South Dakota might just be the most complicated cannabis state in the U.S.
Last November, the state was the first in the nation where voters legalized for both medical and adult use on the same Election Day. But, since then, the adult use measure has remained under legal fire, while medical was allowed to proceed.
In January, Gov. Kristi Noem issued an executive order that stated that the initiative “violated the procedures set forth in the South Dakota Constitution.” And, in another first in the cannabis world, she wrote that the legal challenge was filed “upon my prior instruction.” That legal challenge has been kicked up to the state’s Supreme Court, which has yet to make a decision.
In the meantime, a legislative subcommittee has formed and met to take public comment. It has also heard from regulators and lawmakers in other states, like Colorado, as well as from stakeholders in law enforcement, local government, and the cannabis industry. The biggest news to come out of this committee this year was its vote in October in favor of advancing draft legislation to legalize adult use cannabis.
Take a breath: all of this is happening as advocates again collect signatures to again put adult use on the ballot in 2022], given the uncertainty of progress in the legislature or a favorable Supreme Court ruling.
So, it was with all of this context in mind that Ned Horsted, executive director of the Cannabis Industry Association of South Dakota, moderated an event on Tuesday that focused on local governments and how they fit into the broader cannabis landscape in the state. Panelists included Melissa Mentele, executive director of New Approach SD, also an author of Initiated Measure 26, which legalized medical cannabis; Matthew Jorgenson, CEO of Cannabis Chem Lab and also a former member of law enforcement; and Kittrick Jeffries, director of compliance for Dakota Cannabis Consulting.
“We might see that Supreme Court decision, so we want to make sure that, should it be upheld, folks are prepared for that,” Horsted said.
On the medical front, lawmakers approved a program that launched in July. Localities, Mentele said, are allowed to limit the number of dispensaries that are located in their jurisdictions, but they can’t ban them.
“We have noticed that a lot of counties are making sure that they are taking out every other business license outside of testing and dispensaries. So it’s looking like South Dakota is going to have a whole bunch of dispensaries and not any cultivation or production,” Mentele said.
There are four license types: retail, cultivation, testing, and manufacturing. And those licensing fees, Mentele said, vary fairly widely. In Lake Andes, the fee is $500, while in Meade County, it’s $125,000.
“It’s interesting to see how people consider what a reasonable fee is. Because a reasonable fee for the cannabis industry, on the medical side, is in that $5,000 range,” she said. “$125,000, not so much.”
Panelists also heard perspectives from Kris Teegardin, former mayor of Edgewater, Colorado, a jurisdiction that chose to channel its cannabis tax revenue into fixed assets, rather than the general fund.
“We basically paved our entire streets, along with curb cuts, from one year of taxes. After the
infrastructure was complete, we utilized the taxes to fund a brand new civic center, complete with a gym/fitness center, city hall, police station, and district library. Those upgrades were sorely needed, as existing city properties were then able to be sold to the private sector,” Teegardin said in submitted comments for the event.
Teegardin noted that Edgewater, Colorado, didn’t experience upticks in crime directly related to adult use cannabis, or youth use, and added that he wouldn’t recommend capping licenses, and would instead “let zoning do the work.”
“The success of cannabis in the community far outpaced any negative scenarios the city planned for in the event such negative occurrences did arise. It never happened,” Teegardin added.
But South Dakota is still in transition. Jorgenson, the former law enforcement officer and CEO of Cannabis Chem Lab, described the thousands of lab samples that he analyzed in Washington, Colorado, and South Dakota as a law enforcement officer, a “significant” amount of which was cannabis.
“To think of not wasting that time on something like marijuana and being able to apply my talent, my resources in law enforcement,” Jorgenson said, “to more violent crimes, to more appropriate resources, that appeals to me in a great way. I’m hoping that, as government officials, that appeals to you as well.”
Jorgenson described how, a decade or so ago, he saw products he believed to be from China that were “synthetic cannabinoids, were sprayed on things like catnip” and packaged as synthetic cannabis like Spice. The regulated cannabis market cuts into those channels, Jorgenson said.
“In the end, that’s what we want. We want the cartels out of this business. We want the unsavory actors out of this business. We want it legitimate,” he said.
Jorgenson also encouraged local governments to “get on board” and “really push for” a certificate of analysis to serve as a tool to communicate product safety.
Jeffries spoke specifically about the possibly forthcoming transition from medical cannabis to adult use cannabis in South Dakota, and presented findings from a study conducted by the Drug Enforcement Policy Center at the Ohio State University Moritz College of Law. The study found that “ensuring” interagency coordination is tied to success.
Another lesson? “Start strict and loosen up later” on bigger topics like edibles and testing, and look to create “harmony” between medical and adult use rules wherever possible, Jeffries said.
“This whole process of medical marijuana has been hard because South Dakota has given local control to governments but yet no one really got a blueprint to follow. It is mainly following the footsteps of other states,” Jeffries said. “And this has been a little problematic for industry in municipal and county governments, as well as the state, but it also has its perks. Municipalities have the opportunity to decide what happens within their jurisdictions, and that’s a positive thing, in my opinion.”
Finally, Jeffries pointed out, South Dakota could be a big producer of outdoor cannabis, if its existing numbers related to corn and soybeans, for example, are any indicator.
“South Dakota can position itself to be the West Virginia of the tobacco industry. I mean, we have 10 crops that were top five producers in the United States. And outdoor cultivation is absolutely crucial to several key components of that. It helps keep costs down,” Jeffries said.
