December 7, 2021

Out-of-staters can fully invest in Missouri’s medical marijuana market

The order is up, so let the long-awaited Missouri green gold rush begin.

U.S. Western Missouri District Judge Nanette Laughrey on Oct. 7 enjoined the state from enforcing a 2018 residency requirement on Missouri marijuana businesses.

But it wasn’t until Laughrey publicly posted her written order Thursday that an out-of-state investor could legally become a majority owner of a marijuana business in Missouri.

A lawsuit was filed in 2020 by Mark Toigo, a Pennsylvania resident and minority owner of Organic Remedies MO, which owns a cultivation license in Chaffee and three dispensary licenses.

Toigo, who also owns Organic Remedies PA in Pennsylvania, said the residency requirement violates the commerce clause of the U.S. constitution and prevents him from investing more money in his Missouri businesses.

Proponents maintain dropping the residency requirement opens Missouri’s medical marijuana market to out-of-state investors who can infuse cash into state businesses, diversify supply chains and broaden access to a wider selection of products at reduced price points.

Toigo said being able to invest more means equity with local vendors, competition and growth.

“It’s good for everybody in Missouri who wants to grow the cannabis space,” he told the Columbia Missourian. “Now you don’t have to necessarily find Missourians to invest. You can bring in out-of-state investors, you can bring in capital from all over to improve the program.”

Missouri medical cannabis sales topped $21.73 million in August and total $113 million since it became legal last October, according to the Missouri Department of Health & Senior Services (DHSS).

The Missouri Medical Cannabis Trade Association (MoCannTrade) projects medical marijuana sales will surpass $200 million by year’s end.

Missouri’s program allows doctors to recommend medical cannabis for any condition and imposes an additional 4% sales tax on cannabis sales with revenues earmarked for veterans’ services. A straight reckoning of $113 million in sales taxed at 4% means $4.52 million for veterans services.

Through September, DHSS has approved 143 dispensaries, 40 infused product manufacturers, and 29 marijuana cultivation facilities. DHSS has licensed and certified 379 facilities to cultivate, manufacture, test, transport and dispense medical marijuana to Missouri patients.

DHSS reports nearly 140,000 Missourians are enrolled in the medical marijuana program and that it has issued 4,663 state agent ID cards, which are required to work in medical cannabis businesses; more than 4,500 have been added since January.

Missourians legalized medical marijuana in 2018 when more than 66% of voters approved Amendment 2. But that same amendment requires facilities to be at least 51% “majority owned by natural persons who have been citizens of the state of Missouri for at least one year prior to the application.”

External investment from multi-state operators, initially spurned, is now supported even by many independent Missourians in the business. Only 34 of 60 cannabis companies issued a license by the state since 2019 are in business.

Toigo argues in his lawsuit that Missouri’s medical marijuana market is expected to be near $275 million annually within a few years.

But because of the residency rule, he was prohibited from investing more money into any Missouri company if that investment increases his ownership stakes above 49%.

That requirement is unconstitutional, his suit contended, because it “limits Mr. Toigo’s economic opportunities in Missouri’s nascent marijuana industry.”

DHSS nor Missouri Attorney General Eric Schmitt’s office has announced plans for an appeal. During the Oct. 7 hearing before Laughrey, which lasted 8 minutes, Assistant Attorney General Emily Dodge offered no oral arguments.

This article was originally posted on Out-of-staters can fully invest in Missouri’s medical marijuana market