Podcasts

Summary

In the 13 years since Colorado legalized recreational cannabis, the industry has exploded in multiple states across the country. With Ohio as the latest to open its doors to the cannabis industry, Frantz Ward Of Counsel Mia Garcia and Partners Thomas Haren and Keenan Jones examine Colorado’s established cannabis industry and look forward to the expanding industry in Ohio.

Podcast First Aired: April 17, 2025

Transcript

Mia Garcia:

Welcome to another edition of Frantz Ward’s podcast, Shoveling Smoke, where we discuss current legal issues affecting the business community and our daily lives. I’m Mia Garcia, your host for today’s edition. Today, I’m joined by Tom Haren. He’s the chair of our Cannabis Law Practice Group and Keenan Jones, a partner in our Cannabis Law Practice Group. Today we’re going to discuss the development of cannabis markets from the first state, Colorado, to the most recent state, Ohio. So Keenan, let’s start with Colorado. How would you compare it in terms of structure, regulation, and overall industry health?

Keenan Jones:

So Colorado was the first one of the first markets to allow adult use marijuana sales with their first sales in 2014. And they have had a lot of time to show the rest of the states what to do and what not to do.

Their system is set up so that marijuana operators have a state license that’s issued by the state, as well as a license that’s issued by the local licensing jurisdiction. And under Colorado system, every local jurisdiction had the opportunity to opt out of the program and say that they would not allow any marijuana businesses within their local licensing jurisdiction. We’ve seen that in other states, but not every state has what Colorado calls a dual licensing system where every operator has to get a license from the state as well as from their local licensing jurisdiction. So that’s the main structure of Colorado’s marijuana system – that dual licensing structure.

Mia Garcia:

And Tom, how does that differ with Ohio’s market?

Thomas Haren:

Like a lot of other states on the east coast of the country, Ohio has a very top-down regulatory structure. While Ohio provides the ability for local communities to opt out of having licensed marijuana businesses in their community, there is no ability for local jurisdictions to separately license those businesses. All of the licensing, all of the regulatory authority in Ohio is done at the state level. And that has allowed for a very uniform operation from licensee to licensee, a very uniform ability to regulate these licensees, and hopefully a more consistent application of governing regulations.

Because, as most people would not be surprised to learn, big cities operate differently than small suburbs or small rural communities. They care about different things. And it’s really important in an industry that is as difficult to operate in as the cannabis industry to have uniform application of the governing regulations so that, for instance, if I have a dispensary in Cleveland, I know that dispensary is going to be regulated the exact same as if I have a dispensary in a rural township somewhere else in the state.

Keenan Jones:

That point about uniformity and consistency is a great one, especially when you compare Colorado’s market and structure to newer markets that are coming online. And that point about cities and towns being different throughout a state – we don’t see that in Colorado in terms of regulation because not only are local licensing jurisdictions free to license and they have to license these marijuana businesses, they also have the ability to regulate and license them basically however they want. So we have some rural communities that just follow the state’s lead. They say, show us your state license, we will give you a local license. You have other communities, other cities or other counties that are more populous that have a much more robust regulatory scheme. And so you could have a dispensary in, say, Denver that is regulated entirely different than a dispensary that’s on the southern border of Colorado. So I think that’s something that Ohio and some of the newer states are definitely learning from Colorado is that uniformity and consistency are pretty important.

Mia Garcia:

How do you think that’s affected where we’re at right now with Colorado as a market, as a whole?

Keenan Jones:

That’s a great question. So the marijuana market in Colorado is not doing very well. One of the contributing factors to that is related to the dual licensing structure. A lot of rural communities at the beginning of Colorado’s program opted out of the program. No marijuana operators were allowed in their jurisdiction. In the early 2020s, some of those rural communities decided we are now going to allow marijuana businesses to operate within our jurisdiction. Those rural communities also allowed outdoor cultivations and the overhead, the operating costs of an outdoor cultivation are significantly less than indoor cultivations and even greenhouse cultivations. And so these established cultivations in other jurisdictions were now competing with operations that had significantly lower overhead. And we saw a significant oversupply of product in Colorado’s market because of that shift in local jurisdictions coming online.

Mia Garcia:

You mentioned supply and that’s definitely been a big topic here in Ohio. Tom, can you talk about what that’s been like since adult use came online last year?

Thomas Haren:

Yeah, of course. So by way of background, in 2023, Ohio voted to enact adult use legalization in the state. That was November of 2023. The law became effective in December of 2023. And the state spent the next nine months getting ready to launch adult use sales. And there was a lot of attention given to supply and demand.

One of the lessons that the regulators learned from other states and watching rollout of adult use programs, transitions for medical only to adult use, is you saw long lines in a lot of those states. You saw supply shortages in a lot of those states. And what that meant was, you know, you’re not only running out of product for adult use consumers, but you’re also running out of product for medical marijuana patients, right? People who have chronic or terminal conditions that rely on these products to get by in their lives, to treat their underlying conditions. And the Ohio Division of Cannabis Control was really cognizant of that fact. And so as part of their rulemaking, they effectively required operators to switch not from medical to adult use, but from medical to dual use, meaning you’re signing up and you’re agreeing to serve both the adult use market and the medical marijuana market in Ohio to ensure that patients aren’t left behind. And that meant you had to produce and continue to produce enough product to supply medical patient demand. And if you were a dispensary, you had to have processes in place to ensure that medical patients weren’t waiting in long lines and also to ensure that you had sufficient inventory on hand to continue to serve and meet the demand for medical marijuana products.

The other thing the state learned is that when you flip the switch and adult use sales go online, you want to have wide availability within the market so that you don’t have two or three first movers in the state. And so when adult use sales launched in Ohio in August of 2024, 90 of the approximately 130 dispensaries in the state began serving adult use consumers on day one. And then within a matter of weeks, the next 40 or so dispensaries also came online. And what that resulted in was a relatively quiet rollout of adult use sales. And that quiet rollout continued to this day.

Even though it’s been relatively quiet, we have also seen wide adoption by Ohio consumers. We’re sitting here right now, the first week of April 2025, and from August until April, Ohio has sold more than $400 million worth of adult use products in licensed Ohio dispensaries. That’s $400 million worth of marijuana products that were not bought in the illicit market and that were not bought by Michigan dispensary owners.

We are still dealing in Ohio with prices that are higher than both consumers and operators would like, but those prices have consistently declined over the last several months. And so what I tell clients and stakeholders these days is, look, don’t be prisoners of the moment. Prices are relatively high now. That has happened in every single market that has transitioned from medical only to adult use. But pay attention to the trend. And the trend is as more supply comes online, as more availability comes online at dispensaries throughout the state, prices will continue to drop. And we will be more competitive with the illicit market as well as with states like Michigan that are also oversupplied, that have a 19% failure rate from their licensees because they have too many of them. So Ohio’s market is trending in exactly the direction that we hoped it would.

Mia Garcia:

Keenan, do you want to talk about the trend direction for Colorado right now?

Keenan Jones:

Sure. The trend for Colorado is not good. And one of the key distinctions between Colorado’s market and Ohio’s market, which I think is causing that, is that Colorado doesn’t have any license caps, whereas Ohio does have a license cap in terms of how many licenses there will be in the state. Colorado doesn’t have that, and so if an applicant wants a new license in Colorado, as long as they check the boxes, the state will issue that license. Some local jurisdictions have caps, but by and large, Colorado has a large number of licensees for its population.

That made some sense in the mid-2010s because Colorado was one of the few states that had state legal marijuana. That’s not the case anymore, and so marijuana consumers all over the country aren’t necessarily traveling to Colorado to legally consume marijuana. They can get it in their state or a much closer state. And so it no longer makes as much sense, if it ever made sense, for Colorado to have as many licensees as they do. So that’s another contributing factor to why Colorado’s market is just oversaturated right now with product.

But to Tom’s point about Ohio’s rollout, because of the caps and because of what the Division of Cannabis Control has done to get this program off the ground, they do seem to be regulating the market in such a way where the market remains stable and is getting to consistent stability, where the market will eventually make sense for everyone that wants to participate in the market. Because there’s no caps in Colorado, that market has fluctuated, and those fluctuations have become more violent in the last couple years. Things were really good in Colorado during the pandemic in terms of sales and wholesale prices, but starting in 2022, wholesale prices have just plummeted and there’s little to no regulatory changes. There may not even be any regulatory fixes available to change that trajection in Colorado.

Thomas Haren:

And, you know, one of the important things I think to mention as well is that while Ohio’s rollout is trending in the right direction, it’s also not all sunshine and rainbows here in the Buckeye State. It’s still far too hard to advertise here within Ohio’s adult use market. That was something that was designed to be fixed candidly by the initiated statute, and that has not happened.

The impact of the extremely restrictive advertising rules is that it’s harder for licensed marijuana businesses to transition consumers away from the illicit market, to transition consumers away from the Michigan market, where if you’re in Northwest Ohio, you see all of the billboards for Michigan dispensaries. You know product is widely available and it is cheap in Michigan. But our operators, we don’t have that same ability to reach consumers.

Also, Ohio has in place operational restrictions that are far more stringent than in other states. We have very high testing requirements that operators have to meet. Licensing fees in Ohio are, quite frankly, outrageous. Every large cultivator in Ohio, which when you compare their size to cultivators in other states are actually not all that large, but the larger of the type of cultivation licenses in Ohio, they pay $200,000 every single year to the regulator just for the privilege of doing business. If you’re a marijuana processor in Ohio, you pay $100,000 every year for the privilege of doing business. If you’re a marijuana dispensary, you pay $70,000 every two years for the privilege of doing business. Imagine if you’re a vertically integrated operator –  You’re paying $200,000 for your cultivation license, you’re paying another $100,000 for your processor license, and then if you have five dispensaries, that’s another, what, $350,000? So that’s more than half a million dollars just in licensing fees. that you pay to the state of Ohio on top of the 10% excise tax at the point of sale on every adult use purchase. Anybody who knows anything about economics knows that those costs have to get passed down to the consumer in order for these businesses to even attempt to be profitable. And so when you add those fees, taxes, which some here in Ohio want to raise, on top of just the overall operating costs, the cost to maintain 24/7 video surveillance with live feed capabilities back to the regulator. You add all of those costs together and Ohio can be a relatively difficult market to operate in.

Keenan Jones:

To compare that to Colorado, some of the things that Tom just mentioned are not difficulties in Colorado. So, the market may not be trending well in Colorado, but it is a more operator-friendly market. The fees in Colorado are significantly less than what Tom just mentioned in Ohio. You’re talking between $10,000 and $20,000 per license to renew every year, and half of that is going to the state, half of that is going to your local licensing jurisdiction.

And then on the advertising side of things, there are folks around the country, there are folks in Ohio that don’t know Ohio has an adult use marijuana program. Colorado never had that problem because they were the first. So long lines made national headlines in 2014 when they first opened dispensaries out there. So everyone’s already always known that you can get marijuana out in Colorado.

Thomas Haren:

I still have family members ask me, “So it’s legal now? You can buy it here?” I was the spokesperson for the legalization campaign. That’s how hard it is to break through to consumers in the state of Ohio.

Mia Garcia:

So you mentioned fees and taxes, which brings me to our next topic about lawmakers. Lawmakers in both states have played a big role in shaping the industry and continue to do so, oftentimes without really familiarity or deep knowledge of cannabis operations and markets. How do you think legislative involvement has impacted businesses and what should policymakers in emerging markets consider?

Thomas Haren:

A not uncommon problem when you’re talking about marijuana policy is that, inevitably, there’s a legislator that has never thought about marijuana policy. And then you sit down for a meeting, and that legislator determines that he or she just came up with the perfect way to regulate the production and sale of marijuana. And how could anybody disagree with his or her approach? And one of the ways that I think this becomes most crystallized is actually in the medical marijuana context.

When medical marijuana first became legal in states across the country, it was generally done by ballot initiative through a constitutional amendment. And those constitutional amendments would often include lists of qualifying conditions that would give the legal right for certain types of patients to purchase, possess, and consume medical marijuana. If you had chronic pain, if you had cancer or other chronic or terminal conditions, that was done to protect patients. But as legislatures started enacting medical marijuana laws, you ended up having legislators deciding which conditions should qualify patients to buy and possess medical marijuana. In other words, you had non-health professionals deciding which conditions could be treated with a medical treatment. And oftentimes, they did that in disregard of the physician and patient relationship.

That dynamic continues even when you get into adult use marijuana legalization and how to regulate these programs. You end up with a legislator that might very well be an expert in any number of fields, but this is an industry that is so unique and so new and so dynamic that you do have to rely on people in the industry to explain and you have to engage with the industry operators in good faith with respect to how these businesses operate, right? To understand the fact that they can’t take standard business deductions. So that impacts how they operate their business. You don’t have access to economies of scale like you do in other industries because this is such a state-by-state-by-state patchwork regulatory framework. So it’s imperative that as legislators engage on this topic, they are open to hearing from industry operators, from policymakers in other states as to how those markets have developed. One of the advantages that a state like Ohio has now is that regulators have started talking to each other. There’s now an association called Canra that regulators belong to. They have conferences where they can get together and they talk about best practices. That’s a good thing for this industry. If nothing else, hopefully it results in more consistent approaches across markets that inevitably make it easier to do business.

Keenan Jones:

One thing that has helped, I think, legislatures address marijuana programs in their state is to familiarize themselves with marijuana operations. And so we have seen, I think, here in Ohio, legislators go tour facilities and they get a better idea of what the day-to-day looks like and what the challenges are for some of these operators.

We were on the other side of that in Colorado, where when new states wanted to come online, they would come out to Colorado to tour facilities to see what the day-to-day operations looked like. So I think that’s critical for any legislative body that wants to get in the middle of the industry or make rules, statutes for this industry, is to really see what it’s like already and how the changes might affect the day-to-day.

The other thing is, the folks in the government that have the most interaction with the operators are the regulators. So that’s an important point is that there’s two ways in which this industry is controlled, right? By statute and by regulation. In Colorado, we have the Marijuana Enforcement Division. In Ohio, we have the Division of Cannabis Control. And I think that both regulatory bodies out in Colorado and in Ohio do a fairly good job of communicating with the operators to understand what are the challenges you’re facing, what can the regulators do to potentially alleviate those problems while achieving whatever the state’s goals are in that program. And I think that the frustrating part happens when the legislative body doesn’t necessarily trust the regulators. And so the legislative body is starting to consider legislation that would change what the regulatory authority is doing or could do to address some of what the operators need to address.

Thomas Haren:

I agree with that. And if you don’t have that type of deep understanding of the market, you end up with some really wild proposals. One of which has been floated like in Pennsylvania to have state run dispensaries. That was also a proposal that was floated, I think in Maine maybe, or maybe it was New Hampshire. That model makes no sense when you consider how difficult it is to run these businesses. When you consider the difficulty in obtaining banking within this industry.

There was a proposal early on in Ohio’s medical marijuana program that Ohio was going to put in place a closed loop banking system and every operator would bank basically through the state with some type of special card or something like that. Everybody kind of looked around and said, well, where’s the state going to bank? Where’s the state going to put all this marijuana money? How does this make any sense at all? How are patients going to pay for product? They’re going to sign up for a special state bank account. How is this going to work? Thankfully, that idea didn’t get off the ground. But those are just some examples of people who have not really dedicated themselves to understanding the nuances of this industry. They see one problem that they’re trying to solve, and they don’t know what they don’t know. They don’t know that this solution comes with 90 other problems that then need to be solved.

Mia Garcia:

So where do you think we’re going next, both in Colorado and Ohio and maybe other states who are considering entering the market?

Thomas Haren:

I’m not sure that’s a question that’s capable of being answered at this point. Primarily because this still is an industry that is so heavily tied to the politics of a state, the politics of the country as a whole, right? Again, we’re sitting here in April 2025. There was a rescheduling hearing in December of 2024 under the Biden administration where the administration was moving to reschedule marijuana under federal law from a Schedule 1 to a Schedule 3 substance. There was a report yesterday that some high-ranking official in the Trump administration said they don’t expect any immediate action on rescheduling after President Trump said during the campaign that marijuana should move to Schedule 3.

It’s very unclear right now what, if anything, will happen at the national level. Unfortunately, what happens at the national level impacts what happens at the state level as well.

One thing we have not yet talked about, but I’m sure we will talk about on a future podcast, is intoxicating hemp. Legalized, some would argue it was, some might argue it wasn’t, but in any event, products became available after the 2018 Farm Bill was passed by Congress. And every year, there has been talk about, well, this Farm Bill is going to regulate intoxicating hemp products. No, no, no. This Farm Bill renewal is going to prohibit intoxicating hemp products. No, no, no. This Farm Bill is actually not going to do anything about intoxicating hemp products. But the Farm Bill just keeps getting extended, extended, extended without addressing the hemp issue at all. And that’s left individual states to take vastly different approaches.

Some states prohibit intoxicating hemp products. Some states now regulate them, similar to alcohol. Some states, like Ohio, haven’t done anything yet with respect to intoxicating hemp products. And until there is some decision one way or another that gets made on intoxicating hemp, whether it’s to allow beverages to be sold, but no other types of products or whatever it is, it’s almost impossible, I think, to say where this industry as a whole goes, because so much is up in the air.

Keenan Jones:

If you had asked us that question six months ago, I think we probably would have said we will see rescheduling at a federal level, which will change the availability of capital in the market, could potentially open up interstate commerce. There would have been more freedom and probably some more positivity as to where the national market was going to go. I think we also would have said we would have had a new farm bill that would have put to rest what’s going to happen with intoxicating hemp. But now, I think we’re left with, for the foreseeable future, this patchwork of regulations on a state-by-state basis. However states want to regulate marijuana, however states want to regulate intoxicating hemp, that’s how it’s going to be. And you’ve got to know whatever state you want to operate in, what those restrictions are.

Mia Garcia:

Any final thoughts?

Thomas Haren:

My only final thought is we could probably update this episode every three months for the next several years. And it would not surprise me if every three months we had a different answer to the question, where does the industry go from here?

Keenan Jones:

And what’s crazy is that I think we would have said the same thing since we started doing cannabis law, that it changes so frequently that it’s impossible to know what’s next.

Mia Garcia:

I guess that’s why we’re in it.

Keenan Jones:

That’s right.

Mia Garcia:

And that wraps up another episode of Shoveling Smoke. This podcast is available on frantzward.com as well as Spotify and Apple Podcasts. Shoveling Smoke is a production of Evergreen Podcasts. Our recording engineer is Gray Longfellow. Our producer and audio engineer is Sean Rule-Hoffman. For more information, please visit our website at frantzward.com.

This podcast is provided for educational purposes. It does not constitute legal advice and is not intended to establish an attorney-client relationship. nor is it intended to suggest or establish standards of care applicable to particular lawyers in any given situation. Prior results do not guarantee a similar outcome. Any views, opinions, or comments made by any external guest speaker should not be attributed to Frantz Ward or its individual lawyers.