As the long-foreseen collision of runaway cultivation and cratering prices arrives, the CCC’s pivot toward a license freeze looks more like a litigation trap than a lifeline
The Massachusetts Cannabis Control Commission is considering limitations on issuing new cultivation licenses to stabilize market prices—a so-called freeze. This would be a major change after years of the regulator largely sitting idle as the capacity problem spiraled out of control, but capping, limiting, or slowing the number of licenses is a risky approach that might not be legal and could even backfire.
Capping licenses for economic reasons is likely a restraint of trade, and in an industry as litigious as cannabis, such a move could lead to lawsuits and disastrous outcomes when a more effective and simpler approach could suffice. To quote relevant legal analysis: “In a legal federal market, a cap intended solely to keep prices high for local businesses (economic protectionism) would likely be ruled an unconstitutional restraint of trade.”
While restraint of trade is a national issue and cannabis remains illegal at the federal level, in August 2022, a federal appeals court for the first circuit (ME, NH, VT, MA, RI—basically all of New England except Connecticut—and Puerto Rico) ruled that something called the Dormant Commerce Clause applies to cannabis (Northeast Patients Group, et al v. United Cannabis Patients and Caregivers of Maine). Northeast was about the state of Maine barring non-Maine residents from owning a state-licensed cannabis company.
The federal court sort of acknowledged but ignored cannabis, and instead focused on the ownership of securities, ruling the state could not restrict ownership of securities to only state residents. A creative argument might be crafted to assert that the proposed license cap isn’t about cannabis, but licenses, and so the feds should have jurisdiction.
In Massachusetts, one could argue that the legislature issued a three-license cap when the adult-use marijuana regulations emerged from the Beacon Hill meat grinder after a successful ballot initiative in 2016. Lawmakers are also currently revisiting that limit in negotiations over an omnibus bill that could overhaul various parts of the industry. If an Act modernizing the commonwealth’s cannabis laws increases the cap, as is a possibility, that could further the argument that only the legislature, and not the commission, has the authority to change the license limit.
Back to the future
In February 2020, we published an article about the risk of oversaturation in the cultivation market. The relevant passages below describe the predictions therein:
The slow rate of licensing in Mass exacerbates the problem. As of Jan 29, 2020, the Cannabis Control Commission’s (CCC) open data platform reports that 91 cultivators have achieved a provisional or final license for 1.8 to 2.5 million square feet of canopy. The commission doesn’t disclose canopy size for the 124 applications that are pending, but the average canopy midpoint for issued licenses is 23,640 square feet. If we assume these 124 applicants will have an average canopy similar to the existing 91 cultivation licensees, then once all of these facilities are operational, the state’s canopy will be between 4.4 and 6.1 million square feet. But there’s a rub.
When supply and demand finally come into balance, there will be a backlog of applications to be processed, licensees building out facilities where they have yet to start growing, and new grows that have not reached their first harvest. And if that happens, just like the federal government typically calls a recession about eight months after one starts, the markets won’t realize supply and demand are in equilibrium until at least a year after it happens. Over-capacity seems inevitable.
A clear example
By September 2022, the Massachusetts cannabis market had clearly turned and like a bus without brakes, it started to run over even established operators. In April 2021, Temescal Wellness announced it would convert the former Crane building in North Adams to a state-of-the-art cultivation facility. Seventeen months later, in September 2022, Temescal hosted a ribbon cutting ceremony on the multimillion-dollar facility.
By then, flower prices had started to collapse. Temescal eventually lost the property to its financier, Innovative Industrial Properties Real Estate Investment Trust. IIPR reported in February 2026: “Progress in recouping owed capital is already evident. In Q4 alone, Innovative Industrial Properties collected $3.7 million from tenant Gold Flora. Furthermore, a favorable court judgment against Temescal Wellness secured an additional $7 million in past-due rent, significantly bolstering the firm’s liquidity position.”
The commission’s role
In January 2023, it was recommended to the CCC that the commission employ one of the tools available to it—proactive tier relegation. The small print reads: “In connection with the license renewal process for Marijuana Cultivators, the Commission will review the records of the Marijuana Cultivator during the six months prior to the application for renewal. The Commission may reduce the licensee’s maximum canopy to a lower tier if the licensee sold less than 70% of what it produced during the six months prior to the application for renewal.”
The thinking at the CCC at the time was that enforcing such relegation would put many small tier licensees out of business. Even when shown that the impact was more focused on larger tier grows, the agency did not act. Overcapacity continued to plague the Massachusetts market, driving down prices and crushing profit margins.
The larger impact of market decline
The fallout from declining prices isn’t limited to cultivators. Businesses have to pay their operating costs by generating a gross profit. Consider the impact upon retailers. Let’s assume a retailer sells 300,000 units at $10 each, generating $3MM of revenue. Those units cost $3.50 each (nationally, it is pretty well accepted that a retailer needs a 65% gross profit margin to generate a profit after 280E taxes), generating $1.95MM gross profit. If prices drop by 30%, to maintain the same profit margins and the same gross profit, that retailer must sell 428,571 units (a nearly 43% increase).
While their cost of product may have dropped from $3.50 to $2.45, their operating costs did not. Declining flower costs don’t reduce rent, wages, utilities, or other operating costs. The business must still generate that same gross profit level to survive.
The commission is wise to finally focus on the over-production of flower. Capping license counts just might not be the most efficient solution. But what is?
A potential solution to oversaturation
The commission can reduce cultivation applications by:
- Enforcing relegation. It is already provided for in the regulations and impacts the smallest growers the least.
- Publishing detailed statistics on flower quantity sold by cultivators, licensed capacity, and actual capacity. A cultivator might hold a 30,000 SF license but have a 50,000 SF facility with 20,000 SF idle and could only be using 24,000 SF of their allowed 30,000 SF. The recommended table should be detailed and robust, but simple to understand.
- Limiting the time for non-operational licenses, and no longer allowing those licenses to hang in limbo forever. This could include limiting the life of provisional licenses and not allowing them to remain in limbo for more than a set period (12 or 18 months) without showing meaningful advancement to final licensing. The commission could easily publish what goals must be achieved to satisfy the “meaningful” criteria.
- Allowing final licensees six months to apply for authorization to commence operations and not renewing licenses for “authorized” cultivators that are not growing plants. This eliminates the gray area overhang of potential additional cultivation capacity.
- Requiring all cultivation “direct control” parties and all capital providers to sign off that they have read, understand, and are aware of the commission’s cultivation statistics. Too many cannabis investors blindly put up capital without understanding due diligence or researching market need and existing capacity.
If investors know and understand the state of cultivation capacity (including off-line but previously approved capacity; see a sampling below), the capital for these unworkable projects would likely dry up, naturally, and without any moves that could spawn more litigation or take more time for an issue that has been percolating for years.
- Trulieve. As part of a total exit from the Massachusetts market to preserve cash, Trulieve shuttered its 126,000 SF Holyoke cultivation (60KSF), processing, and testing facility at the end of 2023. The closure followed a 2022 incident where 27-year-old employee Lorna McMurrey died after going into cardiac arrest at the Trulieve cultivation. (MassLive)
- Theory Wellness surrendered its Sheffield cultivation license in Sheffield, according to Cannabis Control Commission records. (Boston Business Journal)
- Temescal’s CEO reported that “unbearable costs” and debts, including issues with faulty grow lights, led to the decision to close its 71,400 SF North Adams facility to save the rest of the company. The company also faced eviction proceedings for unpaid rent. (The Berkshire Eagle)
- Ayr Wellness closed its 90,000 SF Milford facility, formerly operated by Sira Naturals, as part of a national restructuring plan to reduce debt. Operations were scheduled to cease by Sept. 29, 2025. (Milford Daily News)
- Rev Clinics. Once one of the largest cannabis employers in Central Massachusetts, Rev Clinics entered receivership with millions in debt, leaving its massive 146,000 SF Fitchburg facility vacant and available for lease. (Worcester Business Journal)
- RiverRun Gardens. Unlike the large multistate operators, RiverRun focused on small-batch cultivation and wholesaling to other retailers. Its license was listed among 23 Massachusetts cannabis firms that surrendered licenses or saw them become non-active in the first half of 2025 due to ongoing industry consolidation and market pressures. (Boston Business Journal)
