As the Kentucky Cabinet for Health and Family Services (“Cabinet”) gears up to begin accepting cannabis business license applications as early as July 1, 2024, industry stakeholders are keeping a watchful eye on several dormant issues with the potential to stifle the state’s nascent medical cannabis market. Chief among those is the risk that local governments may decide to “just say no.” Despite palpable excitement following the enactment of SB 47 (An Act Relating to Medical Cannabis) in March of 2023 and, more recently, in April of this year, the enactment of HB 829, not everyone is enthusiastic about the roll-out of the state’s medical cannabis program and several local governments are flexing their statutorily-granted muscles to stymie the industry before it even gets off the ground. Indeed, some counties in Kentucky – including Boone Co., which lies just across the Ohio River from Cincinnati – have already prohibited all cannabis businesses. Others, like Nelson County, have teed up the question for voters and will allow them to decide at the ballot box in November.
By law, prospective cannabis business licensees must submit their applications, including robust site control documentation, no later than August 31, 2024. Still, local governments have until January 1, 2025, to decide whether to ban such businesses within their territories. Critically, under a provision of the state’s medical cannabis law (KRS 218B.130), prior to the Cabinet’s issuance of a license to a cannabis business in its territory, a local government may either: 1) prohibit all cannabis business operations within its territory through the passage of an ordinance, or 2) punt the question to registered voters. The statute defines “local government” as a “city, county, urban-county government, consolidated local government, charter county government, or unified local government.”
The framework prescribed by KRS 218B.130, therefore, creates an awkward timing risk for prospective applicants. Based on the statute, local governments can ban cannabis businesses up until the time that a license is issued to a business in the territory. But, the Cabinet has up to 45 calendar days after receiving a complete application to either approve or deny it, meaning that it’s at least theoretically possible that a local government could ban cannabis businesses while an application for a location within the territory subject to the ban is pending before the Cabinet. In other words, the submission of a license application to the Cabinet alone does not necessarily inoculate a prospective licensee from a subsequent local government prohibition. This reality could create logistical issues for the Cabinet as it begins collecting and evaluating licenses. And although the law does include what amounts to a citizen override of a local government prohibition on cannabis businesses, suffice it to say, there remains manifest uncertainty as to where within the state-licensed cannabis businesses will be able to operate.
What does this all mean for prospective applicants?
In short, it means that location matters. More specifically, it means that site selection for a cannabis business in Kentucky will require careful analysis of not only existing local ordinances but also an awareness of any local legislative momentum toward prohibiting cannabis businesses. Moreover, prospective licensees cannot simply kick the can down the road and say, we’ll find a location later. To the contrary, the Cabinet’s uniform application requires license applicants to submit: “[t]he proposed physical address of the cannabis business and the global positioning system coordinates for any proposed cultivation activities.” In turn, the new Cabinet emergency regulation governing the content of cannabis business license applications clarifies that license applicants must submit to the Cabinet property details including:
- Documentation such as a contingent agreement for property sale or lease or an existing deed or lease that shows the applicant has the authority to use the property location as a cannabis business for, at a minimum, the term of the license; and
- A site plan for the proposed cannabis business.
Although there may be regulatory solutions to this thorny issue – for instance, through a change in location filing – given the legwork that will necessarily be required to secure a site and to develop the site-specific property documents, prospective applicants would be wise to invest the requisite time, energy and resources into fully vetting a location prior to filing an application with the Cabinet.
