At least eight have shuttered over concerns about competition, regulations and falling cardholder numbers
B.J. Olson opened his medical cannabis dispensary, Unity Rd., in the summer of 2022, shortly after South Dakota legalized medical marijuana sales. Initially, business met expectations, but competition quickly escalated as dispensaries proliferated across the Sioux Falls area.
OG Article: here
View our Fair Use Policy: here
Olson’s revenue declined with each new dispensary, leading to price undercutting. Unity Rd. is among at least eight dispensaries that held licenses last winter but have since closed. The state’s dispensary count dropped from 78 in February to 70 in December, while patient cardholders fell from nearly 14,000 to fewer than 12,000.
Regulations compounded Olson’s challenges. Advertising restrictions meant even social media posts faced scrutiny, and compliance required costly accountants. Cannabis businesses couldn’t deduct typical expenses like rent and wages, adding complexity to tax preparation.
Olson also had to address regulatory concerns about a door between his dispensary and adjoining smoke shop. Although he installed a plywood barrier to meet state rules, such measures underscored ongoing frustrations. Olson ultimately decided to close both businesses, citing market saturation and regulatory burdens. He noted that had recreational marijuana been legalized under Initiated Measure 29, his outlook might have been different.
The closure trend continues, with smaller dispensaries and cultivators struggling. Dakota Herb CFO Joe Stavig attributed part of the decline to fewer patient cardholders and competition from hemp-derived products. These alternatives exploit a federal legal loophole to mimic marijuana effects without state regulations, undermining dispensaries.
Efforts to ban such products face court challenges, leaving enforcement weak. Stavig hopes to expand qualifying conditions for medical marijuana and advocate for industry representation on the Medical Marijuana Oversight Council to boost patient numbers.
Roy Nielsen, owner of Roy’zzz dispensaries, also faced regulatory hurdles. His Sioux Falls dispensary license is on hold pending a hearing on alleged violations, including a social media post and a mannequin with a Scooby-Doo mask, deemed inappropriate under state rules. These incidents resulted in a cease-and-desist letter, further complicating operations.
Nielsen hired a medical director to promote cannabis education but is considering relocating to Minnesota, where recreational marijuana laws are more favorable. He described navigating South Dakota’s Department of Health regulations as more challenging than working with federal agencies during his previous career in pet medications.
Olson echoed similar frustrations, describing the industry as overly scrutinized and burdensome. Despite South Dakota’s business-friendly reputation, he felt constant pressure and fear of non-compliance.
As dispensaries consolidate or close, the future of South Dakota’s medical cannabis market remains uncertain, with stakeholders pushing for reforms to sustain the industry.
Comentarios