The Market for Cannabis Licensing

Lucy Xiaolu Wang (University of Massachusetts Amherst), Nicholas Wilson (Ludwig Maximilian University of Munich), The Market for Cannabis Licensing, SSRN (2021):

US states have taken varied approaches to licensing medical and adult-use 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 strategies taken by states that have legalized some form of cannabis. We construct comprehensive data on cannabis licenses offered in each state as well as metrics for license categories, license cost, and license issuance volume. We find that states that have legalized both medical and adult-use cannabis tend to license medical cannabis more strictly. States that legalized cannabis earlier offer licenses in more license categories, and of lower cost and greater issuance volume. In addition, states with more complexity in the structure of their offered licenses are those that tend to impose non-retail price cannabis taxes. Finally, we argue that licensing and taxation of cannabis by states is comparatively closer to alcohol (particularly distilled spirits) than tobacco.