Ohio adult-use marijuana legalization could spawn $4 billion market, but lawmakers a wild card

November 6, 2023 · MJ Biz Daily

Ohio is poised to become the cannabis industry’s next big thing if voters there, as expected, approve an adult-use marijuana legalization measure on Tuesday.

Legal cannabis in Ohio – with nearly 12 million people, it’s the country’s seventh-most-populous state – would provide a boost to existing medical marijuana businesses, which would be positioned to serve an adult-use market worth as much as $4 billion within a few years, according to MJBizDaily projections.

It would also be another milestone for the U.S. reform movement that would likely put even more pressure on Congress to legalize marijuana – or at least change the nation’s MJ laws.

But while polling shows a solid majority of Ohioans support legalization measure Issue 2, Election Day is less than half the battle.

State lawmakers in the Republican-dominated General Assembly are already vowing to make changes. And they have the authority to alter or repeal any voter-approved initiative statute.

That’s a wild card that’s keeping players in Ohio’s limited-license market guessing even as legalization advocates prepare to celebrate a major achievement.

Ohio would become the 24th state – plus the District of Columbia – to legalize recreational marijuana if a simple majority of state voters approve Issue 2 in Tuesday’s off-cycle election. (MJBizDaily will offer coverage of this key vote.)

In addition to legalization, the only other question before state voters is a highly contentious abortion-rights measure that county elections officials say is boosting turnout in what might otherwise be a sleepy non-presidential election year.

A win in Ohio, a crucial swing state in presidential elections that’s often considered a bellwether for Middle America attitudes, would be yet another major milestone for marijuana legalization in the United States.

Ohio would be the third state to legalize in 2023, after Delaware and Minnesota approved adult use through their legislatures.

It would be a key legalization victory at the ballot box after Oklahoma voters rejected adult-use marijuana in March.

And a win would supercharge a statewide market currently restricted to the 180,000 Ohioans with valid medical marijuana recommendations, according to state data.

The relatively few Ohio patients are nevertheless demonstrating a healthy appetite: Sales of medical cannabis could reach as much as $575 million this year, according to the 2023 MJBiz Factbook.

But adult use in a populous state that’s also replete with nationally known colleges and universities is a potential game changer.

MJBizDaily projections suggest adult-use sales could total $1.5 billion to $2 billion in the first year after the market launches and $3.5 billion to $4 billion by the fourth year.

State of play

Currently, Ohio is a limited-license medical market that’s attractive to publicly traded multistate operators as well as locally based companies eager to avoid the oversaturation problems plaguing older markets such as California and Colorado.

The opening of a new adult-use market with limited opportunities for competition would be a welcome beacon for some in an otherwise dour bear-market era.

To date, the state has permitted 34 cultivators, with up to 37 licenses available, according to recent state data.

There are also 107 MMJ dispensaries with certificates of operation.

The limited number of licenses, plus the six-figure license fees charged to larger operators, have attracted big cannabis companies.

Those include major multistate operators such as:

  • New York-headquartered Acreage Holdings, which partnered with Ohio operator Greenleaf Apothecaries and that company’s The Botanist retail brand.
  • New York-based Curaleaf Holdings.
  • Chicago-headquartered Green Thumb Industries, doing business under its Rise brand name.
  • Florida-based Trulieve Cannabis Corp., which opened its first Ohio location in Columbus, the state’s largest city, in July.

As written, Issue 2 allows adults to possess marijuana 30 days after the ballot initiative is passed.

The measure would create a new state agency to oversee recreational marijuana that would have nine months to craft regulations.

But it’s understood that existing medical cannabis operators would be first in line to make the first sales.

Sales would be subject to a 10% excise tax on top of an existing 5.75% sales tax.

And while past offenses aren’t automatically expunged, there are social equity provisions in the ballot measure.

There’s even an allowance for home cultivation not seen in other East Coast states: six plants per adult, but no more than 12 plants per household.

Editing allowed

However, the Ohio Constitution allows state legislators to modify or repeal initiative statutes as soon as they’re passed.

And while political observers doubt that the General Assembly would go so far as to repeal voter-approved legalization, sitting lawmakers have already pledged to make changes.

However, most observers expect more modest post-election tweaks given the bipartisan support for legalization among Ohioans.

And it’s believed lawmakers would be more reluctant to dramatically revise Issue 2 if the measure passes with a big majority.

“My guess is that members will tinker around the edges rather than repealing it – I don’t see that happening,” said John Carney, a former state lawmaker who now chairs the cannabis practice at Porter Wright, a major Columbus-based law firm.

Long road

Tuesday’s vote is the denouement of a legalization effort that began in earnest two years ago, although Ohio’s progress from medical to adult use began in the middle of the last decade.

Ohio lawmakers legalized medical marijuana in 2016, the year after voters rejected a ballot measure that would have gifted a select few companies an adult-use monopoly.

In the years since, Ohio has become known as a tightly controlled medical marijuana market.

Advocates launched an attempt to qualify legalization for the November 2022 election in 2021.

But after a lawsuit accused state lawmakers of trying to block the initiative, a legal settlement punted the question to this year.

Supporters turned in more than 500,000 signatures from voters to qualify the measure.

Big money, no big opposition

The yes campaign, the Coalition to Regulate Marijuana Like Alcohol, is relatively well-funded and has enjoyed a relatively straightforward push without any serious opposition.

The campaign reported $1.1 million in contributions to date.

The two biggest donors are the Washington DC-based Marijuana Policy Project, which contributed $275,000, and Curaleaf, which contributed $200,000.

While Republican Gov. Mike DeWine and Republican state Senate President Matt Huffman have come out against the initiative, a well-funded opposition campaign never materialized.

The no campaign, called Protect Ohio Workers and Families, has raised $342,900, according to campaign finance records, with the leading donor, the Ohio Manufacturers’ Association, contributing $101,000.

A Cincinnati-based campaign lawyer who shares an address with the Protect Ohio Workers and Families committee did not respond to an email seeking comment.

With a tiny fraction of the $20 million or more in funding needed to blanket metro areas such as Cleveland and Cincinnati with television and radio ads that might swing public opinion, and with polls showing 59%-65% of voters in favor, passage of Issue 2 seems likely.

And if requests for vote-by-mail ballots are any indication, turnout among Democrat-registered voters – who tend to be more supportive of marijuana legalization – is so far outpacing Republicans, according to an analysis from Cleveland TV station WEWS.

“We’ve been encouraged from the beginning,” said Tom Haren, a partner at Cleveland-based law firm Frantz Ward who serves as the Coalition to Regulate Marijuana Like Alcohol spokesperson.

Haren acknowledged that the campaign has little control over what the General Assembly chooses to do after Election Day.

In a recent webinar hosted by Ohio State University, Republican state Rep. Josh Williams, who represents Toledo’s northern suburbs, said the initiative needs to be “modified substantially,” with “conversations already happening” in the state House.

Notably, Williams did not call for an outright repeal.

“We don’t want to put any carts before any horses,” Haren said, “but I expect and I think the voters have a right to expect that their elected officials will respect the results of an election.

“I don’t think that’s too much to ask of our elected policymakers.”

Boon for business

Ohio’s nearly 12 million residents – about three-quarters are older than 21 – provides a much larger potential customer pool than the 180,000 current MMJ cardholders.

Existing business owners recognize the potential impact on their companies’ balance sheets.

As a social equity licensee, Cleveland-headquartered Harvest of Ohio “will be first in line for adding additional dispensaries” to its existing three locations, Chief Operating Officer Amonica Davis told MJBizDaily.

Harvest of Ohio – which is locked in litigation with former partner Trulieve – is busy revising business plans and raising investment to accommodate what is expected to be a rush of new customers.

“Obviously, the doors will need to be opened wider to be able to accommodate so many new customers” if Issue 2 passes, Davis said.

And since it looks likely it will, preparations are “geared up,” she added.

Industry operators are eager to avoid messy and chaotic rollouts like the one still underway in New York.

Jeff McCourt, the CEO of Firelands Scientific, a vertically integrated operation with a dispensary in Huron, told MJBizDaily he believes Ohio is poised to have a “just-right” approach that will encourage growth in the legal market while limiting opportunities on the illicit market.

Though relatively small, Ohio’s MMJ program “is already well built from an infrastructure perspective,” he said. “And I think all of that will have a positive final impact when and if Issue 2 passes.

“There won’t be a lot of tolerance for products that are unsafe and unregulated,” including illicit cannabis from other states as well as intoxicating hemp-derived products containing delta-8 THC and other novel cannabinoids.

“Having the rollout of the program go right is really important,” McCourt added. (Full Story)

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