Why Missouri's launch of adult-use cannabis could catalyze legalization for other red states
Missouri’s adult-use cannabis sales began on February 3 of this year. It’s expected to generate more than half a billion dollars in sales in the first year. In the first month of sales, Missouri made $103 million – $71.7 million in recreational and $31.2 in medical sales.
This rollout comes a year after Montana began adult-use cannabis sales. Like Montana (and also Oklahoma), Missouri has a Republican trifecta in leadership: the GOP controls the State House, State Senate, and the governorship.
So why is Missouri’s launch so pivotal for other red states?
Apart from the significant revenue generated from Missouri’s new cannabis market, it’s exposing benefits to other red states.
Among the lowest retail cannabis tax in the nation
There’s a 6% retail tax on recreational cannabis purchases, and local jurisdictions could add a maximum 3% tax through local ballot initiatives.
Its geographical location in the Midwest
Missouri borders more states than any other state in the country – eight states, to be exact. Cannabis is still completely illegal in four of those states (Nebraska, Kansas, Kentucky, and Tennessee). Medical cannabis is legal in three bordering states (Oklahoma, Arkansas, and Iowa). Illinois is the only other bordering state with legal adult-use cannabis.
So Missouri is expected to draw customers from across the Midwest, and the South, where cannabis is either illegal or have only legalized medical sales. Customers are expected from Arkansas, in particular, which just rejected a ballot initiative last year to legalize adult-use cannabis.
A high level of state participation
97% percent of Missouri’s medical marijuana dispensaries requested to convert their medical license to a comprehensive license. This led to an adult-use launch with nearly 200 licensed operators. The launch is notably different than Connecticut, which launched adult-use sales with 13 licensed operators, Rhode Island, which started with five, and New York (just one).
A legal provision that enables state tax deductions defying federal law
With Missouri’s passing of Constitutional Amendment 3 in November 2022, legal cannabis businesses operating in Missouri can now deduct business expenses when they file state tax returns in 2023. This is significant because Section 280E of the federal tax code prohibits cannabis businesses from deducting operating expenses on state and federal income taxes.
These tax savings are an incentivize for other red states who are skeptical about legalization.
Other policy features of Missouri’s launch attractive to other red states
Local municipalities can ban retail operations through a ballot measure which must gain 60% approval
Recreational marijuana advertisements must follow the same requirements as alcohol advertisements
Why now is a good time to invest in cannabis
As attention turns to Missouri’s new and growing cannabis market, we can expect that other red states will also develop a stronger willingness to enter the market.
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