News & Events

“Canna-business”: What to know about Ohio’s House Bill 523 and Medical Marijuana

By: Brendon P. Friesen


On June 8, 2016, Governor John Kasich signed into law House Bill 523, legalizing the use of medical marijuana. As such, Ohio is the 25th state to legalize the drug for medicinal purposes. HB 523 permits the medicinal use of marijuana for the treatment of a list of 21 diseases including AIDS, Alzheimer’s, cancer, Crohn’s disease, epilepsy, fibromyalgia, glaucoma, MS, and chronic and severe, or intractable pain.

It remains illegal for physicians to prescribe the drug, but they may legally recommend the treatment of a patient with medical marijuana for the permitted conditions if the physician completes a comprehensive training program. Patients may use vapor, edible, topical, tincture and other similar products to administer the cannabis. Recreational use, smoking marijuana and home grown plants remain illegal.


It is important to understand the law and start thinking about how it may be regulated in the future. If more recent adoptive states, like Oregon and Washington, are any indication of the teething problems that can arise in a new program, then Ohio businesses are sure to experience some of the same issues without adequate planning and legal strategy.

The Department of Commerce (DOC) and the State Board of Pharmacy (Board), at the direction of an Advisory Committee, are charged with creating and administering the rules, regulations and licensing for medical marijuana business and use. The DOC and the Board will likely adopt rules, regulations and licensing by September 2017 and start processing applications shortly thereafter. Fifteen percent of licenses must be issued to minority owned businesses, if application numbers reach that level.

The DOC will regulate growers and processors and the Board will regulate retailers and patients. While vertical integration was prohibited in prior versions of the bill, HB 523 permits “seed to sale” enterprises, spanning cultivation to retail. And there are important procedures for the dispensing of medical marijuana, such as packaging and labeling requirements. Maximum tetrahydrocannabinol (THC) levels in plants and extracts are also regulated.

Local municipalities and township can limit, or prohibit, the number of licensed retail dispensaries. The question remains whether non-participating municipalities may share in the tax revenue. There are also radius restrictions for businesses in proximity to schools, churches, public libraries, public playgrounds, or public parks.

And keep in mind that the marijuana business remains illegal on the federal level, giving financial institutions cause for concern when doing business with those in the industry. HB 523 decriminalizes in Ohio the involvement of financial institutions, however. Different state tax treatment of the marijuana business is not yet clear, but it remains problematic under federal tax law which deems the business illegal.   That is, marijuana businesses are not permitted to claim normal business tax deductions and credits on their federal tax filings. Some states, like Washington and Colorado, have taxation on marijuana products separate from ordinary sales tax.


The law contains important provisions for employers as well. Although the bill legalizes medical marijuana, so far there is nothing prohibiting adverse employment action due to an employee’s use of medical marijuana. Further, if an employee’s medicinal use violates their employer’s Drug-Free Workplace Program or similar policy, generally any discharge of that employee will be considered for just cause. Further, there is a rebuttable presumption that an employee is ineligible for workers’ compensation if the use of marijuana was the proximate cause of the injury, regardless of whether the use is recommended by the person’s physician. However, the law is untested as it relates to a challenge under the Americans with Disabilities Act and other employment discrimination laws.

There are so many details of the marijuana business that are yet to be written into law for regulatory and guidance purposes. Because of the timing requirements in HB 523 and the practical and logistical difficulties of the licensing process, dispensaries will not likely be operational in Ohio until mid to late 2018. Growers and processers will likely begin operating in early 2018. However, the time to start developing your business strategy is now.

For more information on the medical marijuana industry and related legal strategy please contact our Business and Corporate Services Group. For employment related concerns, please contact our Labor and Employment Practice Group.


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