Signed into law on April 17, 2024, by Kentucky Governor Andy Beshear, House Bill 829 makes several changes to Kentucky’s medical cannabis law, including the licensing timeline, opt-outs by local jurisdictions, inspections and provisional registration for patients. The Cabinet for Health and Family Services has also issued new proposed regulations setting forth the process and requirements for applications for cannabis businesses licenses.

One of the most striking features of Kentucky’s new medical cannabis regulatory scheme is the adoption of a limited license structure, deviating from previous expectations of a more open medical market in Kentucky. HB 829 accelerates the licensing process by six months, meaning the application period will begin on July 1, 2024, and end on August 31, 2024. If applications outnumber available licenses, which is certain to occur, licenses will be awarded through a lottery system.

Dentons’ Kentucky Cannabis Law practice recently hosted the webinar, “Kentucky Medical Cannabis Licensing Applications: Strategies for Success,” to help prospective applicants prepare for the cannabis business license application process. Below are some excerpts from that webinar. To learn more about eligibility for a cannabis business licenses, factors that might disqualify a cannabis business, what information and documentation applicants will be required to submit, and what you can expect the lottery process to look like, our 60-minute on-demand webinar features an in-depth discussion with Hannah King, Jason Ams, Kristin McCall and Arin Aragona from our Kentucky Cannabis team.

Webinar Q+A Highlights:

Q: Can you provide an overview of the restrictions on licenses and the licensing process?

Hannah King: When the medicinal cannabis bill was signed into law in the spring of last year, it appeared to those of us that practice in the industry that there were not going to be restrictions on the number of licenses you could have an ownership interest in. You could be vertically integrated, which means you could participate in kind of each activity within supply chain, cultivation, manufacturing and distribution. And really the limitations were going to be at the local level. When the proposed regulations came out in April, at least for an initial licensing period, we saw a significantly different model.

Through an initial licensing process, the Cabinet will issue 10 Tier I cultivation licenses, four Tier II cultivation licenses, two Tier III cultivation licenses, 10 processor licenses and 48 dispensary licenses. For dispensaries, the Commonwealth was divided into 11 geographic zones, with most receiving four dispensaries each and zones containing Louisville and Lexington receiving six each. Each county within a zone will have no more than one dispensary each, with the exception of Jefferson and Fayette, which will have two each.

Like many states that have medical programs that limit the number of dispensary licenses, those dispensaries are going to be spread out across the state. The policy reason behind this is that it's a patient access issue, that if you're going to have a limited number of retail stores that are going to be selling medical cannabis, we want to make sure that everyone across the State of Kentucky is going to be able to have access. In addition to that, retail stores under Kentucky's law are going to be able to run delivery services. The way that these are going to be distributed is that, through the regulations, the State has established 11 different regions, and they're going to be issuing four licenses in most regions, one per county, and then in two areas, Lafayette and Fayette and Jefferson County. There's going to be additional licenses, because those are urban districts.

In addition to restrictions on the number of licenses, applicants are going to be restricted in the types of applications they can submit. An applicant is not necessarily the company that files the license application. When the state defines applicant, they go back up to parent companies and owners.

An applicant is only able to file an application for one license type; specifically, cultivation, processor, or dispensary. If you're filing an application for a cultivator, you can file one application for each tier. However, you have to have a different address for each of those applications. You can file an unlimited number of processor licenses. However, again, you need to have a separate address for each of the applications that you submit. For dispensaries, an applicant can submit one application for each of the 11 regions, so a total of 11 dispensary applications again, each with its own separate address.

Q: What are the fees for an application? Are fees refundable?

Kristin McCall: The application fee depends on the type of cannabis license that you're applying for. The initial license application fees for a Tier I cultivator is $3,000, for a Tier 2 cultivator, it’s $10,000, for a Tier 3 cultivator, it’s $20,000. In this round, they’re not going to be issuing any Tier 4 cultivator licenses, but that application fee will be $30,000 whenever they choose to issue those licenses. A processor application fee is $5,000. They're not going to be issuing producer licenses this round, but a producer license application fee is $5,000 plus the applicable cultivator tier application fee. The dispensary application fee is $5,000, and the fee for a safety compliance facility is $3,000. The application fee is not refundable unless the application is submitted outside of the application window, in which case the application will be automatically rejected. The fee will be refunded, and the application fee will not be applied to the annual license fee if you get the license.

Webinar Material

If you would like a copy of the recording, please reach out to hannah.king@dentons.com