Oregon cannabis regulatory audit released against backdrop of controversy
The Oregon Secretary of State's office released an audit of the state's cannabis regulator. The audit found that the state's cannabis regulator is not adequately funding its operations and that it has not been sufficiently transparent.
Oregon should do more for cannabis businesses before federal legalization.
This was the conclusion of a state audit conducted by Shemia Fagan's office on the regulation of the industry.
However, the recommendation is surrounded by controversy following revelations that Fagan works as a consultant for an Oregon cannabis company. Willamette Week revealed Fagan's involvement just one day before the audit.
According to Willamette Week, Fagan's company is linked to La Mota - the second largest dispensary in Oregon. The company has unpaid taxes, and it is being sued for unpaid vendor invoices.
Willamette Week reported that Fagan had recused herself from the audit. Cheryl Myers, Deputy Secretary at State, made comments in the press release.
The audit examined how the Oregon Liquor and Cannabis Commission regulates recreational cannabis.
The federal cannabis restrictions have created significant regulatory challenges for Oregon's cannabis industry. The audit showed that Oregon's cannabis regulatory system compounds these issues,' Myers said in a statement. "Given what is happening at the federal level, it is time for Oregon's system to be prepared for a future where cannabis will be legal nationwide."
Three recommendations were made in the audit, and according to the OLCC are being implemented at varying levels. The discussion about relaxing certain regulations is in stark contrast to the 2019 audit conducted by then-Secretary Dennis Richardson, which said that rules should be tightened to ensure safety and keep legal cannabis off of illicit markets.
The report, which is 40 pages long, also states that Business Oregon, the state agency responsible for economic development, should be working with cannabis businesses.
Business Oregon does not work with cannabis businesses because it is afraid of losing federal funding due to cannabis' federal status as a controlled drug.
Business Oregon's refusal of working with cannabis businesses means that cannabis entrepreneurs and potential entrepreneurs do not have equal access to the state's economic development programs, which could help them overcome financial challenges when starting a business. The report says that this lack of equal access to the market is particularly problematic for communities of colour.
The audit has made the following recommendations:
The OLCC must identify and reform the rules that were implemented when recreational cannabis first became legal and as a direct result of fearing federal crackdowns on states-legal markets. This audit notes that the rules are based on the assumption that cannabis businesses will be involved in illegal activities, such as requiring 24-hour surveillance or steel doors. As part of the state's diversity equity and inclusion plan, the OLCC is encouraged to collect demographic data and produce reports. Oregon Department of Justice and the Governor should create guidelines for how state agencies should interact cannabis businesses. Business Oregon should be instructed to work with cannabis-related businesses.
Oregon legalized adult-use cannabis in 2014. The OLCC regulates the cannabis industry. During the 2019-2021 period, this industry generated tax revenues of $311 million. This timeframe includes the huge boost in sales the industry experienced during the Covid-19 Pandemic, which pushed it up to a $1 billion industry.
Sales of cannabis have fallen as the industry struggles with low prices and an oversupply.
Craig Prins, Interim Director of the OLCC, told auditors in its response to the audit that the states that had 'the best quality products, from well-regulated system, with recognized testing, labeling and packaging standards, and traceability standards,' would be likely to have interstate commerce allowed by the federal government.
'For the past nine years, the OLCC was able to successfully walk the line of support for the industry so that it can thrive and prepare itself for expansion while minimizing tragedies for public health and consumers protection,' he said. The feedback the agency received from state agencies that regulate cannabis agree that Oregon's regulation system is optimally supportive for industry.
He said that the agency was 'dedicated to supporting and preparing Oregon business so they can successfully transition from a state-based closed system to a national open market.