Now that most of the legacy market has been shut down, there is legislation that could consolidate the market even further than it has been. The timing is not coincidental.
Despite continued downward pressure on retail prices, Massachusetts’ 2024 cannabis tax revenues were the highest ever. This means more volume than ever is being sold. What was regularly one of the top five states for marijuana users per capita under criminal prohibition has only seen consumption rates increase under legalization.
Back when a small group of consumers were the only voice in favor of reforming criminal prohibition policies, they had greater influence than consumers do now. Legalization brought new actors into the mix—especially those whose love of money supersedes their interest in whatever means they use to get it. As they focus on maximizing returns on their investments, rather than qualities of the cannabis plant and the community of users, they will influence the form of the market and the products available.
It has taken more than eight years to have a “final” draft of social consumption regulations open to public comment, revision, and eventually a vote by the Massachusetts Cannabis Control Commission (if it still exists at that time—there’s a matter of possible receivership, an audit, and other potential interventions). Reasons for the lengthy delay include a combination of decades of tobacco smoking bans and prohibition-era reefer madness.
Part of the compromise legalizers have had to accept is no longer questioning prohibition’s legitimacy, and to accept that the reasons for having criminalized users were valid. Tacit acceptance that those who created and executed the policies were not in the wrong. That is why former cops, former prosecutors, and former prohibitionist policymakers were among the first licensees, actively recruited by multistate operators for their lobbying value, and lauded by state social equity programs as model cases.
Now some of them along with other independent retail license holders are backing legislation that would expand the number of licenses held by an entity from three, to six. Their claim? That they wish to sell their businesses, but only multi-state operators (MSOs) are interested in buying them. Apparently, the ever-increasing volume of sales is no longer a working business model.
Of course, small retailers are experiencing pressures from the MSOs—both in terms of retail competition, and in terms of wholesale supply. Unlike most independent operators (those holding licenses only in Massachusetts), MSO businesses are typically vertically integrated. This was the reasoning behind the three-license limit in Massachusetts: Cultivation, Manufacture, and Retail are three different licenses and together are seed-to-sale. MSOs are also among the highest-tier cultivators, with the largest square footage. This was also by CCC design—bring in cultivation at massive scale to drive the legacy market out of business.
The reasoning goes: Criminal prohibition was legitimate, and all those who made the market under it were illegitimate and needed to be put out of business. It was an expressed goal of the legislation—to shut down small businesses and create unemployment—not because the trade they engaged in was itself illegal any longer, but because they opted to participate in it before the law changed. Prohibition was valid and served a purpose and their violation of it disqualifies them from any longer supplying the market they supplied.
In order to put the small-time weed dealer who was making a few thousand dollars a month out of business, it would be necessary to undercut their profit margin. The way to do it was to flood the market with supply, which is why the MSOs were invited to the party. This has had deleterious effects on licensed, independent cultivators and retailers who are dependent on MSO-supplied flower and other cannabis products. Independent operators are being forced out of business already, which is part of the reason for the desire to double the maximum number of licenses held.
There is legislation being heard that will consolidate the market even further than it has been—now that most of the legacy market has been shut down. The timing is not coincidental. With a burgeoning licensed retail market, there has been the first phase of regulatory capture, and consolidation is simply the next step. But there is no longer the need expressed via the legislation to eliminate the legacy market, and further steps in favor of large capital are no longer for original purposes.
There is one proven way to reduce recreational drug consumption: Raise prices. The most expedient way for the state to do this is to raise cannabis taxes. Massachusetts already collects 20 cents on top of every dollar spent, and if the state ever chooses to reduce the cannabis consumption rate (there are public health benefits to be had) the step taken would be to increase the tax.
Massachusetts is in an awkward position. While the state likes cannabis tax revenues, the way they went about collecting them encourages non-medicinal cannabis consumption. Now the legislature is faced with pressure from a new industry that is seeking to make cannabis more profitable, after having been created in a way that would drive the profit out of legacy markets.
Once the price of raw cannabis cannot be pushed any lower, the only way to increase profitability is to increase market share. MSOs already supply more than 80% of the volume of flower and manufactured products—there is not that much market left for them to grab. This is why few people are seeking to buy an independent Massachusetts cannabis retail operation—there never was much room to grow, and they are in competition with their cannabis product wholesalers. Legislation that would allow MSOs to more than double their retail licenses would spell the end to independent retailers.
I suspect that when social consumption legislation is finally put into practice, it will not be tailored to independent operators. Forget the neighborhood corner bar model, we will be seeing something more like City Winery, Margaritaville, or a similar scale, but for cannabis instead of alcohol.
Cannabis consumers need an effective advocacy, post-prohibition. No one seems to be able to step beyond legalization, though I am going to try.
A version of this column appeared on the Practicing Sociology Without A License Substack by Keith Saunders. You can sign up for his newsletter here.
