Time for a Cannabis Policy Reset

 

Time for a Cannabis Policy Reset: Outdated Regulations Are Fueling the Illicit Market

State cannabis regulators are still operating under rules designed for a brand-new industry—and that’s become a big problem. Instead of helping the legal cannabis market thrive, these outdated frameworks are making it harder for licensed businesses to survive. Meanwhile, the illicit cannabis market is thriving.

It’s time for a serious policy reset.

From Safety-First to Business-Blind

When states first rolled out regulated cannabis programs, the heavy emphasis on public safety made sense. Concerns about youth access, impaired driving, and community health dominated the conversation—and rightfully so.

But here’s the issue: regulations haven’t evolved alongside the industry.

The current approach often ignores the economic realities facing cannabis businesses today. Overregulation, high cannabis taxes, and limited consumer access have created a climate where licensed companies are barely hanging on, and many are shutting down entirely. That’s not sustainable.

The Retail-Only Model Isn’t Working

One big example? The strict retail-only model.

Restricting sales to brick-and-mortar dispensaries may seem logical, but in practice, it’s limiting access for consumers and pushing them toward unlicensed sources. Whether it’s for privacy, convenience, or lack of a nearby store, many people simply aren’t walking into cannabis shops. And when the legal market doesn’t meet consumer needs, the illicit market steps in.

Opening up access—through cannabis delivery services, social consumption lounges, or limited retail partnerships—could help drive legal sales and boost compliance.

Illicit Cannabis Is Winning—And That’s a Red Flag

As of 2024, only 29.4% of cannabis transactions happen through regulated channels. That means the illicit market still controls more than 70% of the total market share.

Let that sink in.

This isn’t just bad for legal operators. It also defeats the whole point of regulation—ensuring product safety, preventing youth access, and collecting tax revenue. Illicit cannabis sales have no oversight, no product testing, and no accountability.

The current system is unintentionally propping up the illegal market while choking out the legal one.

Legal Cannabis Businesses Are Struggling

According to a national survey by Whitney Economics, just 27.3% of U.S. cannabis businesses were profitable in 2024.

That’s alarming. Between sky-high taxes, limited retail access, and complex compliance requirements, many cannabis entrepreneurs are being pushed to the brink. Small businesses—especially those that equity programs were supposed to uplift—are failing. Investors are walking away. Jobs are disappearing.

As more states legalize and federal reform gains traction, the industry is shifting. But many state-level cannabis regulations are stuck in the past, created in a time when cannabis was fully illegal nationwide.

Now, we need a more dynamic, forward-thinking approach.

To build a sustainable, competitive legal cannabis industry, we need bold changes. Here’s what that looks like:

• Expand Access: Allow cannabis delivery, permit social consumption spaces, and explore innovative retail models that meet consumers where they are.
• Reduce Regulatory Barriers: Streamline the cannabis licensing process and reduce burdensome compliance costs, especially for small operators and legacy market participants.
• Rethink Cannabis Taxation: Lower and simplify cannabis taxes to make the legal market more attractive for both businesses and consumers.
• Align with Federal Momentum: As federal laws evolve, states must adapt to create a more unified, efficient cannabis regulatory system.

The promise of a well-regulated, tax-generating cannabis industry is still within reach—but not if we keep following outdated playbooks. Regulators and policymakers must evolve with the market and embrace a more balanced, business-savvy framework.

If we don’t change course, we risk cementing a system that fails everyone—consumers, entrepreneurs, and communities alike.

It’s time to build a cannabis industry that actually works.