I moved to Oregon last year and I want to start a pot business. What's up with the residency requirements?
OREGON HAS a two-year residency requirement for recreational marijuana program licensees. That requirement applies whether you wish to be a producer, processor, wholesaler, or retailer in the new OLCC program. The residency requirement has caused a lot of heartburn for out-of-state entrepreneurs, and lots of work for us cannabis lawyers.
Back when we all voted for Ballot Measure 91 to legalize weed in Oregon, residency requirements were not part of the deal. To the dismay of many, they were added by the legislature and are codified in HB 3400. That statute requires "an applicant listed on an application" to have been an Oregon resident for two years. The OLCC was stuck with that framework when it made the program rules, despite an apparent change of heart by several key legislators, who proclaimed last month that they wish to do away with residency requirements in 2016.
Because of the last minute groundswell against residency requirements, the OLCC fashioned a rule that allows the commission to keep license applications by non-residents under review until 30 days after the 2016 legislative session, which begins in February. Though this was welcome news for out-of-state players (and their Oregon partners), it does not afford a clean point of entry for non-residents who wish to act as more than minority owners or passive investors.
To understand the specific contours of the residency requirement and how it affects non-residents, you have to dive deeply into the rules. I am not going to do that here. Suffice it to say, however, that if you really want to own a pot business in Oregon, and you are not local, there are ways. Capital tends to find ways around barriers, and the OLCC rules leave room to maneuver.
At the surface, any out-of-stater will need to cede 51 percent ownership to an Oregon resident, but the out-of-stater can also take contingent interest in the Oregon-owned portion of a business. Depending on your risk tolerance, there are many options for this. We have been presenting some of these options to OLCC and inquiring as to where the commission might hold its nose.
Recently, a very annoyed client asked me if the residency requirement thing "is even legal." The answer is probably not. Generally, federal courts have interpreted the Commerce Clause of the US Constitution to prohibit states from adopting laws that regulate commerce to favor in-state interests at the expense of out-of-staters. The basic rationale is that states should not engage in protectionism to gain economic advantages over other states. The wrinkle here is that cannabis is federally illegal, so it would be fascinating if a lawsuit were filed.
Assuming you don't want to do that, you will need to find an Oregonian to walk you through the door. And because there are so many Oregonians looking for partners, that shouldn't be too hard.