Medical marijuana industry sits tight following court ruling that could alter future of business

Medical marijuana plants are shown during a media tour of the Curaleaf medical cannabis cultivation and processing facility in Ravena, N.Y., in this Aug. 22, 2019 file photo. (AP/Hans Pennink)
Medical marijuana plants are shown during a media tour of the Curaleaf medical cannabis cultivation and processing facility in Ravena, N.Y., in this Aug. 22, 2019 file photo. (AP/Hans Pennink)

Arkansas' medical marijuana industry is in a wait-and-see mode after a court ruling last week that could potentially upend the future of cannabis in the state.

Pulaski County Circuit Judge Morgan "Chip" Welch declared 27 laws regulating medical marijuana in Arkansas "void" June 14, saying the General Assembly unconstitutionally overstepped its legal bounds.

Those laws had changed Amendment 98 to the Arkansas Constitution, which legalizes medical cannabis. The amendment, which was put on the ballot in 2016 through a petition campaign and approved by a majority of voters, cannot be amended by the Legislature, Welch wrote in his ruling.

The laws now declared void and unconstitutional include regulations on how much THC -- the drug's psychoactive compound -- can be in medical marijuana edibles, a ban on pre-rolled joints and restrictions on how cannabis businesses can advertise their products among other rules.

But despite Welch voiding 27 laws regulating cannabis, several people in the medical marijuana industry said they will not change how they operate, at least for now.

"It has not affected the industry in any way yet, but it very much could," said Ryan Kenaga, president of River Valley Relief, a cultivator based in Fort Smith.

After the ruling last week, Attorney General Tim Griffin said he would appeal the case to the Supreme Court. Griffin's office has yet to file an appeal, but with questions as to whether Welch's ruling will survive a ruling from the Supreme Court, some medical marijuana industry insiders said the safer move is to not change how they operate.

While the laws regulating things such as the amount of THC in edibles, pre-rolled joints and advertising have been repealed, regulations adopted by the Alcoholic Beverage Control Division remain in place, said Scott Hardin, a spokesman for the Department of Finance and Administration.

"It remains early in the post-judgement process," Hardin said in an email. "There are complex issues raised in this litigation that we continue to review. It would be premature to speculate how the industry may change based on the outcome of this lawsuit. As of now, the industry continues its normal operation."

Jeff LeMaster, a spokesman for the Attorney General's office, said in a statement, "Absent further guidance the state's medical marijuana industry should continue to operate as usual."

The plaintiffs in the case -- Good Day Farm Arkansas, LLC, a Pine Bluff cultivator, and Capital City Medicinal, LLC, a Little Rock dispensary -- sued the state in 2022, arguing the General Assembly went around the constitutional amendment process and instead passed constitutional changes as if they were regular laws.

David Couch, a Little Rock attorney who authored the 2016 constitutional amendment legalizing recreational cannabis, said he felt the Legislature abused its power when passing laws regulating the amendment.

Couch said he wrote his amendment to give regulatory authority to the Arkansas Department of Health and Alcoholic Beverage Control, with only limited ability for the General Assembly to make changes.

The 27 laws that Welch voided in his ruling were mostly unpopular with those in the medical marijuana industry. Pre-rolled joints are a major money maker for dispensaries in other states. The limit on the amount of THC that can be in edibles, 10 mg per dose, is very restrictive, cannabis industry personnel and executives said.

"So why should a terminally ill patient looking for a 100 mg dose have to eat an entire jar full of sugarcoated gummies ... just to be able to medicate," Kenaga said.

But even though most of the regulations are unpopular, dispensaries and cultivators are hesitant to change their practices.

"We don't want [Alcoholic Beverage Control] to be upset with us," said Jessica Fields, a vault technician at Arkansas Natural Products, a dispensary in Clinton.

However, one category of the industry could be put into jeopardy by the court order. Since Welch's ruling orders that only the original text legalizing medical marijuana -- not the later version amended by lawmakers -- is valid, the state's future of processors could be at risk.

The original 2016 language of the amendment only allowed the state to issue licenses for dispensaries and cultivators. It was not until lawmakers passed a law allowing the state to issue licenses for processors that businesses could make medicinal oils, vape cartridges and edibles from marijuana.

Casey Flippo, CEO of Dark Horse Medicinal, a Little Rock medical marijuana processor, said he has conflicted feelings about the court ruling.

"I do think that there's been some overreach from the legislation in certain aspects of regulating the market," Flippo said. "Naturally, I'd love to see some corrective action for that, but selfishly I do think there are some pieces to the 27 [laws] that make a lot of sense to stay intact."

Flippo said he is working on a backup plan in case the Supreme Court upholds Welch's ruling, which could mean the loss of his processor license.

Melissa Fults, a self-described medical marijuana patient advocate, said Arkansas' current regulatory regime has "handcuffed" the cannabis industry, echoing a feeling that many in the industry have. Fields mentioned how Missouri-based dispensaries, where both recreational and medical marijuana are legal, have begun advertising in Arkansas.

Meanwhile, Arkansas marijuana businesses are highly regulated, with heavy restrictions on cultivators and processors. Dispensaries have less strict regulations on their advertising, but for Fults, they should have the ability to market their products under the same rules as pharmaceutical drugs.

"The state basically knew nothing -- nothing -- about marijuana and they started making laws left and right about something they knew nothing about," Fults said.

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