A Tale of Two Industries: California and Oklahoma Show Pros and Cons of Legal Weed Approach

As states around the country watch their local cannabis industries move past their first years of sales and turn into more established businesses, they have already begun taking inventory on what is working and what isn’t. Nothing exemplifies the differences between state-specific approaches to the marijuana business quite like the contrast between California and Oklahoma.

The Sooner State and Golden State have the most and second most licensed cannabis farms in the nation, respectively, but the way that they operate their individual industries could not be more opposite. A pair of new reports from The New York Times and Politico outlines just how different the programs are, how successful they have been, and how each state is already looking at legislative changes to shore up some faction of the growing business.

California, long known as the birthplace of modern domestic cannabis production, took a strict approach to regulation after voters passed a legalization measure in November 2016. Requiring businesses to acquire separate licenses from their local municipality and the state and demanding hundreds of thousands of dollars in backing, and some of the nation’s highest pot taxes, California has made it difficult for the mom and pop businesses that created the state’s world-famous traditional and pre-legalization medical markets to survive the state’s turn to full-scale legalization.

“We’ve always been in this position where the expectations have been greater than the resources allocated and, unfortunately, it was this way from the beginning,” Cat Packer, executive director of Los Angeles’ Department of Cannabis Regulation, told Politico.

For many prospective license holders, the requirement that they secure a location, staff, and successful inspections before they are approved for permits requires financial assets and time that does not make financial sense.

“There are people who were selected to get a license and have told me they can’t deal with the emotional stress,” Madison Shockley III, a former actor turned cannabis entrepreneur, said. “And so they’ve decided to walk away from this.”

Shockley is a perfect example of the red tape that ties up California cannabis operators – since 2019 his investment group has spent upwards of $150,000 in rent alone as they await local licensing.

Across the country in Oklahoma, the notriously right wing led state is still home to a medical-only marketplace, but with a conservative-minded pro-business, anti-regulation mindset, the Sooner State already has more licensed grow sites than California, with nearly 10,000 cultivators currently working to supply some 400,000 permitted patients.

“It might look strange, but this is where the action is,” Logan Pederson, a transplant who moved from Seattle to Oklahoma to run a grow site told the Times.

To secure a license to grow or dispense cannabis in Oklahoma, the cost is a mere $2,500, with no limit on the number of dispensary or grow permits that can be awarded statewide and no local licensing requirement.

“A few years ago I thought Oklahoma would have been the last state in the country to get cannabis going,” Tara Tischauer, co-owner of Red Dirt Sungrown in Guthrie, a town north of Oklahoma City, told the Times. “If we can’t succeed, it’s our own fault. That’s how a free market works.”

With that free market has come a significant drop in the retail price of pot. While California dispensaries typically sell an eighth of flower for $35 to as much as $100, Oklahoma dispensaries offer flower for as low as $3 a gram, or about $10 an eighth.

So while California’s high barriers to entry have restricted access largely to investor-backed multi-state operators, Oklahoma’s heavy competition and low prices have scared off the big industry players, with homegrown mom and pop businesses taking over significant market share.

Going from 0 to 100 as fast as the Oklahoma cannabis industry did has created huge opportunities for business, but has also inspired some less-than-legal actors to take advantage of the open season licensing. Because it is so cheap and easy to grow cannabis legally, cultivators are able to produce their pot in Oklahoma and then turn around and distribute it in states where weed is more expensive like New York and Texas.

Both Oklahoma and California are struggling to contain the black market, but from opposite angles. California’s high taxes and industry barriers have pushed weed into the traditional market, with lawsuits and proposed bills designed to create easier access to legal avenues. In Oklahoma, legislation is in the works to add huge numbers of new regulators as a way to reel in the packed legal market. In both cases though, regulators are still struggling to find a balance.

At the current moment, it appears like it will be easier for Oklahoma to add more oversight than it will be for California to cut through its red tape and makeup ground.

“It’s not as easy as opening 1,000 more retail stores,” Mike Moussalli, a co-founder of California cannabis manufacturing and distribution company Se7enLeaf, told Politico. “because it’s going to take five, six years for that to actually happen, and 50 percent of the current businesses are going to die.”

As the US moves closer to ending federal prohibition and enacting a nationwide legal market, it is case studies and comparisons like these that will influence the formation of the country’s larger market – and hopefully lead to an equitable and accessible market for all.