The cannabis industry in Ohio is navigating a challenging landscape as it seeks to establish itself following the legalization of recreational marijuana in 2023. While states like California and Colorado were early adopters of cannabis legalization, their markets are now experiencing significant declines. California, which legalized medical marijuana in 1996 and recreational use in 2016, has seen a sharp drop in its licensed cannabis market over the past five years, as noted by California Assembly Member Matt Haney.
In contrast, Michigan has fared better than California, largely due to lower taxes and fewer barriers for businesses and consumers. Haney indicated that these factors contribute to a more favorable market environment in Michigan compared to California’s current struggles. Meanwhile, a bill in California aims to prevent a scheduled tax increase in July, which Haney believes could further harm the industry there.
Colorado, another state that initially thrived after legalization, is also facing difficulties. The state experienced revenue of $2.2 billion in both 2020 and 2021, but this figure fell by 20% to approximately $1.77 billion in 2022, and further decreased to $1.3 billion by October 2023. Experts attribute these declines to excessive regulations and market saturation, compounded by the fact that over 23 other states, including Ohio, have legalized marijuana, resulting in increased competition and reduced sales nationwide.
In light of these challenges, the Ohio Division of Cannabis Control (DCC) is implementing measures to create a sustainable cannabis market. The DCC has studied other states’ experiences to identify successful practices and avoid pitfalls. A spokesperson for the Division explained that their priority is to establish a successful, efficient, and sustainable business model that minimizes dispensary closures, a fate that has befallen other states with recreational markets. The DCC is also looking at states like Maryland, Missouri, and Oregon for guidance on regulatory aspects.
Currently, the number of recreational cannabis licenses in Ohio is limited, and the DCC is set to conduct a biennial review to assess demand, geographic distribution, market growth, and both state and federal legislation. This review could influence the number of licenses issued. The DCC spokesperson emphasized the importance of avoiding an oversupply of licenses, which has led to issues in other states, including diversion and higher failure rates for dispensaries.
The DCC’s regulatory efforts exist separately from the revenue decisions made by lawmakers. Conflicts have already arisen concerning the allocation of tax revenue from cannabis sales. Under Ohio’s legalization framework, 36% of the 10% marijuana tax is designated for municipalities hosting dispensaries. However, Governor Mike DeWine’s latest budget proposal and a bill introduced in the Ohio Senate aim to eliminate this host fee, highlighting the ongoing tensions between regulatory frameworks and legislative intentions.
