Opportunities in 2023 Sparked by 2022 Legalization Moves in Many States
Which US States are legalizing cannabis in 2023? Read below for a timeline and roadmap of 2023 cannabis opportunities including key dates in key states.
With Missouri and Maryland voting to legalize adult-use in November 2022, the ranks of states that have approved adult-use cannabis sales swelled to 21. But those were just two 2022 developments that continued the evolution of a cannabis landscape across the U.S. that has changed dramatically over the 10 years since Washington and Colorado first legalized adult use in the November 2012 election. A key measure of those changes: the modest $2.5-billion medical-only market of 2013 has since exploded 10x to about $25.1 billion in medical and adult-use spending in 2021, according to BDSA.
That remarkable run at a 33% compound annual growth rate (CAGR) is coming to an end. In a September 2022 forecast update, BDSA revised downward its forecast for 2022 US industry growth to just 7.8% in 2022. The company forecasts a re-acceleration of growth rates to an 11% CAGR through 2026, but with some significant caveats: If the country’s largest market California can resume growth in 2024 after declining in both 2022 and 2023; if the four big northeastern states (Massachusetts, New York, New Jersey and Pennsylvania) can more than double in size to $8.8 billion in five years; if the third-largest state in the union, Florida, legalizes adult use in 2025.
Those mega-markets will have the biggest impact on national-market growth rates. But for individual companies the best opportunities may lie elsewhere: smaller states expanding from medical-only to adult-use legalization, and states of all sizes loosening restrictions on their medical programs. With so much change in cannabis regulations across many state markets, it is difficult to keep track of what is happening when and where. Below is a roadmap explaining what regulatory changes lie ahead in US cannabis laws along with key dates to plan around in the 2023 New Year.
Cannabis License Opportunities Set to Open in 2023
Dec. 19th, 2022: Florida (finally) Offers New Licensing Opportunities!
Florida is the US’s largest and most lucrative medical only cannabis market with Brightfield Group expecting 25% growth in 2022 to $1.7 billion. With only 22 businesses licensed to legally operate in Florida, cannabis licenses in the state are extremely valuable and have sold for well over $50 million. So the industry has been buzzing with excitement over the December 19th, 2022, issuance by the Office of Medical Marijuana Use (OMMU) of Emergency Rule 64ER22-9, which sets the stage for an ongoing and revolving “batching cycle” of new cannabis licenses, with this first cycle offering 21 new licenses. It is expected that a future rule announcement will be forthcoming in the next 30 days. In fact, the Florida’s cannabis law, § 381.986, Fla. Stat. (2022), legally requires the state to do so now that the litigation that was holding up new licensing has been settled.
Since Florida’s launch of medical sales in 2017, the market has been a growth engine and cash cow for the six of the top 10 multi-state operators (MSO’s) that have licenses there: Curaleaf, Trulieve, GTI, Cresco Labs, Verano, and Ayr Wellness. For cannabis entrepreneurs, Florida presents a unique opportunity for those that can afford it. The Florida cannabis license is different from those in most states in two critical ways:
• Licensed cannabis businesses in Florida can build and manage an unlimited number of production and retail facilities. This makes Florida one of the few medical markets in the US where the capacity of a cannabis business to grow is entirely dictated by the appetite of its consumer market.
• The other major feature to Florida’s cannabis license is that it requires full vertical integration because only the retail sale of medical cannabis is allowed – meaning that each licensed company must have to have the financing to stand up a cultivation center, a GMP certified manufacturing center, and multiple retail outlets within a year or two of being licensed.
For cannabis entrepreneurs, the new licenses in Florida then present enormous upside: Florida’s over 776,365 active medical cannabis patients represent more than 20% of the whole country’s registered patient count. Ultimately, with nearly 2 million monthly adult cannabis consumers, Florida could prove the second biggest market in the country, or even exceed the size of the troubled California market if regulators maintain a laissez-faire approach when the state transitions to adult use.
The new licensing opportunity in FL is expected to be similar to its Pigford/BFL Batching Cycle, which closed in March of 2022. For instance, the cost to submit the application is a whopping $146,000 which is more than double the $60,830 charged during the initial application round but is similar to what was charged to the Pigford/BFL Applicants. The application is also fairly similar to Pigford/BFL, including in its scoring criteria the awarding of points for having infrastructure and equipment already secured and constructed while awarding lesser points for plans to secure property and equipment. In other words, the barriers to entry to FL’s medical cannabis market will remain high, and Florida is likely to remain a market with a limited number of large-scale players.
February 2023: Missouri Will Launch Adult-Use Sales
Cannabis is now legal in Missouri after voters approved Amendment 3 at the polls this past November. As of Dec. 8th, 2022, the measure allows Missourians 21-and-older to possess up to three ounces of cannabis flower or an equivalent amount in other forms, establishes a lottery for adult-use licenses, allows for home cultivation of up to six mature cannabis plants (with no more than 12 mature plants per residence), and imposes a 6% sales tax.
The Amendment creates two separate adult-use commercial markets, one that is open solely to current medical cannabis licensees and one that is solely open to social equity candidates. For the medical providers, Dec. 8 is the date at which they had to apply to the Division of Cannabis Regulation (DCR) to convert their current medical license to a “comprehensive” license that allows them to serve both medical and adult-use markets. Currently, 63 marijuana cultivation licenses, 204 dispensary licenses and 84 manufacturing licenses are eligible for this conversion. As the state has a 60-day requirement to process such applications, that means that Missouri is likely to have adult-use cannabis sales happening by the end of Feb. 2023.
Under the Amendment, the State must begin accepting new, original microbusiness license applications by June 6th, 2023, and must issue those licenses by September 4th, 2023. These licenses will only be issued to social equity applicants, whom are businesses primarily owned by individuals who meet certain income thresholds and/or have lived in certain impoverished communities within the State. Microbusinesses will not be able to purchase or do business with the current medical providers but will instead have to transact cannabis exclusively with other microbusiness licensees.
The Amendment calls for a total of 18 licenses in each geographical region of the state for a total of 144 microbusiness licenses. The State plans to have at least 48 of those licenses issued prior to the end of 2023. The addition of 144 microbusiness retail locations on top of the 204 existing medical dispensaries should prompt substantial growth off what BDSA in a November report estimated would be a $370-million medical-only base in 2022. That represents enormous growth since medical-only sales began in October 2020. Missouri saw the number of active brands explode by 60% in the first nine months of 2022, per BDSA, and revenue growth has continued even while average retail prices plummeted 40% since September 2021.
Mid 2023: New York To Launch General Licensing for Cultivation, Processing, Distribution and Retail
After months of uncertainty, New York's Cannabis Control Board (CCB) will in fact meet its self-imposed deadline to launch adult-use cannabis sales by the end of the year, but just barely. Housing Works Cannabis Co., located at Broadway and Eighth Street in Manhattan, was the first New York adult-use dispensary to open its doors at 4:20 p.m. on Thursday, Dec. 29. While Housing Works Cannabis Co.’s opening will let Gov. Hochul keep her promise of having a New York dispensary open by the end of the year, the CCB has still only issued 36 of the promised 175 total social-equity conditional retail licenses to as many as 150 individuals and 25 nonprofits. These stores will be served by the 280 conditional cannabis cultivators and 39 conditional cannabis processors that were licensed as of Dec. 27th, 2022.
The general round of licensing, which has been repeatedly delayed, now seems to be very much on track for its promised Mid-2023 launch. The state has issued its proposed cannabis regulations, which are open for public comment until 2/13/2023. Once those regulations are finalized, it is expected that the State will take the next few months to design an application and recruit application reviewers, making the June/July expected opening of the cannabis application window a strong likelihood.
New York licensure may be the biggest opportunity on the horizon for new entrants to the market given two factors: 1) the state’s 1.6 million monthly adult cannabis consumers, behind only California (3.8 million) and Florida (1.7 million), and 2) the severe limits which the state proposed in November to put on the 10 incumbent medical-only Registered Organizations (ROs). The 10 ROs are owned or in process of being acquired by MSOs: Acreage, Columbia Care, Cresco, Curaleaf, Goodness Growth Holdings (parent of Vireo Health), Green Thumb, iAnthus, MedMen, Pharmacann, and RIV Capital (in process of acquiring Etain Health).
The MSOs will be barred - under the proposed rules barring most license combinations from being held by the same True Party of Interest (TPI) - from operating in the adult-use channel using their preferred vertically integrated model. The ROs that opt to be adult-use retailers will be required to provide 40% of their shelf space to non-RO suppliers. Those that opt to be cultivators will be limited to 100,000 square feet of canopy, far less than several ROs had announced plans to build. All retail licenses will be limited to three adult-use stores and barred from owning other types of licenses. Even before the proposed rules were announced, regulatory saber-rattling was cited by Ascend Wellness in pulling out of a deal to acquire MedMen’s New York operations. The reasons for the collapse of Verano’s announced acquisition of Goodness Growth are in dispute, but the latter’s principal asset is its New York license.
The tentative rules look friendlier to processors and distributors, and hence potentially to brands. That may prove true for both homegrown start-ups who obtain licenses and for national brands looking to partner with local licensees to go after the industry’s biggest near-term adult-use sales opportunity.
Further State Legislation Likely to Result in More New Licensing Opportunities
Dec. 1, 2022: Rhode Island Launches Adult-Use Sales, New Licenses Due in Late 2023
The Ocean State launched adult-use cannabis sales in the final month of 2022, becoming the 19th state to make cannabis available at retail for adult-use. The opening of adult-use sales comes just over six months after Gov. Dan McKee signed the Rhode Island Cannabis Act on May 25, a decade after Rhode Island became the 13th state to legalize medical use in 2013.
The extreme limitations put on medical access during that decade – mainly the limitation to just six dispensaries – had stalled market growth there in the $40 million dollar range since 2016. An upcoming round of new licensing promises to grow the store count by 5x and unlock nearly $200 million in adult-use sales by 2027, according to the Brightfield Group.
When adult-use sales launched Dec. 1, five of the six existing compassion centers were given the green light to commence sales with hybrid (medical/adult-use) retail licenses: Aura of Rhode Island (Central Falls), Thomas C. Slater Center (Providence), Mother Earth Wellness (Pawtucket), Greenleaf Compassionate Care Center (Portsmouth), RISE Warwick (Warwick).
Over the course of the next year, the state is expected to issue licenses for 24 more adult-use only dispensaries, including a portion reserved for social equity applicants and worker-owner cooperatives. These new adult-use retailers will be supplied by the nearly 70 existing medical cannabis cultivators who are now permitted to sell products to adult-use cannabis businesses.
However, this new licensing opportunity is expected later in the year as, at the time of this update, Gov. Dan McKee has not yet appointed the three-member Cannabis Control Commission who will oversee the regulatory system governing the adult-use cannabis market in Rhode Island. Meanwhile, 33 cities and towns across Rhode Island voted on local referenda to determine whether cannabis businesses would be allowed in their jurisdiction, ensuring them a portion of the tax revenue generated by legal sales. Ultimately, 25 of those municipalities approved proposals to allow cannabis businesses.
So, for the State of Rhode Island, adult-use sales have already started but that market is set to expand its licensed-retail footprint – and consumer spending – significantly in late 2023.
Jan. 10, 2023: Connecticut to Launch Adult-Use Sales, More Licenses to Follow
After Gov. Ned Lamont signed adult-use cannabis legalization into law in June 2021, many industry stakeholders in Connecticut hoped and anticipated adult-use sales would launch in the state before the end of 2022. However, Connecticut was unable launch sales before the calendar turned to the New Year. The delay stemmed from Connecticut state law requiring 250,000 square feet of growing and manufacturing space to be approved for adult-use production before sales can begin. This, in turn, requires all four of the state’s existing medical cannabis producers to receive approval to serve the adult-use program and convert their facilities to be able to meet production needs.
There are a total of four cannabis producers – Advanced Grow Labs, Connecticut Pharmaceutical Solutions, Curaleaf, and Theraplant – that have been approved for adult-use production and have completed their conversion process. With that, Connecticut was set to begin adult-use sales on Jan. 10.
Seven existing hybrid (medical and adult-use) dispensaries also completed the necessary steps to participate in the Jan. 10 sales launch and were notified by the state’s Department of Consumer Protection (DCP). Those retail operators are Affinity, Bluepoint Wellness of Connecticut, Still River Wellness, Fine Fettle Dispensary – Newington, Fine Fettle Dispensary – Stamford, Fine Fettle Dispensary – Willimantic, and Willow Brooke Wellness.
While all licenses from the 2022 lottery round have now been granted, Connecticut’s Department of Consumer Protection has plans to announce new licensing rounds in 2023, though the exact date is still pending. Five of the country’s top 10 MSOs have operations in Connecticut as part of their northeastern corridor strategies: Curaleaf, Trulieve, GTI, Verano and Acreage. If enough retail outlets are allowed Connecticut could end up punching well above its weight as the number 30 state in population: Brightfield Group forecasts the combined medical/adult-use market could be the 19th largest in the country, generating $810 million, by 2027.
March 7, 2023: Oklahoma’s Special Election for Adult-Use Cannabis Legalization
Oklahoma voters will finally have their say on adult-use cannabis in March. In October 2022, Republican Gov. Kevin Stitt declared a special election to be held on March 7, 2023, to allow voters to decide State Question 820, which would legalize, regulate, and tax cannabis for adult-use.
The special election comes after an initiative to place adult-use cannabis legalization on the November 2022 ballot was quashed when Secretary of State Brian Bingman’s office took longer than expected to verify petition signatures. That delay caused Oklahomans for Sensible Marijuana Laws (OSML), the group behind what has been dubbed the Yes on 820 Campaign, to miss the deadline to finalize the measure ahead of the November elections.
OSML submitted roughly 164,000 signatures—much more than the required minimum of 94,911 signatures—to Bingman’s office on July 5, 2022. OSML was told the verification process would take two to three weeks, “which was historically how long it had taken to manually count signatures,” according to the state’s Supreme Court ruling, but a slow signature count caused OSML leaders to miss the Aug. 26 deadline to finalize the ballot measure. But now, thanks to Stitt’s declaration of a special election, voters in Oklahoma will make their decision on whether to legalize adult-use cannabis.
The measure would authorize the Oklahoma Medical Marijuana Authority (OMMA) to administer and enforce the law and would impose a 15% excise tax on adult-use sales. That excise tax revenue will fund the law’s implementation, with any surplus directed to public schools to address substance abuse and improve student retention, as well as to the General Revenue Fund, drug addiction treatment programs, courts, and local governments.
Oklahoma’s liberally regulated medical-only program has been so successful in terms of allowing for industry growth, it’s not clear how much incremental growth adult-use legalization will spark. The state had 368,218 registered patients by May 2021, per the Marijuana Policy Project. That’s 9.3% of the population, by far the highest percentage in the country and well above the less-than-5% of adults in the state that reported monthly cannabis use in government surveys prior to medical legalization. Medical-only pending was expected by the Brightfield Group to break $1 billion for the first time in 2022, or $250 per capita, higher than in any adult-use state other than Alaska, Colorado and Nevada.
On the other hand, there’s no reason to expect an actual market contraction like that seen in California in 2018 when a highly taxed and regulated adult-use regime launched in what had been loosely governed medical-only state. In California in 2018, newly passed local bans shuttered more than two thirds of existing dispensaries. Under Question 820, local jurisdictions will not be able to ban businesses, OMMA will be required to regulate adult use in substantially the same way it does medical, and a 15% excise tax on adult-use sales would not apply to medical patients. Incumbent medical licensees would have a two-year window to apply for adult-use licenses before the state opens the adult-use application window to new entrants.
July 1, 2023: Cannabis Possession Becomes Legal in Maryland, Licensing Schedule to Follow
Question 4 passed in Maryland by a 65.4% to 34.6% margin in November 2022, officially making Maryland the 20th state to approve adult-use cannabis. Medical cannabis has been legal in the state since the passing of House Bill 881 in 2014. The approval of Question 4 allows for adults 21 and older to purchase and possess up to 1.5 ounces of cannabis, 12 grams of concentrate, 750 milligrams of delta-9 THC or two plants for personal use.
While ambiguity remains around when licenses will be awarded, when regulations will be released, and when sales will launch, cannabis possession becomes legal in the Free State beginning July 1, 2023. The state’s cannabis program will be run by the Maryland Medical Cannabis Commission, which has not issued any recent updates.
While this is still largely conjecture, the political talk in Maryland is that the legislature is highly motivated to pass the required enacting legislation by the end of the 2023 session on April 10th, 2023. Rumors of draft legislation already circulating abound, though there has been no official word on what the future market might look like. Still, hopes are high that Maryland might have an active adult-use licensing process as early as late 2023 or early 2024.
The state’s medical program had been one of the most successful in the country: in 2000, some 102,000 patients per the Marijuana Policy Project spent what Brightfield Group estimates was $460 million (or $4,500 per patient). But monthly sales peaked in March 2021 per BDSA’s retail sales tracking; in September 2022 they were 7% below September 2021. With pricing under pressure as in most established markets, a return to growth in Maryland depends on opening up sales to the state’s 600,000-plus monthly adult consumers.
Nov. 2023: Ohio Push for Adult-Use Cannabis Legalization
Cannabis advocates in Ohio had their 2022 adult-use legalization campaign suspended by a lawsuit, but that didn’t deter advocates’ from reaching agreement with lawmakers to renew the ballot qualification push for adult-use legalization in 2023.
There are currently two initiatives seeking support to legalize adult-use cannabis in Ohio: The Ohio Marijuana Legalization Initiative, backed by the Coalition to Regulate Marijuana Like Alcohol, and House Bill 382, introduced by state Reps. Casey Weinstein (D-Hudson) and Terrence Upchurch (D-Cleveland).
The adult-use legalization initiative has been cleared for signature gathering to qualify for the November 2023 ballot. The campaign has until about the end of January to get the 130,000 signatures needed to put the initiative on the 2023 ballot, according to a Cleveland.com report
CRMLA has been down this road before. In December 2021, the Coalition submitted 206,943 signatures—much more than the required 132,877 signatures required—to Ohio Secretary of State Frank LaRose. In early January 2022, LaRose announced his office rejected more than 87,000 of those signatures, leaving the petition effort short by 13,062 signatures, which led to the lawsuit filed by CRMLA against Ohio GOP leadership.
The adult-use legalization proposal would legalize cannabis purchasing and consumption for adults aged 21 and older while also creating a new state regulatory agency, the Division of Cannabis Control. It would also levy a 10% sales tax on adult-use cannabis sales, with tax revenue distributed among several entities, including a social equity fund, a substance abuse and addiction fund, and municipalities that host cannabis businesses.
CRMLA says it will continue to collect signatures to qualify the measure for the November 2023 ballot. H.B. 382, meanwhile, was heard by the Ohio House Finance Committee on Dec. 6, just before the legislative session adjourned Dec. 21. Under H.B. 382, consumers would be able to possess up to 5 ounces of cannabis and 15 grams of concentrates. The proposal would also create a cannabis regulatory agency within the Ohio Department of Commerce to oversee licensing for cultivators, processors, retailers and testing laboratories, while also levying a 10% tax on retailers’ gross sales. The revenue generated from that tax would be divided among road and bridge maintenance (35%), K-12 education (35%), as well as funding for dispensary-friendly municipalities. The legislation also mandates $20 million to be allocated in the program’s first two years to clinical trials and research towards cannabis treatment options for veterans.
Movement toward adult-use legalization in Ohio bears watching simply because of the state’s size. The Brightfield Group forecasts that a 2024 start to adult-use sales could result in an explosion in sales from less than $400 million in 2021 to nearly $3 billion by 2027.