Cannabis business licensing continues slowdown

The cannabis industry’s breakneck expansion across North America cooled even further in the first quarter of 2024. The number of active licensed businesses and new applicants declining steeply in both the U.S. and Canada, as market saturation and economic pressures took their toll.

“The pace of cannabis business licensing in North America slowed in the first quarter of 2024 … as regulated markets in both (the U.S. and Canada) entered a second year of rationalization and retrenchment after several years of torrid growth,” a quarterly licensing review from cannabis corporate intelligence firm CRB Monitor said.

In the U.S., the total number of active marijuana business licenses fell 8% in the first three months of the year to 39,850, according to data CRB Monitor. That marked the fifth consecutive quarterly decrease from a peak of 44,323 active licenses in late 2022.

Approved licenses awaiting final signoff to commence operations fell 1% for the quarter to 4,719, while applications still in the pre-licensing stage plummeted 64% from late 2023 to just 1,907 nationally.

In Canada, the pullback in licensing activity has been more gradual. Active business licenses fell 9% in the first quarter to 6,267, representing the lowest level since 2021. That follows two years of relative stability. The number of new applications entering the pre-licensing process rose 38% but remained modest at 401.

The falls underscore mounting pressures across the cannabis industry from persistent oversupply issues, fragmented regulations between state markets, and unrelenting competition from illicit operators. Access to capital has grown increasingly scarce as well amid economic uncertainty and investor skepticism about the sector’s near-term prospects.

That even persists in light of rescheduling moves by the federal government due to the myriad of unanswered questions about what’s next, as well as its inclination for deeply bureaucratic timelines.

Plus, there’s no playbook for the move as no Schedule I drug has ever been moved down the Controlled Substance’s Act’s class list.

Several state markets saw significant declines in licensing activity in early 2024. Oklahoma, which had been the state with the most active licensees, saw the number of licenses plunge 20% to 8,428 after implementing a temporary licensing moratorium and cracking down on noncompliant operators.

That cleared the way for California to regain its position as the state with the most active cannabis licensees, despite a 4% quarterly decline to 9,433. Colorado, Illinois, Michigan, and Washington state also posted sizable drops in active license counts.

Missouri, one of the newest adult-use markets, saw its active licensing tumble 24% to 347 as that market entered its second year of adult-use sales.

Just five states managed to increase licensing by more than 5% for the quarter.

New Mexico led the country in both the highest number and greatest percentage jumps in new cannabis business licensing during the first quarter. Specifically, the state added more than 300 new active cannabis business licenses in the quarter, an increase of 15% from the end of 2023. When looking at a 12-month period, the number of active licenses in New Mexico was up 35% year-over-year.

The state also had the most businesses in the pre-licensing stage at the end of the first quarter, with 410 applications awaiting approval. That represented a 7% rise from the prior quarter.