Michigan and Illinois legalized recreational marijuana within months of each other; Michiganders could start buying marijuana starting December 1, 2019 and Illinois residents on January 1, 2020. A comparison of the two states can be a helpful indicator as to how the cannabis industry is taking shape throughout the rest of the country.
Recreational marijuana sales in Michigan approached nearly $6.5 million during the first month and are expected to grow substantially as more retail dispensaries become licensed and more grow operations shell out product. As of January 2, Michigan’s regulatory agency issued 54 recreational business licenses, including 26 to retail stores. In Illinois, sales for legal cannabis totaled a little more than $30.6 million for in-state residents for the entire month of January. Illinois sold another $8.6 million to out-of-state residents, totaling over $39 million during its first month, notably higher than Michigan’s revenue.
Illinois Appealing to Out-of-State Customers
One reason that Illinois greatly surpassed Michigan in its weed sales could be due to Illinois’ advantageous geographical position. Its bordering states (Iowa, Indiana, Wisconsin, and Kentucky) have extremely restricted cannabis laws and have completely outlawed the plant for recreational use and have only limited medical laws on the books. This means more out-of-state residents will be drawn to Illinois’ relatively easy access to recreational weed. Illinois is a much more central state than Michigan, largely because Michigan is surrounded by water, and Illinois will be able to take advantage of this position for a while to come, as many of the states surrounding Illinois are unlikely to pass wide-ranging recreational marijuana bills for some time.
A Look at the Licensing Process
We can also look to the licensing and regulation process of the two states to see why Illinois reaped much more revenue than Michigan. Illinois’ licensing process is two-fold: first, the existing medical dispensaries could apply for recreational licenses and were able to begin selling to recreational patients beginning January 1, which was the first date people could legally possess marijuana in the state, per Illinois’ Cannabis Regulation and Tax Act. This means that more than 40 dispensaries were open and operating to eager customers on January 1. In May 2020, the state will issue licenses to “new” cannabis companies, i.e. businesses who were not already in the medical marijuana business prior to the passage of the act mentioned above. Illinois put in place a system to allow customers to immediately access legal marijuana (though given the fact that dispensaries are licensed first, before grow operations, means there is and will continue to be a product shortfall, which Illinois is painfully seeing the affects of now).
Michigan, on the other hand, issued only 4 recreational licenses as of December 1 when recreational sales began. The state has been gradually approving additional retail licenses (there are 43 issued at the beginning of February), but it did not seem ready with the appropriate number of dispensaries open, and sales suffered as a result. However, a longer-term look at the state’s licensing process may be an issue for Illinois. The state will award 75 licenses by May 2020 with an additional 110 licenses awarded after January 1, 2021. This totals 185 licenses by the end of next year, if the timelines aren’t altered. Additionally, the cannabis act caps the total number of dispensaries in the state to 500. In comparison, Colorado currently has over 520 operating dispensaries and the population (5.7 million people) is significantly lower than Illinois (12.7 million people). Similarly, Oregon has over 400 dispensaries with a population of 4.2 million people. Looking at these numbers, it’s clear that Illinois could stand to have more dispensaries open without an issue selling the product. If Illinois really wants to bring in substantial revenue from the sale of legal weed, revisiting this dispensary cap is certainly a good place to start.
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