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How to Open a Dispensary in South Dakota

Following the legalization of medical cannabis, interest in how to open a dispensary in South Dakota has grown. This has created new business opportunities. However, starting this business requires a solid understanding of the law and market behavior. This guide aims to walk you through the key steps, offering a clear plan to establish your business successfully.

Legal Landscape and Overview

In South Dakota, marijuana is legalized strictly for medical purposes, with recreational use remaining illegal. Patients over the age of 18 are permitted to possess up to three ounces of cannabis for health purposes. Minors, on the other hand, need a responsible adult to obtain it for them. Medical users have the right to grow up to four cannabis plants. Breaking these rules could lead to serious consequences, including jail time, fines, or the loss of a license.

Medical marijuana was legalized through Initiated Measure 26 in 2020, receiving 70% of the vote. The South Dakota Department of Health regulates this program, handling patient registration and dispensary licensing. They make sure the rules about how marijuana is packaged, labeled, and advertised are followed carefully. The penalties for breaking marijuana laws, especially with large amounts or selling near schools or to young people, are tough. Driving while high on cannabis is strictly forbidden and leads to severe punishments, especially for those who do it more than once.

On the other hand, efforts to legalize recreational cannabis have faced challenges. In 2020, voters approved a law known as Constitutional Amendment A to allow adults 21 and older to use, possess, and sell cannabis. However, this decision encountered legal obstacles, and in 2021, the South Dakota Supreme Court ruled that the amendment did not meet state law requirements, leading to its cancellation. Another legalization attempt, Initiated Measure 27 in 2022, failed to gain voter approval.

Advocates for legalizing marijuana in South Dakota have succeeded in getting their initiative on the November 2024 ballot. They needed 17,509 valid signatures by May 7, 2024, and managed to submit 29,030 signatures. On June 3, 2024, the Secretary of State confirmed that 22,558 of these signatures were valid, ensuring the measure’s placement on the ballot. The proposed legislation includes age restrictions, possession limits, and dispensary regulations to ensure responsible use and distribution. Currently, recreational cannabis remains illegal in South Dakota, but this initiative aims to create a comprehensive legal framework.

On March 14th, 2024, the South Dakota Governor signed SB43 into law, increasing the registration fees for medical cannabis businesses. The annual certificate fee will rise from $5,310 to $9,000. This new law mandates the Department of Health to implement the fee hike by September 30th. 

On June 11th, 2024, a statewide survey revealed that 52% of registered voters oppose Initiated Measure 29, which aims to legalize recreational marijuana, 42% support it, and 6% are undecided. The poll highlights a significant partisan divide, with 71.4% of Democrats supporting the measure, compared to only 24.4% of Republicans, and independents more evenly split. The legalization campaign faces strong opposition from the South Dakota Republican Party and two Catholic dioceses, urging voters to reject the initiative. 

These legal developments have had a direct impact on dispensary businesses. Entrepreneurs looking to enter the cannabis market must learn to navigate these laws, ensuring they comply with the state’s regulatory framework for medical cannabis.

Local Cannabis Restrictions and Laws

The state prohibits cannabis consumption on federal property and across state borders, as well as driving under its influence. Distributing cannabis to those under 21 is illegal, and both public and correctional educational facilities strictly ban possession and consumption.

Dispensaries must follow specific location guidelines, including being at least 1,000 feet away from schools and within approved zones designated by local authorities. Although these regulations are strict, licensees can operate multiple dispensary locations across different municipalities, provided they secure the necessary approvals for each site. South Dakota carefully controls the use of medical cannabis. They do this by allowing it to be used only in certain places, making sure it’s used safely, and watched closely.

Medical Cannabis Program

The South Dakota Medical Cannabis Program provides medical cannabis access to qualifying patients in South Dakota. It’s designed for individuals with specific medical conditions, such as cancer and chronic pain, who can obtain a medical cannabis card after a licensed physician’s certification. 

Cannabis License Types

To operate a cannabis business in South Dakota, obtaining the right license is crucial. The state issues several types of cannabis licenses, including:

  • Cultivation License: Allows for the growing of cannabis plants. Applicants must meet specific requirements related to facility security, record-keeping, and product tracking.
  • Dispensary License: Permits the retail sale of cannabis to qualified patients or caregivers. Dispensaries must comply with location restrictions, operational standards, and patient verification processes.
  • Manufacturing License: Authorizes the production of cannabis products. Manufacturers need to follow the guidelines on product safety, labeling, and quality control.

Each type of license has specific rules and legal requirements. If you want to open a dispensary, you need to carefully learn and follow both the state and local laws. This is to make sure your business is legal. Also, it’s important to keep up with any new changes in the laws because the rules about cannabis in South Dakota are still changing.

How to Get a Cannabis License in South Dakota

To get a license for a medical cannabis business in South Dakota, detailed preparation and strict following of state regulations are important. Applicants must prove they meet the criteria in key areas such as the location of the business, how it operates, its safety measures, and their clear understanding of the legal side. This process is important to ensure that businesses are legally compliant, uphold high safety standards, and positively impact South Dakota’s medical cannabis industry.

The Medical Cannabis Establishment Application Review Checklist for South Dakota details the necessary steps for businesses wanting to enter the medical cannabis industry. This checklist is a guide to help ensure applicants understand and meet the specific requirements needed to operate legally and successfully in the industry.

  • General Requirements:
    • Completed application form with date of birth for all required applicants.
    • Proof of allowable location, not within 1,000 feet of a school, and property owner consent.
    • Compliance with local licenses, permits, or registrations.
    • Principal officers and board members must be over 21, with at least one being a South Dakota resident.
  • Specific Requirements for Each Sector:
    • Operational plans, including management and site plans, identifying daily operations, key personnel, and physical layout.
    • Workplace safety and security plans, detailing equipment, procedures, and measures to prevent unauthorized access and ensure safety.
    • Product handling, including waste management and procedures for handling failed product tests.
  • Additional Operational Details:
    • Pre-employment screening with state criminal background checks.
    • Control of site access, specifying who has entry rights, and visitor management procedures.
    • Technical and infrastructural details like security system specifications, water and waste management plans.

The rules are set to make sure businesses meet state laws, operate safely and securely, and keep a well-controlled area for medical cannabis. The health department in South Dakota accepts applications for medical cannabis establishments on a rolling basis, allowing for continuous submission. However, in places where the number of these businesses is limited by the city or county, there are specific deadlines to submit applications.

Key Steps for Starting a Dispensary in South Dakota

Applying for a license to open a dispensary in South Dakota involves submitting a comprehensive business plan to the South Dakota Department of Health. This plan should include competitive analysis, market strategy, financial projections, and operational details. While state law prohibits local governments from completely banning medical cannabis dispensaries, they retain the power to control the quantity and zoning of these businesses.

To go through this process successfully, it’s important to use a checklist. This ensures that all the necessary requirements are met.

  • General Application Information: This section includes details such as applicant contact information, establishment information, and attachments required, such as proof of the property owner’s consent and operating procedures.
  • Local Government Compliance Certificate: Applicants must include the Local Government Compliance Certification form, which confirms compliance with local regulations. This form can be submitted after the application deadline.
  • Principal Officers and Board Members: Information on all principal officers and board members of the proposed establishment must be provided, along with attachments such as copies of valid identification and legal documents relating to the business structure.
  • Certifications: Applicants must certify various conditions, including the accuracy of the information provided, the absence of misrepresentation, and compliance with background check requirements.

The timeline for obtaining a dispensary license in South Dakota varies, depending on local government certification and the level of competition for licenses in each area. 

People who want to start a cannabis business in South Dakota must be familiar with the state’s cannabis laws, including how much they can have and the taxes they must pay. This knowledge helps them run their business legally and be successful. They also need to know the local rules about where they can open dispensaries and how many are allowed in each area. This is important for making sure their business follows the law and can do well.

In South Dakota, dispensaries selling medical marijuana must pay a 4.5% sales tax to the state’s Department of Revenue. On top of that, there can be a local tax of up to 2%. Also, products mixed with cannabis, such as cookies and beverages, are taxed at 1%.

How much does it cost to open a dispensary in South Dakota?

The total cost of opening a dispensary involves various expenses such as buying or renting property, daily business operations, and making sure all state laws are followed. To begin, there is a $5,000 non-refundable fee that must be paid to get a medical establishment registration certificate. Please note that this fee is expected to change between July 1 to September 30, 2024.

Local Insights and Market Potential

The medical cannabis market in South Dakota is experiencing rapid growth due to an increase in patient approvals for various health conditions. This increase is linked to the state’s specific rules about what qualifies as a ‘debilitating medical condition,’ which are detailed in SDCL 34-20G-1 and outline who can use medical marijuana. These guidelines have led to an increase in patient registrations, indicating a strong and expanding market for medical marijuana in the state.

Dispensaries must understand patient preferences and needs, offering a variety of cannabis products such as different plant strains, edibles, oils, and creams. If South Dakota legalizes cannabis for recreational use in the future, the market could grow even larger, providing more opportunities for business expansion. As the industry broadens to include both medical and recreational cannabis, the money earned could reach millions of dollars each year.

The Tax Foundation estimates that South Dakota could make around $14.27 million from a special tax on recreational marijuana if the market is set up well and lasts for three years. This estimate shows how much money could be made from allowing and controlling the sale of marijuana. However the real money the state earns will depend on the rules they make and how many people want to buy marijuana. There’s a significant opportunity for market growth and increased revenue in South Dakota’s marijuana sector, but this will need careful planning, strong rules, and close watching.

Operational Planning

Selecting the right location is crucial when opening a dispensary in South Dakota. Zoning regulations are particularly important as they specify areas allowed for dispensary operations, typically excluding areas near schools, parks, and homes. The physical features of the chosen property play a significant role as well. It needs to have a safe place to keep things, enough room for selling, and maybe even space to make products. Local government rules can affect how the dispensary works, so it is important to work closely with local zoning and planning offices.

Beyond location, a comprehensive operational plan is important for a dispensary’s success. This includes strong security measures to maintain safety and meet regulatory standards. Environmental considerations are also key, with a focus on implementing sustainable practices. On the other hand, quality control is important, with regular checks done to ensure products are safe and meet health standards, which helps protect consumers. Training for staff is another key element. Having a team that is knowledgeable and well-trained helps improve how the dispensary works and makes customers’ experiences better.


Starting a dispensary in South Dakota offers a unique opportunity in a rapidly growing industry. The state’s open approach to medical marijuana has resulted in a flourishing market, but it requires strict compliance with state rules and careful planning. Successful dispensaries prioritize following the law and actively engage with their communities, contributing to a broader conversation about the responsible use of medical cannabis. Prospective dispensary owners should approach this business opportunity with enthusiasm, recognizing the potential for both business success and a positive impact on the well-being of patients in South Dakota.

As South Dakota continues to develop its cannabis program, we will keep you informed of any relevant news regarding the establishment of a dispensary in South Dakota. By subscribing to our South Dakota Cannabis Mailing List (below), we will keep you informed of any relevant and not-so-easy-to-find information and news about South Dakota legalization. This includes, but is not limited to, the following:

  • What are the most recent developments regarding the legalization of cannabis in South Dakota?
  • When will applications for new cannabis licenses be available?
  • What special programs will be offered?
  • And more.

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