Ohioans don鈥檛 have to look far for the economic promise of legal recreational marijuana 鈥� Michigan鈥檚 market sold more than last year, enjoying almost $280 million in total sales in December alone.
With the 2023 passage of Issue 2, Northeast Ohio cultivators and dispensary owners can look to Michigan and other states where adult-use recreational marijuana has been legalized on how to build, and improve upon, a recreational marijuana ecosystem, said area cannabis experts and entrepreneurs.
Even as Ohio lawmakers consider that , the state can cast a wide net over existing licensing, regulatory and taxation frameworks, noted Julie Winter, vice president of retail operations at , a Miami-based cannabis company with a retail shop in Woodmere.
Speed to market is a good starting point, as state officials will be weighing a deluge of license applications in the coming months, said Winter. Michigan, which approved adult-use legalization in 2018, had 2,170 licensed cannabis businesses at the end of 2023. This figure included 751 retailers, 250 processors and 46 marijuana event organizers.
Ohio may not reach such heights due to a statewide cap on retail shops, among other potential changes to the legalization law. Yet, officials would be wise to fully support experienced operators while simultaneously bringing new entrants into the space 鈥� such a system will help flatten the 鈥渓egacy market鈥� of illicit dealers, Winter said.
鈥淭his will allow (veteran entrepreneurs) to expand to make sure there are good access points for customers,鈥� said Winter. 鈥淪ometimes, markets open up with too limited of the number of dispensaries, and it鈥檚 hard to get people to opt out of the legacy market because it鈥檚 not convenient for them.鈥�
Veteran owners led the charge in Massachusetts and New Jersey, setting the stage for a cannabis program that benefitted minority operators and other new entrepreneurs through grants and additional funding, said Ayr Wellness vice president of engagement Robert Vanisko.
鈥淥n the flip side, New York had such a long layoff between passage of legalization and the actual opening of any stores, what you saw there was a broad proliferation of the legacy market,鈥� said Vanisko. 鈥淪o that speed to market is important. Having a good base of dispensaries who have storefronts and cultivation capacity certainly helps.鈥�
Ready for an adult-use future?
Ohio currently has 120 licensed medical cannabis dispensaries, according to the state pharmacy board. The recreational market here will not match that of Michigan, where jurisdictions can offer citizens unlimited licenses for the growth, processing and sale of marijuana,said Andrew Rayburn, owner of Eastlake cultivator and processor .
Rayburn, who also recently opened an medical dispensary in Bedford, believes Ohio needs a four- to five-year runway to launch the approximately 275 recreational shops expected for the state. About 50 adult-use dispensaries will be certified social equity participants, a pillar of Issue 2 meant to buoy populations negatively impacted by marijuana laws.
Ohio鈥檚 strict governing atmosphere will prevent the type of dispensary 鈥渃lustering鈥� found in Michigan, where participating towns and counties opened their doors to recreational cannabis. Difficult-to-enforce federal laws prohibiting transport of marijuana across state lines did not stop many Ohioans from making the trip, said Rayburn.
鈥淲hen Michigan kicked off, they didn鈥檛 structure the regulations of the market nearly as tightly as Ohio鈥檚 medical market, or what will be our recreational market,鈥� Rayburn said. 鈥淭here will be zoning or distancing of dispensaries here that is designed against clusters. So, if there are X number of dispensaries in the city of Cleveland, at some point there will be a number where they are cut off.鈥�
Michigan鈥檚 鈥渨ild west鈥� nature led to more illegal product coming into the state, said Rayburn. In Ohio, the department of commerce inspects Rayburn鈥檚 cultivation and processing set-up every 90 days, a schedule enacted in Michigan only during the last few months.
Far from a detriment, the commerce department has become a partner in preparing Rayburn for Ohio鈥檚 adult-use future, he said.
鈥淚鈥檓 very excited and positive about how the recreational market can be introduced here, because the department of commerce is receptive to industry input,鈥� said Rayburn. 鈥淭hey鈥檙e communicative and we enjoy working with them.鈥�
Watch those taxes
Marijuana legalization is forecast to bring in millions in tax revenue to Ohio. According to an Ohio State University Drug Enforcement and Policy Center released in 2023,the state stands to gain between $276 million to $403 million in taxes by the fifth year of an adult-use cannabis market.
Per Issue 2, about 36% of funds will go to social equity and jobs programming, while another 36% is earmarked for jurisdictions that host adult-use dispensaries. Another 25% is set aside for substance abuse and addiction, with a final 3% utilized for general administrative costs.
Put simply, state lawmakers don鈥檛 want Ohioans generating tax revenue for the state up north, said Winter, the Ayr Wellness official. However, Ohio should emulate Michigan鈥檚 adult-use tax rate 鈥� a 10% excise tax on sales along with a 6% standard sales tax.
鈥淲hen an excise tax is too high, it incentivizes customers to stay with the legacy market,鈥� Winter said. 鈥淭he point of adult use is to bring people into the regulated space, so you need fair tax rates to allow them to compete.鈥�
Although Ohio鈥檚 proposed tax rate is currently similar to Michigan鈥檚, legislators are contemplating a 15% excise tax at point of sale for recreational marijuana operators. A bad idea, as a higher tax rate equals higher prices for customers, said executive director Harry Bernstein, whose Cleveland firm works with growers and processors on the registration of their businesses.
鈥淧eople will pay more for premium and safety than buying from their buddy, but only to a point,鈥� said Bernstein. 鈥淚f legal cannabis is 20 times what you can buy around the corner, then they鈥檙e not going to pay for it. States have to be very careful of that.鈥�
Making consumers comfortable is another way of keeping people from the local dealer, said Winter. Dispensary employees must adequately explain the differences between strains, distinguish between cannabis brands, and make the proper recommendations to customers both old and new, she noted.
Legal states like New Jersey have also developed a retail shopping experience where guests can touch and even 鈥渟mell-test鈥� available strains, Winter said. All in the name of normalizing cannabis for a new and existing customer base.
鈥淪ome people just want to browse over-the-counter rather than talk to someone,鈥� said Winter. 鈥淣ew Jersey is proof of a very successful market.鈥�