Addressing the Harms of Limited Licensing

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It’s time we talk about limited and capped licensing practices and how they hinder us all. As the industry continues to evolve and grow, this crucial conversation can’t be forgotten.

Limited and capped licensing practices hurt accessibility, competition, professional development, and the underlying ethos of our industry as a whole. So how did we get here, and how can we shift toward a more inclusive, free-market model that gives everyone a shot at success?


The history of limited licensing

Limited licensing doesn’t stem from any ill-intentioned decision to inhibit the success of aspiring entrepreneurs while favoring a select few others. Rather, the inception of limited licensing traces back to a well-intentioned political compromise made to appease those who opposed or were apprehensive about legalization.

Initially, the move was a strategic tactic to navigate around big challenges posed by anti-cannabis sentiments. “Will dispensaries take over every street corner? Will my kids have to see people buying drugs day in and day out?” At that time, rolling out licenses on a limited basis made sense to squash fears of dispensaries growing like weeds on every street corner. But we’re past that now. Today, limited licenses mostly serve to accommodate large multistate operators who want to keep their stocks up and their competition down.

The industry is more mature than it was in the beginning stages of legalization. It’s time we reevaluate the role of limited licensing and see the bigger picture it paints: a hindrance to passionate business owners and the plant’s true potential.

How limited licensing hurts everyone 

What once was a pragmatic solution to an initial policy problem is now a barrier that contradicts the overall spirit of the community. It functions as a closed door that shuts out the plant’s legacy in the pursuit of choice and freedom.

Artificial and state-sanctioned licensing caps disproportionately impact low-income, less-educated, and disenfranchised members of our community. Caps impede these people from meaningfully participating in our industry, which leads to a glaringly obvious lack of diversity. Only large players with significant capital realistically can get ahead in this type of environment.

A 2022 report indicated the twenty-seven states with limited licensing structures all struggle with diversity in the industry. The Minority Cannabis Business Association report identified limited licensing as one of the barriers to equity. This includes the Arizona market, where I have watched outstanding entrepreneurs lose opportunities again and again due to this licensing structure.

Limited licensing structures also foster a warped version of capitalism, crushing competition, innovation, and entrepreneurial spirit. The market needs to stop accommodating large multistate operators and instead make them compete with the smaller businesses many consumers want to support. Do we really want a world where our children work tirelessly to learn the nuances of cultivation, manufacturing, and retail, only to be stuck working under a bigger boss forever because they can’t apply their knowledge to start their own businesses?

Safety is not guaranteed and financial viability is not promised through licensing caps. Instead, the limited-license regulatory framework pushes us toward a scenario reminiscent of previous drug wars and prohibition. The support of protectionist measures—building moats and walls instead of bridges and doors—deviates from the values the cannabis movement first stood for, such as social justice, entrepreneurship, and innovation.

How can we fix it?

The problems won’t fix themselves. Our industry needs to see a paradigm shift toward a more inclusive and free-market approach. If we want to ensure a vibrant marketplace and continue advocating for more legalization, we need to increase the number of market participants. There’s no way around that.

I encourage everyone who is reading this and nodding their head in agreement to spread the word. If you agree limited licensing is keeping us stuck in this prohibitive economic model, it’s time to speak up. We need to get our entrepreneurs excited about the industry again!

Talk to others, spread the word, and advocate for an open market with lawmakers and big decision-makers. If we build a marketplace that reflects the diversity and inclusivity at the heart of the movement, we fulfill the industry’s promise to be a beacon of change, break down barriers, and embrace the values that define its essence.

Demitri Downing, Esq.

Demitri Downing, Esq., is CEO at the Marijuana Industry Trade Association, a network of professionals, entrepreneurs, educators, and advocates building a strong and sustainable future in Arizona. A former prosecutor and registered lobbyist, he was instrumental in drafting the state’s legalization bill.