In November 2012, voters in Colorado and Washington took a historic step by approving Amendment 64 and Initiative 502, respectively. These were the first voter initiatives in the nation to assume state control over the regulation of marijuana for recreational purposes under certain circumstances.1 Since these first state legalization efforts became effective, eight additional states plus the District of Columbia have passed laws to legalize marijuana for adult use.
Most, like those in Colorado and Washington, have been enacted by voter initiative. However, state lawmakers have taken an increasing interest in legalizing marijuana through the legislative process. In 2018, Vermont became the first state to enact a legalization statute through the legislative process, and similar efforts are gaining momentum in Illinois, New Jersey and New Mexico. Meanwhile, voter initiatives to legalize marijuana continue apace with Michigan voters approving such a measure in November 2018. The perceived trend, then, is that more states are likely to enact laws to legalize marijuana.
This recognition sets forth important questions about how best to regulate these newly legal markets for marijuana. This effort is challenging because robust black market supply chains already existed to satisfy the demand for marijuana. Thus, policymakers and regulators are faced with the challenge of:
- establishing a legal market in an industry with which they are largely unfamiliar,
- balancing the tradeoffs between ensuring sufficient oversight and public safety
- generating public revenue through taxation, and
- simultaneously creating a business environment in which legal suppliers are not just able to compete, but, hopefully, to drive out black market suppliers. Since regulatory and tax burdens increase production costs for legal operators relative to black market suppliers, these goals are often in conflict.
To date, states have developed vastly different approaches for establishing their legal marijuana markets and balancing these competing objectives. No approach has been perfect in its totality, but states have experienced success to greater or lesser degrees within certain aspects of their regulatory frameworks. This brief compiles the approaches taken by states to date and develops a conceptual framework of best practices that policymakers should use as a guide for either improving their existing marijuana markets or establishing new ones.
In addition, the brief highlights considerations specifically relevant to state-licensed medical marijuana programs. Policymakers should note that many consumer products commonly marketed as containing cannabis and, especially, cannabidiol (CBD) are created from federally licensed or imported hemp and do not fall within the scope of state marijuana regulations.