California, Maine, Massachusetts and Nevada recently passed laws legalizing the recreational use of marijuana. Arkansas, Florida and North Dakota enacted medical marijuana initiatives, bringing the total of states (and the District of Columbia) that allow some form of marijuana use to 33.
What does this trend mean for entrepreneurs thinking of entering the cannabis industry?
National prohibitions against interstate cannabis commerce and federal banking and drug laws are keeping big companies at bay, which opens the door for small businesses and startups to establish dispensaries, retail stores, cultivators, processing, manufacturing and testing facilities.
Marijuana Business Laws By State
To prosper, entrepreneurs must know the laws that govern their state’s use of the substance. To be safe, they should also confer with an attorney to ensure they are in compliance with the law.
Here is a state-by-state breakdown showing which states have passed laws governing some form of marijuana use and, where applicable, what businesses are allowed to do regarding its growth, production and sale.
States that Allow Medical Marijuana Use
Alaska was one of the earliest states to pass a ballot initiative allowing medical use of marijuana. Voters approved Measure 8 in 1998. The law went into effect the following year.
Its passage removed criminal penalties for the use, possession and cultivation of marijuana by patients who possess written documentation from their physician advising that they “might benefit from the medical use of marijuana.”
Alaska’s online application for a marijuana business license became available on February 24, 2016. On January 22, 2016, the State adopted final cannabis industry regulations, which began enforcement on February 21, 2016.
Arizona passed Proposition 203 in 2010 by the slim margin of 50.13 percent of voters. It allows registered qualifying patients to obtain marijuana from a registered nonprofit dispensary and to possess and use medical marijuana to treat the condition.
Patients must have a physician’s written certification that they have been diagnosed with a debilitating condition and that they would likely receive benefit from marijuana.
The Arizona Department of Health Services recently awarded 31 new medical cannabis licenses for dispensaries. Currently, there are 94 operating in the state, along with another five that have received licenses but are not yet up and running, bringing the total of licensed dispensaries to 130.
Arkansas enacted a measure, Issue 6, on November 8, 2016, that allows seriously ill patients to use and obtain medical marijuana with their doctors’ approval.
The amendment will establish between four and eight cultivation facility licenses and up to 40 dispensaries, all of which it will regulate under the auspices of the Alcoholic Beverage Control Division. The law prohibits cultivation.
As of now, the state has 120 days to adopt rules concerning the licensing and regulation of dispensaries and cultivation facilities and will begin accepting applications on June 1, 2017.
On November 5, 1996, California became the first state in the United States to legalize medical marijuana when the voters passed Proposition 215 by 56 percent.
Governor Jerry Brown signed the Medical Marijuana Regulation and Safety Act (MMRSA) into law on October 9, 2015. It establishes a framework for future medical marijuana regulations and a statewide licensing program for growing, manufacturing, transportation, distribution, testing and retail dispensing of medical marijuana. State licenses are not currently available.
State licenses are not currently available.
On November 7, 2000, Colorado voters approved Amendment 20, which amended the State Constitution to allow the use of marijuana in the state for approved patients with written medical consent. (See Colorado’s entry under recreational use to view business opportunities.)
In June 2012, Governor Daniel Malloy signed into law a medical marijuana program for his state, following a 21-13 vote in the Senate.
Connecticut has nine medical marijuana dispensaries. The state is not accepting new applications at this time.
In May 2011, Governor Jack Markell signed legislation allowing patients 18 and older with “certain serious or debilitating conditions” to use cannabis, and possess up to six ounces
The state has one dispensary (called a “Compassion Center”), in Wilmington, but is not currently accepting applications for new businesses.
On November 8, 2016, Florida passed legislation allowing residents to apply to open Medical Marijuana Treatment Centers (MMTC). These entities can acquire, cultivate, process and distribute or administer marijuana and related products, such as food, aerosols and ointments.
It remains to be determined whether or not regulators will allow stand-alone, specialized businesses for retailing, cultivation, delivery services, edibles or topicals.
In 2000, Hawaii passed SB 862 HD1, making it the first state to legalize medical cannabis via the legislature, as opposed to a voter initiative.
The legislature amended the law in 2013 with two bills that took effect in January 2015, House Bill 668 and Senate Bill 642. HB 668 moves the medical marijuana program from the Department of Public Safety to the Department of Health and establishes a Medical Marijuana Registry special fund.
Registered medical cannabis patients and caregivers may possess up to three ounces of usable cannabis and cultivate up to seven plants (three mature, four immature).
The bills made no provision for the commercial sale of marijuana, however.
In 2013, The Compassionate Use of Medical Cannabis Pilot Program Act (HB 1) was enacted to create a temporary statewide distribution program for qualifying patients.
HB 1 allows patients to obtain up to 2.5 ounces of cannabis every two weeks from one of the 60 dispensing organizations that will be supplied by 22 cultivation centers.
The state closed the licensing period in September 2014 for opening a medical marijuana dispensary and growing or cultivating medical marijuana legally. Cultivators are allowed to create medical marijuana/cannabis edibles and extractions and other marijuana-infused products.
In 2014, the Iowa legislature passed SF 2360, the “Medical Cannabidiol Act,” which allows licensed neurologists to certify patients with intractable epilepsy to use cannabidiol (CBD) products with three percent or less THC content.
The law does not allow other types of physicians to write qualifying recommendations, nor does it allow for patients with any other conditions to obtain legal protections or marijuana businesses to be licensed to operate.
No plans are currently in place to license commercial dispensaries.
Although there is an approved legislation (SB 271) that allows 10 pharmacies to distribute medical cannabis and only one cultivation center to exist, they aren’t viable options for would-be business owners due to the severe limitations imposed by the regulations.
On November 2, 1999, Maine legalized medical marijuana when 62 percent of the population voted yes on Question 2. (See the provisions for starting a business under Maine’s listing regarding recreational use.)
Maryland closed medical marijuana business applications on November 6, 2015, but continues to move toward licensing cultivators and dispensaries.
Senate Bill 923 and House Bill 881, signed into law by Governor Martin O’Malley on April 14, 2014, changed the medical marijuana program being implemented by the Natalie M. LaPrade Medical Marijuana Commission.
The new regulations have provisions now for how to:
- Open a medical marijuana dispensary;
- Start a marijuana cultivation business and grow medical marijuana legally;
- Start a processing facility.
In 2012, Massachusetts legalized medical marijuana when voters passed Question 3 by 60 percent. (See the state’s entry under the recreational use category to learn about business opportunities.)
Under the new regulations (HB 4209, HB 4210, HB 4287), signed by Gov. Rick Snyder on September 20, 2016, Michigan will be open for medical marijuana businesses soon.
The regulations contain stipulations for dispensaries, cultivators, processors, testing facilities and transporters.
The state has 360 days from the effective date until prospective businesses can begin applying, which is no later than September 15, 2017.
On May 29, 2014, Gov. Mark Dayton signed a bipartisan medical marijuana proposal that was crafted by a House and Senate conference committee, making Minnesota the 22nd state to exempt some of the very sick and their caregivers from penalties for using marijuana with a doctor’s certification.
No provisions were made to license commercial dispensaries.
Missouri passed HB 2238 in 2014, which creates a legal right for certain patients to obtain, possess and use “hemp extracts” in limited circumstances.
Only patients with a seizure disorder and a recommendation from a neurologist are eligible to get a “hemp registration card,” which entitles them to access and legal protections.
Qualified patients can purchase hemp extracts from two state-regulated “Cannabidiol oil care centers.”
The law also allows the Department of Agriculture to license and regulate growers of cannabis plants to produce the oil to make sure they conform to the CBD and THC stipulations.
Under the new regulations, enacted as of November 8, 2016, Montana is currently open for medical marijuana businesses.
The regulations of this measure have provisions for medical marijuana dispensaries, manufacturers, cultivators and testing facilities.
Nevada legalized medical marijuana on November 7, 2000, when 65 percent of the populace voted yes on Question 9. (See the state’s listing under recreational use to view business opportunities.)
New Jersey signed the medical marijuana program into law in 2010, but implementation has been slow. Currently, it serves little more than 5,000 patients through five operational treatment centers.
The state is not actively licensing any medical marijuana businesses at this time.
When the state reopens it’s program to applicants, it will have provisions for medical marijuana dispensaries, cultivators, product manufacturers, delivery services and testing facilities.
Currently, the state is not issuing marijuana business licenses.
On July 5, 2014, Gov. Andrew Cuomo signed a limited medical marijuana bill into law.
The bill gives the state and Department of Health 18 months to enact regulations and install a patient and business infrastructure to allow the cultivation and sale of medical marijuana to qualifying patients.
Registered organizations (RO) are companies — either for- or not-for-profit agencies — that the state will license to produce and dispense medical marijuana.
The state will permit no more than five ROs, which can operate four dispensaries each.
On November 8, 2016, the state legalized medical marijuana when voters passed Measure 5 by 64 percent.
The regulations of this measure have provisions for nonprofit dispensaries (also known as “Compassionate Care Centers”), which will cultivate a limited amount of medical cannabis and dispense it to enrolled patients.
Applicants will pay a $5,000 non-refundable application fee and if approved, a $25,000 licensing fee.
Under new regulations, enacted as of September 8, 2016, Ohio is ready to welcome medical marijuana businesses.
The regulations of this measure have provisions for dispensaries, cultivation facilities, processors and testing facilities.
At present, the state has not indicated when it will open the application period to entrepreneurs.
Oregon established the Medical Marijuana Act by Ballot Measure 67, a citizens’ initiative, in November 1998. It modified state law to allow the cultivation, possession and use of marijuana by prescription for patients with certain medical conditions.
In 2013, Oregon House Bill 3460 became law, allowing registered medical marijuana dispensaries. The legislation went into effect on March 1, 2014.
Pennsylvania enacted regulations on April 17, 2016, that include provisions for dispensaries, cultivators and product manufacturers.
The state will open applications beginning January 17, 2017. All permit applications will be accepted from February 20, 2017, until March 20, 2017.
There will be a capital requirement for each type of business. An applicant for a grower/processor permit must provide an affidavit that the applicant has at least $2 million in capital, $500,000 of which must be on deposit with one or more financial institutions.
An applicant for a dispensary permit shall provide an affidavit that the applicant has at least $150,000 on deposit with one or more financial institutions.
Under emergency regulations, enacted as of October 25, 2016, Rhode Island will accept applications for medical marijuana cultivation businesses until April 30, 2017.
Under the Act (R.I. Gen. Laws § 42-35-2.10), the Department of Business Regulations (DBR) will be responsible for licensing would be entrepreneurs.
There will be a $5,000 non-refundable fee at the time of application. License fees range from $20,000 to $80,000 depending on the class of license issued.
When the state reopens it’s program to applicants, it will have provisions for medical marijuana dispensaries, which may acquire, possess, cultivate, transport, sell and dispense marijuana and related products and supplies to enrolled patients and their caregivers.
Currently, the state is not issuing marijuana business licenses.
On February 26, 2015, Virginia Gov. Terry McAuliffe signed HB 1445 into law. This measure will provide an affirmative defense to patients who have intractable epilepsy (and, for minors, their parents or legal guardians) for the possession of marijuana extracts that contain at least 15 percent of either cannabidiol (CBD) or THC-A and no more than 5 percent THC.
By merely providing an affirmative defense, the law has no provisions for any marijuana business.
The Cannabis Patient Protection Act — SB 5052 integrates the medical market with the regulated recreational market.
Under the act, the Department of Health adopted rules for a medical marijuana authorization database, training and certification of medical marijuana stores, consultants and product compliance.
Washington D.C. licensed a very limited number of dispensaries and cultivation centers in 2013 and 2014. There is no system presently in place to permit the issuance of additional licenses.
Gov. Scott Walker signed a very limited medical cannabis bill (A.B. 726) into law. It exempts a distinct class of individuals from criminal penalties for the use and possession of cannabidiol “in a form without a psychoactive effect.”
There are no stipulations for any businesses to open around this very limited law.
States that Allow Recreational Marijuana Use
On November 4, 2014, Alaskans passed Measure 2, which institutes a system to tax and regulate marijuana like alcohol through the Alcoholic Beverage Control Board.
Adults age 21 and older may possess up to one ounce of marijuana and grow up to six plants (with no more than three being mature) for personal use.
The measure also includes provisions for businesses to grow, test and sell marijuana and paraphernalia to persons over age 21.
Proposition 64, also known as the Adult Use of Marijuana Act, passed on November 8, 2016, legalized the sale and distribution of cannabis by individuals and commercial businesses. Licenses will be issued for cultivation and business establishment beginning in 2018.
The regulations of this measure have provisions for retail marijuana stores, product manufacturers, cultivators, testing facilities and distributors.
Colorado Amendment 64 legalized the sale and possession of marijuana for non-medical uses on November 6, 2012, including private cultivation of up to six marijuana plants, with no more than three being mature. The state also lets business owners open a medical or retail marijuana dispensary.
Business owners must be current residents living in the state for at least two years before applying for a license.
Under the new regulations, enacted as of November 8, 2016, Maine will be opening its doors to recreational marijuana businesses.
The regulations of this measure have provisions for marijuana stores, social clubs and cultivation, product manufacturing and testing facilities.
As of right now, the state has yet to establish an application process.
Under the new regulations, enacted as of November 8, 2016, Massachusetts became the first state on the east coast to be open to recreational marijuana businesses.
The rules of this measure, which went into effect December 15, 2016, have provisions for marijuana stores, product manufacturers, cultivators and testing facilities.
The state has yet to establish an application process but is mandated to begin accepting applications no later than October 1, 2017.
Under the new regulations, enacted as of November 8, 2016, Nevada will be open for recreational marijuana businesses.
The tenants of this measure, which will become effective January 1, 2017, have provisions for retail stores, product manufacturers, cultivators, testing facilities and distributors.
The state has yet to indicate when it will open the licensing period but is required to establish the rules and licensing procedures by January 1, 2018.
Also, under the new law, only businesses that already have medical marijuana certificates will be allowed to apply for recreational licenses for the first 18 months the program is open.
On July 1, 2015, Measure 91 legalized the possession and cultivation of marijuana by adults 21 and older for recreational use.
The Oregon Liquor Control Commission allows dispensaries, retail stores, cultivators and manufacturing businesses to operate legally within the state.
There will be a $250 non-refundable fee at the time of application. The initial license fee is $4,750.
Marijuana was legalized by Washington Initiative 502 in 2012. The law requires state licenses from all sellers, distributors, cultivators and producers of marijuana.
States with No Medical or Recreational Marijuana Use Laws
States that currently prohibit marijuana use include:
- New Hampshire
- North Carolina
- South Carolina
- South Dakota
- West Virginia
Information used in preparing this guide came from the following sources:
- Governing.com, an online resource covering politics, policy and management for state and local government leaders;
- Green Rush Consulting, a marijuana business consulting firm;
- Greenzipp, a medical and recreational marijuana consulting firm;
- NORML, an advocacy organization supporting legalization of marijuana;
- ProCon.org, a site that addresses controversial topics;
- Wikipedia: Legality of cannabis by U.S. jurisdiction.
Marijuana Dispensary Photo via Shutterstock
This article, “Starting a Marijuana Business: A State By State Guide” was first published on Small Business Trends