With the national cannabis industry projected to soar from $44 billion to $76 billion by 2030, Kentucky is now seeing the rise of a new legal practice area — one focused on expertly guiding businesses through the complex regulatory landscape of producing, processing, dispensing, and prescribing cannabis.
In March 2023, Gov. Andy Beshear signed Senate Bill 47, which legalized medical cannabis effective Jan. 1 this year. Kentucky joins 39 states with medical marijuana (24 states have legalized recreational cannabis) and across the commonwealth, businesses are cropping up to serve this new and now permissible demand.
Kentucky’s Office of Medical Cannabis within the Cabinet for Health and Family Services is implementing and administering the commonwealth’s Medical Cannabis Program. By last spring, the OMC had posted 17 regulations by which businesses and registered cardholders must abide.
At Dentons Louisville law office, Partner Arin Aragona has worked with medical cannabis issues for nearly a decade, having previously worked as general counsel for a private equity firm that invested substantially in medical and adult-use cannabis markets nationwide.
Dentons, which established its Kentucky Cannabis Practice Group in 2023, assisted 400 people with applying for licenses during the lottery process last fall and is helping others challenge declined licenses or sell their license to other entities, Aragona said.
He finds the bulk of his clientele in the operator realm — those who are cultivators, processors, dispensaries, and run safety-compliance facilities.
The dawn of this strictly regulated and potentially profitable era in Kentucky’s history is bringing new clients to area law firms.
Bradley Clark, managing attorney for KY Cannabis Law Group in Lexington, is a prime example, marketing his firm precisely for cannabis matters.
Throughout his years as a trial attorney, Clark often felt that the system was broken when it came to prosecuting minor marijuana offenses. On the day Senate Bill 47 passed, he was working at a regional firm and knew he wanted to delve deeper into this area of law.
“When Kentucky finally passed medical cannabis legislation in early 2023, I’m pretty sure I had my cannabis law website up before the governor even signed the bill,” he said.
Now in solo practice for the past year or so, Clark represents about 20 licensees across all sectors — dispensaries, cultivators and processors — with some under contract to sell and newcomers consistently signing up.
Overwhelming demand
Other Kentucky law firms have been watching the process unfold with interest and are welcoming clients seeking to dip their toes into the medical cannabis pool.
Nearly 5,000 people applied for the 74 available medical cannabis business licenses last year, which were awarded to cultivators, processors, and dispensaries through a lottery system. Some clients who were unsuccessful are still seeking to acquire licensure.
Other clients are pursuing specific locations in Kentucky municipalities that have authorized medical cannabis operations. Questions come from both employers and healthcare providers seeking legal advice regarding compliance with new laws.
There are many issues to sort through early in the process.
“Prior to beginning operations, cannabis companies need to get local land use approval and — depending on the municipality — local licenses and approvals,” Aragona said. “They also need assistance with ensuring that the build out, equipment, packaging and labeling, advertising, employees, products, and standard operating procedures comply with state cannabis laws and are structured in the most tax and cost-efficient manners. We are seeing these same trends in legal needs from cannabis companies entering the Kentucky market.”
Aragona said Kentucky has the benefit of learning from the example of other states that legalized medical cannabis a decade or so ago and have worked out some kinks.
“Unlike when the first states legalized medical cannabis, there are recognized best regulatory practices and resources — such as CANNRA, the cannabis regulators association — for state regulators,” he said. “Kentucky has done a good job learning from other states and adopting regulatory best practices.”
By last fall, the first medical cannabis business licenses were being awarded to cultivators and processors.
Expertise in adjacent sectors helps
Stephen Amato is a member of McBrayer PLLC, a firm that has represented clients in other highly regulated industries, including alcoholic beverages and hemp production.
The firm began helping clients prepare for the licensing phase that began last fall once SB 47 passed and updated information as administrative regulations were approved. Speed to market was a priority, so it was important to be able to quickly advise clients about what they needed to do to qualify.
“There was an ever-increasing frequency of inquiries about the application process starting in early 2024, peaking in mid-summer when the application process got underway,” Amato said.
Interest stemmed not only from in-state entrepreneurs and startups but also existing, sophisticated out-of-state medical cannabis operators.
Amato said cultivators seek help with issues like infrastructure development, real estate, land use and corporate work, and even healthcare providers have had questions about eligibility to prescribe, insurance reimbursement and other regulations.
“Our clients hope that by the end of 2025, there will be some cannabis already grown, harvested and processed,” he said. “However, in order to get those products to the patients who need them, the dispensaries must be stood up and ready to operate.”
Issue impacts a wide range of business sectors
Stites and Harbison now has a medical cannabis team that includes member/partner Jennifer J. Cave, who was appointed by Beshear to the Team Kentucky Medical Cannabis Advisory Committee in 2022. The panel held town hall meetings across Kentucky to solicit public comments from residents, healthcare providers, advocacy groups and local officials about the legalization issue.
She said that most of the speakers at the gatherings supported the legalization of medical cannabis, sharing powerful and emotional stories. Residents spoke about their need for access to treatment for a range of conditions, including children with epilepsy, veterans with PTSD, and adults living with multiple sclerosis, cancer and chronic pain.
Stites & Harbison’s Hemp and Medical Cannabis Team has attorneys with experience in several areas that come up in medical cannabis law, including real estate, employment, healthcare, planning/zoning, corporate, mergers and acquisitions, construction, banking, tax, regulatory compliance, litigation and environmental law.
“Last year, most of our work centered around the licensing process and the state licensing lottery,” Cave said. “More recently, our work has focused on real estate, corporate, healthcare, employment, mergers and acquisitions, and regulatory compliance issues.”
Helping clients understand Kentucky laws
Firms with multistate practices are familiar with cannabis business needs.
Frost Brown Todd Partner Nolan Jackson, who is based in Washington, D.C., has been assisting medical cannabis clients in Kentucky since 2022 and has been working with hemp and hemp products clients since 2016. His clients include growers, manufacturers, processors, distributors, retailers, brands, financial institutions, medical providers and more.
Much of Jackson’s legal work involving cannabis surrounds legal distinctions between hemp and marijuana and educating lawmakers, law enforcement, and regulatory officials about these differences.
Jackson closely followed Kentucky’s medical cannabis laws through passage and regulations approval the past couple years, and since 2024 has helped clients understand license types, changing licensed locations, potentially selling licenses and maintaining compliance.
With roughly 50% of his medical cannabis-related client load being dispensaries, Jackson has helped clients understand the details of the state’s medical cannabis program, including cardholder eligibility, licensure and compliance, assisting others with license applications and the lottery process, and most recently giving advice on a number business and legal operational issues that medical cannabis businesses face.
Jackson believes the state is well on the way to its first dispensaries opening their doors.
“In my opinion, we are still several weeks away from plants being harvested and months away from cannabis products being available in dispensaries,” he said in April. “The state has moved quickly, but the total process from seed to sale takes time. The state has said it hopes that there will be sales by the end of the year, if not before, and I think that is realistic. In the short term, the focus will be on approving more practitioners, getting people registered as cardholders, and ensuring accessibility and business compliance.”
Clark, of the KY Cannabis Law Group, said he stays busy guiding clients with transactional and regulatory matters as they’re navigating the process, whether it’s sketching blueprints, fundraising, acquiring licenses or selling them.
“It’s buzzing out there,” he said. “We should transition into operational mode soon. Everyone — businesses, media and the public — is super curious and genuinely excited about what’s happening.”
Meeting patient demand
Though he says the process has gone smoothly so far in large part to the OMC’s responsiveness, Amato anticipates a limited cannabis supply to start but says as harvesting and processing matures, increased inventories will follow. It should take up to two years for the industry to fully meet patient demands, he said.
“Additionally, we have worked closely representing the Kentucky Cannabis Industry Alliance to help advance the opportunities and framework for its membership. With that entity having the ability to advocate for its members, we believe it will expedite the solving of any problems that may arise throughout the process,” Amato said.
Cave estimates that sales likely won’t begin until the third or fourth quarter of 2025. Because marijuana is still classified as a Schedule I drug under federal law, all medical cannabis sold to eligible patients in Kentucky must be grown, processed, and packaged within the state. Additionally, businesses regulated under Kentucky’s medical cannabis laws face unique challenges — such as being unable to claim standard IRS business deductions when calculating pre-tax profits.
Some banks remain leery about working with cannabis-related businesses, though some smaller community banks and credit unions have started to do so, she said.
Cave noted that one challenge is Kentucky’s limited list of qualifying medical conditions for obtaining a medical cannabis card. Despite recommendations from the Board of Physicians and Advisors to expand the list, the General Assembly has not taken action.
Other challenges include some criticisms about the lottery process, reported construction delays for cultivators, regulatory issues like the 1,000-foot restriction, and too few practitioner approvals, Jackson said.
Thus far, Clark said it’s been an “absolute privilege” to work in the field of medical cannabis, and with those working to establish the industry in Kentucky, from government officials to business owners.
“The people I’ve met are incredible — passionate, patient-focused, and determined to make this dream happen,” he said. “Usually, as a criminal defense attorney, I’m quick to critique government action. But hats off to the Office of Medical Cannabis. They’ve crafted a transparent, safe and fair system for everyone involved. I’m beyond excited to see what the next few years bring in this booming, vibrant industry.”
