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US: New study examines differing state approaches to cannabis licensing

Though cannabis remains federally illegal, 37 states and the District of Columbia have passed medical cannabis laws (MCLs), and 18 have passed adult-use recreational cannabis laws (RCLs), creating a “state legal” U.S. cannabis market estimated at $18.1 billion. While these states have taken varied approaches to licensing cannabis businesses until now, there has been limited research on cross-state licensing approaches. A new study led by an economist from the University of Massachusetts Amherst, however, provides a systematic analysis of the current licensing strategies taken by all states that have passed MCLs and RCLs. 

In their paper, recently published in the International Journal of Drug Policy, Lucy Xiaolu Wang and Nicholas J. Wilson construct comprehensive data on cannabis business licenses offered in each state, as well as metrics for license categories, cost, and issuance volume. By analyzing patterns between these metrics and considering how long ago the states implemented MCLs/RCLs, qualitative licensing aspects, state ideology and voting preference, and state cannabis taxation data, Wang and Wilson found that states tend to license medical cannabis more restrictively than adult-use cannabis and that states that implemented MCLs/RCLs earlier tend to offer licenses in more categories, at lower cost, and in greater volumes. 

Wang, an assistant professor of resource economics and faculty associate in the Computational Social Science Institute at UMass Amherst, and Wilson, a master’s student at the Ludwig Maximilian University of Munich, further found that although states that implemented MCLs recently lean conservative and Republican, they did not observe clear relationships between ideology or voting preference and licensing policy.  

“While the ‘early mover’ states are some of the least conservative (e.g., California, Colorado, and Washington), in recent years, multi-category or low-cost licensing regimes have also been implemented in conservative-leaning states (e.g., Oklahoma and West Virginia),” write Wang and Wilson, who are both also affiliated with the Max Planck Institute for Innovation and Competition during the study period. “Further, the restrictive-MCL, broad-RCL approach taken by Illinois and Massachusetts (both less conservative, Democrat-leaning states) may influence these results, which only consider MCLs. Another consideration is that most states without MCLs (e.g., Idaho, Indiana, Iowa, Tennessee, and Wyoming) lean conservative and Republican.” 

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