In Oklahoma, illicit growing operations are dominating the medical cannabis market, and it’s taking a toll on local growers.
“When Oklahoma passed the State Question 788 [the Medical Marijuana Legalization Initiative] in June 2018, really for about the first two and a half years, we had very little, criminal activity that worked its way into our lane,” says Mark Woodward, the public information officer at Oklahoma Bureau of Narcotics (OBN). “But in the last six to eight months, we’ve seen an influx of both legal and criminal organizations pouring into Oklahoma and applying for a license.”
Woodward says the OBN has shut down more than two dozen criminal growing operations between April and June, and the organization currently receives about 30 to 100 tips a week of suspicious farms.
There are a few standard methods of illicit cannabis operations the OBN is recognizing, he says.
“We’ve got some dispensaries that are selling out-of-state [illicit] market products from places like Nevada and California coming here,” he says. “We’ve got some criminal organizations that come here, and they just start growing. They never get a license, and they think because it’s so overwhelming in Oklahoma, nobody will notice as we’ve got over 7,300 licensed growers.”
The operations that are growing without a license have been relatively easier to crack down on, Woodward says. If the OBN gets a tip on a suspicious operation, runs the address, and no active license is registered, they can immediately go to a judge and get a warrant and file cultivation, he says.
However, nine out of ten times, this is not the case, and the situations are much more complex.
To apply for a license in Oklahoma, 75% of the ownership must be owned by someone who has lived in the state for a minimum of two years; however, these illicit companies are finding a way around that through hiring “ghost owners,” he says.
“They’re working with local attorneys and others who can pop up fraudulent paperwork to find somebody who will agree to be the quote-unquote ‘owner,'” he says. “They’re having these ghost owners put their names on sometimes over a hundred licenses. When in reality, they know nothing about the farm, other than they go to the mailbox once a month for a $5,000 check.”
“So that fraudulent business structure is set up, so they get their license, and they cross every ‘T’ and every ‘I’ so that they don’t draw attention to themselves,” he adds. “But a hundred percent of their product is being moved off the farm in box trucks in the middle of the night to the East coast and the money is laundered all over the U.S. and outside of the U.S.”
Woodward says these situations involve a thorough investigation to “peel back” all the layers of fraudulent ownership to discover who is moving the workers and plants and who is laundering and wiring the money all over the world.
“Through our criminal investigation and through working with federal partners, we’re tracing their product all over the U.S., and one hundred percent of the product is being sold to people who are not legally allowed to have it,” he says.
The OBN has identified several farms tied to some of these criminal elements, but it’s challenging to keep up, as new ones are coming in every day, he says.
“The drug organizations can bring in new workers and [several thousand] three-foot plants within 48 hours,” he says. “They know we’re going to clamp down eventually, but because our licenses and our land is cheap, they can grow for $400 a pound in Oklahoma, and turn that around and flip that for $2,400 a pound in Brooklyn, New York. So, they cannot get here fast enough because they know the profit margin is just absolutely off the charts.”
With three major highways running through the state, and Oklahoma being centrally located in the U.S., it’s an ideal place for a distribution center, says Corbin Wyatt, owner of Likewise Cannabis, an Oklahoma-based vertically integrated cannabis company.
“I think people are looking at Oklahoma as a great hotbed and an opportunity to grow and then distribute,” Wyatt says. “But on top of that, the licensing process is so easy and cheap, and there’s no cap. So not only are we ideal for it from distribution and a cost for production standpoint, but it’s also easily accessible, more easily accessible than anywhere else in the country to get growing licenses.”
One of the most significant impacts the illicit market has had on local growers is they are fighting an excess of production, Wyatt says.
“When people are essentially just saying, ‘Oh, you know what, that doesn’t concern me; also, it’s cheaper in the legal market to cover my basis. So, I’m really making my money in the illegal market.’ That hurts everybody, because suddenly you go from what’s a profitable and enjoyable industry to be a part of to we’re competing against people that aren’t playing by the same rules.”
Woodward says the OBN has attended several of the Oklahoma Cannabis Industry Association’s meetings, where the company has heard from several growers who express the same frustration as Wyatt.
“We’ll be in a room of hundred people saying, ‘We’ve got our life savings invested and we can’t keep our head above water because we’re having to test our batches, follow all the pesticides and regulations and pay our workers fair wages, which is keeping our prices much higher than the illicit market. We just can’t compete,'” he says. “And again, those are their words, not ours. They’re begging for help.”
To get a handle on the illicit market, Wyatt says several things must change, including implementing seed-to-sale tracking and stricter requirements for the state’s licensing process.
“There really just needs to be a better system in making sure that when people are trying to come in to get licenses, that it’s not only legal but it’s done as the rules say it should be done,” Wyatt says.
The state has already taken some steps to implement stricter law enforcement.
“Just yesterday, U.S. Senator James Inhofe said that they’re going to make a request to Congress for $4 million to help start up a full-time enforcement unit here in Oklahoma,” Woodward says. “We’ve hit a number of farms and we’ve got dozens of active investigations, but our agents are also working with fentanyl, heroin, cocaine and prescription fraud—they’re spinning a lot of plates.”
Woodward says the OBN has a commitment from the legislature and congressional delegation to help the agency start a full-time unit that will consist of 20 to 30 strategically located agents who will work with sheriffs and police departments all over Oklahoma to get a better handle on this issue.
“We’re doing a good job, but we can’t do it fast enough to meet how many new applicants are coming in here.”