10 Best States For Cannabis Businesses Ranked By Legal Experts, The Winner Will Surprise You

Have you ever wondered which US state has the most favorable regulations for cannabis businesses?

Seems like a very complicated question, right? Especially now, when nearly half have approved recreational cannabis and 38 have legal medical marijuana. In that federal law still classifies the plant as an illegal substance, each state has its own rules and regulations.

The question is: what factors should be taken into account when deciding on the best cannabis state?

Among those that come to mind include whether the state has just medical, or both medical and recreational cannabis programs, non-profit entities, rules about commercial licenses, etc. These are some of the factors the Missouri-based law firm Thompson Coburn used to create an updated state-by-state ranking of cannabis regulations.

Newly revised for 2023, this guide provides an overview of cannabis laws in every state, DC and U.S. territories. The analysis lists each state from most favorable to cannabis businesses to most restrictive.

Surprise Winner 

California got bumped by Michigan.

“The biggest surprise was Michigan which took the top spot,” said Michael Rosenblum, partner at Thompson Coburn and co-chair of the company’s cannabis group told Benzinga. “Its success is fueled by low taxes and low barriers of entry at the state level. Michigan recovered significantly from a strenuous few years, which were marred by pricing compression and black market operations throughout the industry. I expect that regulators throughout the country will turn to Michigan’s Cannabis Regulatory Agency as a case study for how to overcome these challenging market dynamics.”

10 Best States For Cannabis Businesses

Here is a brief overview of the first three marijuana states with the best laws for businesses.

1. Michigan

• Last year's ranking – #7. 

• 2023 sales are expected to reach $3 billion. As of July 2023, 700 retailers are licensed in the state.

• While California holds the distinction of the largest cannabis market, with $5.3 billion in 2022 sales, Michigan’s sales per capita figures exceed the Golden State (2022 sales in Michigan were $229 per resident, compared to $135 per resident in California)

• In towns such as Ann Arbor, where an annual “Hash Bash” event has been celebrated by residents and University of Michigan students for almost 50 years, local ordinances regulate and license cannabis dispensaries. The state’s first cannabis consumption lounges opened in 2022

2. Illinois

• Last year's ranking – #6.

• To assist “social equity applicants” with startup costs, lawmakers passed H.B. 1438, which created a $30 million loan program. 

• In a speech at the Benzinga Cannabis Capital Conference in September 2023, Gov. Pritzker touted Illinois’ legislation for creating “the most equitable, accessible, and prosperous cannabis ecosystem in the nation.” He said the program intentionally left portions of the market open so that social equity applicants could obtain licenses and capital.

• Despite licensing delays, Illinois sold more than $1 billion in legal marijuana – medical and recreational sales combined – and collected over $205 million in tax revenue in 2021. In 2022, the state continued its upward trend in industry growth, with $1.5 billion in sales and over $560 million in tax revenue. 

• Illinois is home to some of the largest multi-state operators (MSOs) in the country, including Green Thumb Industries GTBIF, Verano Holdings VRNOF, PharmaCann, Cresco Labs CRLBF, and Ascend Wellness AAWH.

3. Arizona

• Last year's ranking – #9.

• Qualified medical patients may not be discriminated against or penalized by an employer based on their status as a cardholder. As of September 2023, a total of 148 recreational and medical facilities were operating, according to the Arizona Department of Health Services, with the largest retailers including 4Front Ventures FFNTF, Sunday Goods & the Parm and Nature’s Medicines. Large MSOs have a strong presence in Arizona, including Florida-based Trulieve TCNNF, which acquired Arizona retailer Harvest Health & Recreation in 2021.

The ranking further continues like this:

4. California

5. Nevada

6. Massachusetts

7. Missouri

8. New York

9. New Jersey 

10. Oregon

Worst States, But Some With Huge Potential

Among the 10 worst cannabis states per the ranking are South Carolina, North Carolina, Wyoming, Kansas, Tennessee, Indiana, South Dakota, the US Virgin Islands, Iowa and Wisconsin.

Even though currently ranked 43rd, the U.S. Virgin Islands has a lot of potential, according to Rosenblum, it’s just a young marijuana state, considering that the state welcomed adult use this year.

“The U.S. Virgin Islands also stood out as a recently legal state that has tremendous potential, not just for the sizeable tourist population (1.6 million day tourists annually), but for the lucrative tax incentive program offered through the territory’s Economic Development Authority which can result in a 90% reduction in corporate income tax for MSOs that open a back office in the territory,” Rosenblum concluded.

Complete guide and ranking read at Thompson Coburn.

See Also: How Does Cannabis Reclassification To Schedule III Differ From De-Scheduling & What Is Ideal Reform? Legal Expert Explains

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