Cannabis Industry Licensing Trends

LOS ANGELES- The rapid expansion of the cannabis industry in North America has shown signs of cooling in the first quarter of 2024, with a noticeable decline in the number of both active licenses and new applicants in the U.S. and Canada. This slowdown reflects a broader trend of market saturation and economic challenges impacting the sector.

According to a report by CRB Monitor, the pace of cannabis business licensing has slowed significantly, entering a period of rationalization. In the U.S., active cannabis business licenses decreased by 8% in the first three months of 2024, totaling 39,850. This marks the fifth consecutive quarterly decline from a peak of 44,323 active licenses in late 2022. Furthermore, the number of approved licenses awaiting final approval dropped slightly by 1% to 4,719, while applications in the pre-licensing stage plummeted by 64% to 1,907.

Canada’s cannabis licensing activity has seen a more gradual pullback, with active business licenses decreasing by 9% in the first quarter to 6,267, the lowest level since 2021. However, new applications for the pre-licensing process saw an increase of 38%, though the total remained modest at 401.

The industry faces ongoing challenges from an oversupply, inconsistent regulations across state markets, and competition from illegal operations. These issues, coupled with economic uncertainty and declining investor confidence, have made access to capital increasingly difficult for cannabis businesses.

Several U.S. states have experienced significant declines in licensing activity. Oklahoma, previously the state with the most active licenses, saw a 20% drop to 8,428 after imposing a temporary licensing moratorium and intensifying enforcement against noncompliant operators. Conversely, California reclaimed its position as the state with the highest number of active cannabis licenses, despite a 4% decrease to 9,433. Other states such as Colorado, Illinois, Michigan, and Washington also reported notable reductions in active license counts.

In contrast, New Mexico exhibited robust growth in cannabis licensing, adding more than 300 new active licenses in the first quarter, a 15% increase from late 2023. The state also led in the number of businesses in the pre-licensing stage, with 410 applications pending at the end of the quarter, a 7% increase from the previous quarter.

This slowdown in licensing activity highlights the ongoing adjustments within the cannabis industry as it navigates through a complex landscape of regulatory and economic pressures.