed. While the OMC reviews applications over the next month, applicants should be aware of what to expect next in the process.
On April 18, 2024, almost a year after Governor Andy Beshear signed SB47, an act regarding medicinal cannabis, into law, the OMC published emergency rules for issuing licenses to cannabis businesses. These rules imposed restrictions on the number of licenses that the state would initially issue and prohibited individuals from applying for and holding licenses for more than one license type. The rules provided that the 74 licenses—46 dispensary, 10 processor and 16 cultivation—were to be awarded via lottery following a license application period running from July 1, 2024, to August 31, 2024. To be eligible for the lottery, prospective licenses holders would have to submit a complete application that included, among other things, right title and interest to a location to operate the cannabis business, proof of sufficient capital to operate a cannabis business and payment of a non-refundable application fee ranging from $5,000 to $12,000, depending on the license type. If an applicant failed to file a complete application, they will be provided notice and 10 days to cure the deficiency. There is only one opportunity to cure. If an applicant is unable to cure or the efforts to cure are deemed insufficient by the regulators, their application is not eligible to participate in lottery and they forfeit their application fee.
According to the OMC, at the end of the licensing period, 4998 license applications had been submitted—239 Tier I cultivation, 190 Tier II cultivation, 155 Tier III cultivation, 333 processor, 4076 dispensary and 5 testing facility— raising millions of dollars in non-refundable application fees for the state. Over the next month, the OMC will review applications and issue notice that the application is complete or has one or more deficiencies. Because there is only one opportunity to cure deficiencies, it is critical that applicants timely respond to deficiency notices with the documentation and information necessary to adequately cure the deficiency.
Given the number of license applications that were filed, and that the majority of the applications were filed in the final few days of the application period, it is expected that the state will need to delay the lottery, which was tentatively scheduled for October 2024. Following the lottery, successful applicants will have 15 days to submit a non-refundable license fee—ranging from $25,000 for a processor to $50,000 for Tier III cultivation. Before the OCM will authorize a licensee to begin operations, licensees will need to obtain local land use permits and, if applicable, local licenses, and satisfy a long list of regulatory requirements including:
- buildouts and security systems that comply with state law
- developing standard operating procedures for security
- recordkeeping
- employee qualifications, supervision and training
- quality assurance
- adverse event reporting and recall
- waste disposal and sanitation
- transportation of medicinal cannabis
- inventory management, including storage and labeling of medicinal cannabis
- cash management and anti-fraud procedures
- preventing unlawful diversion of medicinal cannabis
- incident reporting procedures to notify the cabinet.
Licensees will also be required to secure a Metrc seed to sale tracking account and, where applicable, have packages and labels that comply with the regulatory requirements. Applicants may also want to enter into supply and distribution contracts with other vendors and take steps to protect their brand. The licensees can also, with regulatory approval, change locations, change ownership and transfer their licenses.
With offices in Louisville and Lexington, Kentucky, our lawyers have helped file hundreds of license applications during the initial application period, and we are advising applicants on curing deficiencies. Our Kentucky land use attorneys are available to help you with local land use and licenses application processes and, with the assistance of members of Dentons national cannabis practice, can help prepare or provide guidance on standard operating procedures, security, and packaging and labeling compliance.