Legalization of marijuana in South Dakota could provide a new, lucrative economic-development opportunity for Native American tribes and tribal members who have historically struggled to find prosperity and stability in the state economy.
Voter-approved measures to legalize marijuana in South Dakota may be on hold or stalled for the time being, but planning and research into creating a regulatory framework and business opportunities surrounding legal pot are continuing.
As shown in Western states that have already legalized marijuana, Native tribes that operate as sovereign nations have found the marijuana industry to be a path to creation of new jobs, generation of tax revenues and redevelopment of communities that have often suffered economic hardship.
“It brings forward a demographic of people who weren’t welcomed at the table before,” said Laurie Thom, enforcement director at the Inter-Tribal Marijuana Enforcement Commission of Nevada. “Not only does it allow tribes to thrive, but it allows individual tribal members to spread their wings and their skill sets.”
South Dakota voters in November approved a statewide initiative to legalize medicinal marijuana and passed a constitutional amendment legalizing the possession, use, growth and sale of recreational marijuana for adults. Both measures were set to take effect on July 1.
But Gov. Kristi Noem is seeking to delay legalization of medical marijuana for a year and has led a court challenge to legalization of recreational marijuana. A state judge recently declared the recreational marijuana amendment unconstitutional, but an appeal of her decision to the state Supreme Court is seen as likely.
South Dakota Sen. Troy Heinert, D-Mission, said marijuana legalization and businesses associated with marijuana can provide a boost to Native American reservations that have long faced economic challenges.
“I think it has a very good chance to provide an economic engine that could transform tribal communities,” he said.
Heinert, a member of the Rosebud Sioux Tribe who is the minority leader in the South Dakota Senate, said several factors may give an edge to tribal governments or individual tribal members who pursue economic development related to legal marijuana.
Heinert said tribal governments are smaller and more nimble than state government in regard to issuing permits or licenses related to the growth, production or sale of marijuana.
“The biggest thing is that we can move faster,” Heinert said. “We have a land base; we have lots of people who are looking for work, and it is something that would be new.”
Rep. Mike Derby, R-Rapid City, is a leader of the legislative Cannabis Caucus who has submitted a detailed plan to create a regulatory framework for legal recreational marijuana in the state. His measure, House Bill 1225, is still moving forward despite the recent court ruling, Derby said.
Derby said he has learned that the potential exists for businesses owned by tribes or tribal members to develop a vertical industry platform, or “Seed to Sale” operation, in which a business grows, tests, packages and then sells marijuana and related products.
“We absolutely see an opportunity there,” Derby said. “It’s about jobs and job creation.”
The Flandreau Santee Sioux Tribe in eastern South Dakota is keeping a close eye on marijuana legalization and is positioning itself to be an early adopter when it comes to creating new businesses related to marijuana, said Monte Lovejoy, coordinator of Native Nations Cannabis, a business run by the tribe.
“Once everything is figured out and all the wrinkles are ironed out, we definitely want to be a player in the state,” Lovejoy said.
The Flandreau tribe already operates a thriving cannabidiol, or CDB, business that sells legal hemp-derived medicinal products online.
The tribe with about 800 enrolled members drew national attention when it attempted to launch a marijuana operation in 2015 after the U.S. Justice Department outlined a new policy to allow Native tribes to grow and sell legal marijuana. Those plans were scuttled and the marijuana plants were burned after South Dakota authorities cracked down.
The tribe sees legal marijuana as another revenue driver for its people and reservation, which is contained almost wholly within the city of Flandreau, about 45 miles northeast of Sioux Falls. In addition to its CBD business, the tribe also manages an industrial park, raises a buffalo herd and operates a casino, hotel, RV park and restaurant complex.
“Anything we can do will be an injection of revenue into the local economy,” Lovejoy said.
Nevada voters approved legal use of home-grown marijuana for medical purposes in 2000; legal sales of medical pot began in 2015. Voters approved legalization of recreational adult-use marijuana sales starting in July 2017.
Increasingly, Native American tribes in Nevada are becoming licensed to grow, process or sell marijuana, according to Cassandra Dittus, co-owner of Tribal Cannabis Consulting group, which helps tribal entities enter the marijuana market.
Successful relationships forged between the consulting group and Nevada tribes resulted in development and operation of medical and recreational marijuana dispensaries by the Ely Shoshone Tribe in Ely, Nev., and the Yerington Paiute Tribe in Yerington, Nev.
Both have tribally run dispensaries that opened in 2018 and created about 15 new jobs each, with a potential for 40 to 50 more full-time positions at each.
In April 2020, the consulting group also helped the Winnemucca Indian Colony open a marijuana dispensary that employed eight people to start and turned a profit after just three months of operation. The dispensary has since generated tax revenues for the depressed colony economy, and has helped pay for a new police station and spurred development of a new housing project, Dittus said.
The consulting group has helped tribes repurpose existing buildings to aid in community redevelopment, Dittus said.
“TCC works with Native American tribes to better the entire community by helping them enter the lucrative cannabis industry,” Dittus said.
Five Native tribes in Nevada are sanctioned for marijuana growth and sales by the intertribal enforcement commission, said Thom, the state regulator.
Tribes set up their own systems of regulation and enforcement of marijuana laws, often operating under the guideline of imposing rules that are “as strict as if not stricter” than existing state laws, Thom said. The compacts signed with the state allow for legal sales on reservations and also enable people who buy marijuana products on reservations to carry and use them off the reservation.
One major benefit for tribal marijuana businesses is that the taxes collected on licensing and sales go directly to tribal governments where the business are located, Thom said.
“They’re able to collect those tax dollars and funnel those right back to tribal nation specialty programs or education programs,” Thom said. “They don’t have to turn that money over to the state so they’re able to use that money almost immediately.”