The Oklahoma Bar Journal May 2025

create a functional and sustain able cannabis processing frame work in Oklahoma. The current fragmented regulatory struc ture, in which multiple agencies impose overlapping and some times conflicting requirements on processors, presents one of the most significant challenges to industry stability. Presently, cannabis processors are subject to regulations from multiple state and municipal agencies, each overseeing different facets of compliance, from prod uct testing and safety standards to environmental and fire safety regulations. However, there is no centralized system ensuring uni formity in enforcement, leading to regulatory inefficiencies, delayed approvals and unnecessary financial strain on businesses. The absence of a coordinated compli ance structure not only compli cates regulatory adherence but also deters investment and inno vation within the industry. To address these challenges, Oklahoma lawmakers should consider the establishment of an interagency task force – a coordi nated body composed of represen tatives from OMMA, the OBNDD, OSHA, the OSDH, the ODAFF, the OSFM, the DEQ and the LPG (and the Oklahoma Tax Commission and more), as well as industry stakeholders and legal profes sionals. This task force would be responsible for:

cash-only entities. 48 This increases security risks and complicates payroll, tax compliance and vendor payments. 49 Additionally, IRS Code 280E prohibits cannabis businesses from deducting standard operating expenses, resulting in dispropor tionately high tax liabilities. 50 Many processors face effective tax rates of up to 70%, making profitability an ongoing challenge. 51 Without fed eral legalization or reclassification, businesses remain restricted from traditional financing and inter state commerce, limiting growth opportunities. Regulatory inconsistencies exacerbate compliance difficulties. Oklahoma law does not clearly define distinctions between cannabis products and extraction methods, as noted previously, leading to discrepancies in prod uct classification and labeling requirements. This lack of stan dardization results in enforcement inconsistencies, creating legal uncertainty for businesses (and attorneys) attempting to comply with shifting regulations. Further, laboratory testing inconsistencies pose a serious problem, as proces sors receive conflicting potency and contaminant test results from different labs, increasing the risk of mislabeling. These major dis crepancies undermine regulatory enforcement and heighten the risk of unintentional noncompliance and the risk of product recall. LEGISLATIVE SOLUTIONS AND THE PATH FORWARD Bridging Regulatory Gaps With Targeted Reforms and Unified Regulatory Framework While defining key industry terms is a crucial first step in resolving regulatory ambiguities, broader reforms are necessary to

By reforming and establishing a uniform regulatory framework for cannabis processing terms, Oklahoma can create a more consistent and predictable compli ance environment. This will not only protect consumer safety but also promote industry growth and regulatory adherence. REGULATORY GAPS AND COMPLIANCE CHALLENGES Oklahoma’s cannabis proces sors face numerous regulatory challenges stemming from leg islative gaps, overlapping juris dictions and financial burdens. Navigating state, federal and municipal requirements presents significant barriers to operational stability and long-term success. While Oklahoma state law primarily regulates the distance between dispensaries and sensitive locations, municipal regulations further complicate processing compliance, as local governments impose zoning restrictions, addi tional permitting requirements and operational limitations. Certain municipalities have enacted local buffer zone restrictions specifically for cannabis processing facilities – for example, the city of Purcell requires a 1,000-foot buffer between processing facilities and schools; a 750-foot buffer from places of worship, libraries, museums and childcare centers; and a 200-foot dis tance from residential zones. 47 Other cities may have similar restrictions, requiring processors to carefully review local zoning laws before establishing operations. Financial constraints further hinder processors’ ability to oper ate properly. Due to federal prohi bition, cannabis businesses have limited access to banking services, often requiring them to operate as

Standardizing enforcement policies across agencies Clarifying jurisdictional authority to eliminate redundant or conflicting regulations Creating a unified com pliance framework that

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

MAY 2025 | 11

THE OKLAHOMA BAR JOURNAL