Red tape, cost blamed for keeping pot license unused

Minnehaha County commissioners say fee, regulations reasonable for medical marijuana industry

The one and only medical marijuana license in South Dakota’s largest county has yet to be used to sell even a single bag of grass or container of gummies more than two years after its creation.

Last year, South Dakota’s largest cannabis company – Genesis Farms – forfeited the right to open a dispensary just outside of eastern Sioux Falls, blaming development obstacles for its inability to use the $100,000 license it bought from Minnehaha County in 2021.

And last month, the medical cannabis company that had been waiting all that time –  Shangri-La – also passed on the chance to use the license to sell marijuana.

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While both companies and county commissioners alike cite internal business struggles for the two companies walking away – Shangri-La experienced a fire at its Brandon grow operation –  industry representatives say regulatory burdens on the books in Minnehaha County are keeping the license from being used.

“That is a boatload of money,” said Kittrick Jeffries, founder and CEO of Rapid City-based Puffy's Dispensaries, referring to the $100,000 fee for Minnehaha County’s cannabis license.

While Puffy’s has locations throughout the state, the bulk of their eight dispensary licenses are in the Black Hills area. And while it has paid six figures for at least one of its licenses, Jeffries said that’s a barrier to entry into the market that few operations can overcome. It’s also why Puffy’s has not bothered to compete in the Sioux Falls-area.

And those high-cost licenses, along with restrictive zoning regulations that make it difficult to find a location eligible for a dispensary, have proved too challenging for most small businesses, he said.

“The one thing that local governments shouldn’t do is have their license fees be so high that it pushes the opportunity for local businesspeople to get into the business,” Jeffries said.

Cannabis Industry Association of South Dakota President Deb Peters agreed, saying only large corporations already established in other states can withstand a $100,000 fee required to enter the cannabis market in Minnehaha County. And those costs also drive up the cost of a product that voters wanted to be accessible to medical marijuana patients.