States should learn from each other to confront the challenges of regulating marijuana.
The movement to end cannabis prohibitions in the United States continued its steady advance in the 2018 midterm elections, with voters in three states approving ballot measures to regulate but not prohibit the use of marijuana for medical purposes or by adults. Utah and Missouri became the 31st and 32nd states to adopt comprehensive medical cannabis laws, while Michigan became the ninth state to legalize cannabis and authorize a regulated cannabis market for adults 21 and older.
Lawmakers and administrative agencies in these three states are already hard at work implementing their new laws and creating the regulations that will govern their forthcoming medical and adult-use cannabis industries. As with any policy area, the devil will be in the details, and the decisions state officials make over the next 12 to 18 months will have an immense impact on the success of these voter-approved laws and the businesses that must follow them.
As policymakers begin to grapple with creating regulated cannabis markets, they will be forced to address a number of challenging issues. Some will be typical to business regulation, such as balancing public health and safety with administrative feasibility and business operability. Others may be less familiar, such as conflicts with federal law, a lack of institutional knowledge, and a well-established illicit market.
Federal cannabis prohibition laws create a variety of challenges for regulating cannabis markets. Some of them have received substantial media attention, such as the difficulty cannabis businesses have accessing basic banking services and the resulting complexities of managing cash. Others have not received as much attention but still create plenty of headaches for policymakers. For example, all pesticides must be approved for their use on specific crops by the U.S. Environmental Protection Agency, and as of yet no pesticides are approved for use on cannabis.
To meet the challenges created by legalizing marijuana, state governments must address matters that are typically handled by the federal government. Yet state regulators lack institutional knowledge in these areas and must overcome a significant learning curve. This challenge has led law enforcement bodies—which essentially operate as the cannabis regulatory agencies—to develop standards for packaging and labeling of cannabis products that do not always conform to traditional best practices.
To complicate matters further, every policy decision must consider the previously existing illegal market and avoid placing regulated businesses at a competitive disadvantage. Most cannabis consumers started consuming prior to legalization, and many have long-established purchasing habits and relationships with illegal suppliers. Research published in September found most consumers prefer legal cannabis and are even willing to spend slightly more for it, but there is a price point at which they will revert back to purchasing it illegally. That means regulators can only impose so many additional costs on businesses without losing ground to the illegal market.
Despite these challenges, there appears to be a consensus among the populations and authorities in legalization states that regulating cannabis is a substantial improvement over prohibition. For example, a poll conducted four years after Colorado voters approved legalization found that a majority of that state’s voters thought it was having “a positive impact on the state and its economy,” and only about one-third of voters would support repealing the measure that legalized and regulated marijuana for adult use. Even the state’s governor, who publicly opposed the proposal, has come around and said he would not support going back to the old system.
One of the key benefits of regulation that he and other officials have pointed to is the avenue it creates to address cannabis-related concerns. Labeling requirements are employed to prevent accidental ingestion and over-consumption. Widely demanded cannabis extracts are produced safely in controlled industrial settings rather than in residential neighborhoods, where home extraction methods have been known to result in explosions.
Most importantly, the vast majority of commercial cannabis activity that occurs within a regulated state is conducted inside tightly controlled businesses rather than on the street. Operators and workers are licensed and subject to criminal background checks, and their facilities must meet a variety of security and public health standards. Operators and workers are also subject to extensive regulations designed to protect minors, including restrictions on advertising and a strict requirement that they check customers for proof of age.
In addition, licensed businesses pay taxes that can be used to support public education campaigns aimed at preventing impaired driving and teen use. Cannabis tax revenue is also used to fund substance abuse treatment and prevention—and not just for cannabis, but also for alcohol, opioids, and other drugs.
The success of state regulatory programs has not gone unnoticed, as evidenced by an October Gallup poll that found that two out of three Americans in every geographic region of the country support making marijuana legal. Support for legalizing medical cannabis is even stronger. Over the next two years, several more states are expected to enact laws regulating marijuana for adult or medical use. Policymakers in these states will be able to use lessons that have been learned across the country over the past several years, as well as now from policy implementation in Michigan, Missouri, and Utah.
As new best practices are developed, cannabis regulation will continue to evolve and improve. An eventual change in federal law would bring new resources and experiences to bear on this nascent industry, launching a new wave of growth and regulatory evolution. New developments in technology and products will raise new challenges, which can be best met through open and honest conversation about the most practical path forward.
