SIOUX FALLS, S.D. (KELO) — In the 2022 midterm election, IM-27, a measure to legalize adult-use recreational marijuana failed with 52.9% of South Dakota voters in opposition.

This leaves South Dakota as it is today, with a burgeoning medical marijuana industry, and a number of businesses that were poised to move into the recreational market if it had been approved by voters.

Kittrick Jeffries, founder and CEO of Puffy’s dispensary, and a board member of the Cannabis Industry Association of South Dakota (CIASD) spoke with KELOLAND News on Friday about his business, the industry, and his own outlook on the failure of recreational marijuana in South Dakota.

On a personal note, Jeffries was disappointed in the failure of IM-27. “In just the immediate aftermath of the vote it was heartbreaking for a lot of our patients that couldn’t get access.”

Today, Nov. 11, 2022, is Veterans Day, a fact not missed by Jeffries.

“We have a lot of people that have reached out to us that have gone to see their VA doctor, who will not issue them a medical cannabis card because the VA is federally funded,” Jeffries said. “Having to talk to our veterans who can’t get medical access to cannabis in the last couple of days has really been weighing a heavy toll on me personally.”

Asked how the failure of IM-27 would impact his own business, Jeffries says the position hasn’t changed. “We’re a patient-owned and oriented business. I named the store after my mom, who is patient-zero in my heart, and the reason I got into the medical cannabis industry,” he said.

However, Jeffries did concede that the failure of IM-27 has catalyzed a change in his business plan — or at least the route his business will take.

“Basically, there are fewer medical patients than there are adult-use customers in the state of South Dakota,” Jeffries said. “With the failure of IM-27, we’re gonna be focused on more of an intimate approach with our dispensaries.”

This more intimate approach, says Jeffries, will manifest in a smaller-scale operation with fewer registers and less expansion of existing facilities, due to the smaller number of customers.

In terms of the size of that customer base, Jeffries cited a national average of about 2.17%-4% of the population of a state. That’s a range of 20,000-45,000 potential patients in South Dakota.

Comparatively, Jeffries says the South Dakota Dept. of Health reports that around 88,000 people (roughly 10%) in South Dakota currently use marijuana. Nationally, he says that percentage is around 18%.

One aspect of the rejected industry Jeffries laments is the loss of the tourist market. His flagship Puffy’s dispensary is in Rapid City, on the edge of the Black Hills and a major tourist market in South Dakota. “Just in our first months of being open here at Puffy’s, we’ve had to turn down 400 out-of-state medical cards, because they have to go through a very bureaucratic process before they come shop with us,” he said.

South Dakota does technically practice reciprocity with other medical marijuana states, however, the process for out-of-state patients can be difficult.

Jeffries explained that the state department is responsible for deciding if a patient with a card from another state has a South Dakota qualifying condition, which means that the patient must register with SDDOH, have their own doctor write them a recommendation for South Dakota’s program and then submit that to the department, who would then mail them a South Dakota medical card.

This process, said Jeffries, can take up to 60 days, making it especially difficult for patients who haven’t had time to plan two months ahead.

“I can’t stand at the front door of my dispensary anymore and turn down a patient from out-of-state,” Jeffries said. “It is so heartbreaking to see somebody who cannot take marijuana across state lines show up at our doorsteps in a wheelchair and crying their eyes out because they need medicine — it’s an unbelievable thing that we need to address immediately.”

Along with a smaller user base for cannabis products due to a market limited to medical sales, South Dakota’s cannabis industry, and the state government itself, will also see lower revenue than if adult use had passed.

“Take the great state of Montana,” Jeffries said. “Montana just passed adult-use cannabis in 2020. They’ve already implemented their program, and in the first fiscal year, raised $34 million in tax revenue, and that’s tax revenue that’s lost out in South Dakota.”

Another thing Jeffries cautions that South Dakota may lose out on is regulatory control.

“It’s only a matter of time before the federal government decides to regulate [marijuana], and we as a state of South Dakota have to figure out, are we going to allow the federal government to regulate cannabis after the fact or do we come in and implement a program, and regulate it ourselves to establish a status quo,” he asked.

And federal change may indeed be coming. On Oct. 6, President Biden directed the federal secretary of health and human services and the U.S. attorney general to begin the process of considering the rescheduling of marijuana under federal law.

Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act — along with such drugs as heroin, and higher than the classification of fentanyl and methamphetamine.

Not all is doom and gloom in the eyes of those in favor of recreational cannabis, however, at least as far as Jeffries is concerned.

“I was raised in a household that always talked about ‘look at the bright side,'” said Jeffries. “I think there is a silver lining in IM-27 not passing in that the super-majority of cannabis establishments in South Dakota are locally owned. This will allow South Dakotans to establish their footprint before adult use passes, either nationally or in 2024 [in South Dakota].”

Another thing favoring local businesses in South Dakota is the caps that some local governments have put on cannabis establishments in their jurisdictions. “That would prevent large out-of-state cannabis companies from seeing an appetizing market — and allows South Dakotans that unique incubation period,” said Jeffries.

This delay however could be a double-edged sword however, with Jeffries warning that it could result in South Dakota being left behind.

As of November 9, 2022, 21 U.S. states (as well as Guam and Washington D.C.) have legalized recreational marijuana. Due to marijuana’s federally illegal status, those states all represent closed economic ecosystems for marijuana, as it is a federal crime to take marijuana across state lines.

If the federal government were to legalize marijuana, however, regulated interstate commerce for the substance would be possible, and those states with full-fledged recreational markets of their own would be primed to immediately take advantage of the brand-new market.

“Had South Dakota been able to jump in front of the program — we could be an export state of adult-use cannabis instead of being an import state,” said Jeffries. “California, Oklahoma, Colorado, Oregon — states that have had programs in place — they will be export states, and they’ll be exporting to states like South Dakota.”

While there are plans to get recreational marijuana back on the South Dakota ballot in 2024, with the federal government taking a serious look at rescheduling, it may already be too late.