How To Get A Cannabis License in South Dakota


How To Get A Cannabis License in South Dakota

Updated September, 2021

South Dakota has recently gone one step closer to legalizing medical marijuana. On September 13, 2021, the legislative panel in charge of establishing the rules that would govern South Dakota’s new medical marijuana legislation approved a number of proposed regulations and returned others for further study, in a critical administrative step toward the new statewide program’s launch.

The South Dakota Legislature’s Rules Review Committee gave “the green light to most of the 124 pages of proposed regulations for medical cannabis in South Dakota from the state Department of Health” on Monday.

Other proposed measures, on the other hand, were rejected by the committee. According to the Associated Press, the panel members rejected one proposal “that would have limited the amount of high-potency marijuana that patients could possess, required medical practitioners to write a recommendation for patients who wanted to grow more than three cannabis plants, and defined a list of conditions that would qualify for a medical marijuana recommendation.”

Medical Marijuana Program

On Election Day 2020, voters passed Measure 26, clearing the path for South Dakota to establish a medical marijuana program.

Measure 26 allows for a variety of medical cannabis licenses.

  • Medical Cultivation license – an entity that purchases, owns, cultivates, distributes, transfers, transports, furnishes, or sells cannabis and related materials to a medical cannabis facility in accordance with the provisions of the Act.
  • Medical Dispensary license – a person or business registered with the department under the Act who obtains, keeps, stores, distributes, transmits, transports, sells, furnishes, or dispenses cannabis, cannabis products, paraphernalia, or associated supplies to cardholders
  • Medical Manufacturing license – an entity that gets, owns, manufactures, distributes, transmits, transports, furnishes, or sells cannabis goods to a medical cannabis dispensary in compliance with the act

Recreational Marijuana Program

Measure 26 also established a recreational marijuana program. The Department of Revenue is in charge of regulating and licensing businesses in the state that cultivate, produce, test, transport, deliver, and sell marijuana. The department is in charge of accepting and issuing the following licenses:

  • Cultivator/Manufacturer.
  • Testing.
  • Distributors/Transport.
  • Retail

Furthermore, while determining the proper number of licenses to issue, the department must consider the following factors:

  • They must issue enough licenses to significantly diminish illegal marijuana cultivation and sale throughout the state; and
  • They must, if necessary, limit the number of licenses given in order to avoid an excessive concentration of licenses in any one municipality.

Local governments may adopt rules or restrictions limiting the time, place, method, and number of licenses operating within their jurisdiction, including outright prohibition of marijuana businesses.

However, there’s no clear date when the recreational program will be available, as there is a lawsuit pending.

Gov. Kristi Noem has led the battle against legal marijuana, sponsoring a lawsuit specifically targeting recreational cannabis. The case is currently being considered by the state’s Supreme Court.

South Dakota Cannabis License Applications

On September 13, 2021 the Legislature’s Interim Rules Review Committee approved the Department of Health’s proposed administrative rules to establish a medical cannabis program in South Dakota. The legislature approved 143 of 149 proposed rules.

According to the newest administrative rules, you will need to prepare the following:

  • Written procedures for implementing corrective action and preventive action, as described in the administrative rules.
  • Proper lighting, sufficient for observers to see and cameras to record any activity within ten feet of the gate or entry. A motion detection lightning system may be employed to light required areas in low-light conditions.
  • Commercial grade locks intended for facilities requiring high levels of physical security, are required on all perimeter entry doors. All windows must be in good condition and lockable.
  • All medical cannabis establishment must permanently fix security cameras, at each exterior door and gate, at each door separating non-public areas of a dispensary from areas in which sales to patients and designated caregivers are made and in sufficient number to allow the viewing, in its entirety, of any area where cannabis plants, products or waste are cultivated, manufactured, stored, destroyed, or prepared for transfer, sale, or testing. The system must meet a series of requirements established in the administrative rules.
  • A medical cannabis establishment must maintain an alarm system.
  • All agents from the establishment must have identification badges.
  • All agents must receive at minimum two hours of training in record-keeping.
  • The storage of a medical cannabis establishment must comply with specific requirements established in the administrative rules.

Further, each type of license has their own set of specific requirements that you must comply with.

It’s a good idea to employ a consulting business to help you get licensure. To apply for a license, it is not as simple as paying a fee and describing your business plans. The application can take hundreds of pages. The operation is generally lengthy and complex.

You may also encounter legal and financial jargon that you are unfamiliar with. Working with a firm that has a proven track record of obtaining cannabis licenses can help you stand out.

RELATED: Ohio Marijuana Dispensary License Application

Securing Capital

Cannabis laws differ from state to state, but one thing is constant across borders: cannabis is illegal at the federal level. It is classed as a Schedule I substance and is a prohibited drug. This means that traditional lending institutions, such as banks, are not allowed to work with you. This will continue until the federal government decriminalizes or legalizes marijuana. Hemp was removed from the Schedule I Substances list with the passing of The Farm Bill in 2018.

So, in the meanwhile, your options are private investors and bootstrapping. Given that dispensaries cost approximately $150,000 to run on the low end and $2 million on the high end, few cannabis entrepreneurs are bootstrapping. Private investors are probably your best bet.

Staffing Cannabis

As a dispensary owner, one of the most essential drivers for a positive client experience is correctly staffing your establishment. Keep in mind that South Dakota is legalizing two cannabis programs at the same time. As a result, you will have many clients who have never tried cannabis before. Your staff will be responsible for educating customers and recommending goods to both new and seasoned cannabis users. When recruiting budtenders, make sure you have a robust training program in place.

Sourcing Product

Finding suppliers is one of the most important tasks in starting a dispensary in South Dakota. Your items are what will attract customers to you; you will not prosper if you offer substandard quality.

Compliance Considerations

Municipal governments and jurisdictions will need to develop their own zoning rules for dispensaries and growing operations and you must comply with them.

Further, as mentioned above, in South Dakota dispensaries need to invest in high-quality cameras, inventory management, quality control, health and safety measures, cash controls, and more.

RELATED: How to open a dispensary in Ohio

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Thomas Howard

Licensed to practice since 2008, Thomas Howard has represented numerous financial institutions in litigation to enforce their security interests.
Homegrown Cannabis Co's Cannabis Seedshomegrown
Picture of Thomas Howard

Thomas Howard

Licensed to practice since 2008, Thomas Howard has represented numerous financial institutions in litigation to enforce their security interests.

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