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Discussion Papers
Innovation and Entrepreneurship Research

U.S. State Approaches to Cannabis Licensing

Wang, Lucy Xiaolu; Wilson, Nicholas (2022). U.S. State Approaches to Cannabis Licensing, Max Planck Institute for Innovation & Competition Research Paper No. 22-09.

U.S. states have taken varied approaches to licensing cannabis businesses under federal prohibition, but up to now there is limited research on cross-state licensing approaches. This paper provides a systematic analysis of the current licensing strategies taken by all states that have passed medical cannabis laws (MCLs)/recreational cannabis laws (RCLs). We construct comprehensive data on cannabis business licenses offered in each state, as well as metrics for license categories, cost, and issuance volume. We then analyze patterns between these metrics, also considering how long ago states implemented MCLs/RCLs, qualitative licensing aspects, state ideology and voting preference, and state cannabis taxation data. We observe that states tend to license medical cannabis more restrictively than adult-use cannabis: i.e., by offering licenses in fewer categories, at higher cost, in lower issuance volume, and more often mandating vertical integration. Additionally, states that implemented MCLs/RCLs earlier tend to offer licenses in more categories, at lower cost, and in greater issuance volumes. Further, though states that implemented MCLs recently lean conservative and Republican, we do not observe clear relationships between ideology or voting preference and licensing policy. In our supporting results, we observe that a greater share of states with complex licensing structures impose non-retail price cannabis taxes than states overall, and we discuss how states have changed their licensing policies over time.

Available at SSRN