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Navigating Local Cannabis Business Licensing in Newly Legalized States

The landscape of cannabis legalization is rapidly evolving, and several states are set to begin licensing cannabis businesses in 2024. States like Delaware, Minnesota, Ohio, and Kentucky are making strides to create a framework for their cannabis programs. Simultaneously, municipalities, such as Redondo Beach, Monterey, and Santee in California, are gearing up to finally license cannabis retailers in their jurisdictions. 

As these regions prepare for the cannabis industry influx, local entrepreneurs have a unique opportunity to establish themselves in the market by prioritizing community connections, crafting robust business plans, fundraising early, building competent local teams, and scouting properties during the interim period.


The Rise of MSOs and the Need for Local Business Prioritization

Over the past decade, certain larger cannabis companies, often referred to as Multi-State Operators (MSOs), have dominated specific medical and adult-use markets. However, concerns have risen regarding the monopolization and vertical integration practices of these large, out-of-state operators. While some MSOs have demonstrated community involvement and social equity initiatives, others have faced criticism for exploiting the very communities and local employees they claim to support. State regulators are beginning to recognize the need to prioritize local cannabis businesses, prompting action to level the playing field.

Strategies for Prioritizing Local Cannabis Businesses

State regulators are exploring various strategies to prioritize local cannabis businesses and owners in their jurisdictions. Two prominent approaches include residency requirements and social equity provisions.

Residency Requirements For Local Cannabis

Residency requirements have evolved, with direct and indirect approaches gaining prominence. Direct residency requirements involve proving that an applicant has resided in the state for a specified period, while indirect requirements may focus on something like having a cannabis-related conviction within the state.

Because of the federal prohibition on cannabis, the cannabis industry remains one of the few sectors where states and localities have been able to restrict cannbis business licenses exclusively to residents within the state. Though residency requirements were found unconstitutional in courts in Maine and Missouri, a Washington court recently upheld the state’s residency rules for licensing.

Social Equity Provisions For Local Cannabis

Social equity provisions in licensing aim to address historical disparities and promote diversity in the cannabis industry by reserving licenses for specified classes. These provisions almost always benefit residents over outsiders. 

A few states prioritizing social equity in cannabis licensing in 2024 are:  

  • Delaware: Social equity applicants must be Delaware residents with at least 51% ownership and control by individuals who have resided for at least five of the preceding ten years in a disproportionately impacted area.


  • Minnesota: Qualifying individuals include military veterans with honorable status lost due to a cannabis-related offense, residents of areas with disproportionately high cannabis enforcement, or residents of census tracts with specific poverty or income criteria.


  • Ohio: The Ohio Initiative establishes a cannabis social equity and jobs program, offering preferential treatment to those facing social and economic disadvantages.


  • Kentucky: Social equity applicants are Kentucky residents meeting specific criteria, such as residing in disproportionately impacted areas or having cannabis-related arrests, convictions, or adjudications.


  • California: Apart from ownership requirements, California municipalities often require a Community Impact Assessment to evaluate the potential effects of a cannabis business on a community along with the remission of fees or profits to a community fund.


How to Beat an MSO: A Local Cannabis Entrepreneur’s Guide

1) Utilize Community Engagement To Set Your Business Up For Success

Navigating competitive licensing processes against larger, out-of-state players may seem daunting, but local, independent groups possess unique advantages. Establishing robust community connections is vital, and local entrepreneurs should focus on community engagement strategies that highlight positive outcomes, job creation, economic impacts, and long-term benefits, capitalizing on challenges that out-of-state teams inherently face in showcasing local ties.

2) Focus On Your Team, Your Location, and Your Investors

Success for local parties also lies in strategic planning and leveraging local connections across the foundational elements of Team, Facility, and Finance. 

For your team, building a competent core group is crucial for success, and local entrepreneurs should emphasize the expertise, passion, and understanding of the community within their teams. It’s no secret that scouting and securing the right property or facility is essential. Local entrepreneurs should consider locations that align with their own community values and neighborhood needs.

3) Fundraise With Realistic Projections and Solid Plans

Crafting a solid business plan, engaging in fundraising efforts, and presenting realistic financial projections are key elements in securing funding and demonstrating business viability, and sophisticated business modeling from the experts at Canna Advisors can put new operators on par with multi-state operators. As a local entrepreneur, you’ll want to start planning ASAP to establish yourself with investors and to raise the funds needed for the project.

Planning a Local Community Strategy with Industry Experts

By understanding and leveraging residency requirements, social equity provisions, and community engagement strategies, local cannabis businesses can compete effectively against out-of-state operators. And as cannabis legalization and licensing continues to expand nationally, local entrepreneurs have a unique opportunity to thrive in the industry and can proactively plan their community impact with the help of the experts at Canna Advisors.

Get in touch with our local cannabis consultants or book an hourly consultation to get to work on your community engagement strategies that will put you ahead of out-of-state operators.

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