Is this the year that Pennsylvania finally legalizes adult-use cannabis? While some battle-scarred skeptics remain, there is fresh optimism in the Commonwealth with both the Governor and several key legislators pushing for legalization with perhaps greater intention than in years past. On February 4th, Governor Shapiro put the issue squarely on the table by including it in his budget proposal for 2025-26. Specifically, the Governor's budget proposal would:
- Legalize adult-use cannabis effective July 1, 2025, with legal sales beginning on January 1, 2026;
- Invest $10M in restorative justice initiatives from adult-use proceeds;
- Expunge the records of those incarcerated for only a possession-related offense attributable to cannabis; and
- Invest $25M to help new small and small diverse businesses enter the new adult-use marketplace.
Motivating this renewed sense of urgency are the lost tax
revenues flowing to neighboring states in amounts that are becoming
hard to ignore. Pennsylvania currently finds itself almost
landlocked by adult-use jurisdictions and the blossoming cannabis
markets which are drawing Pennsylvanians across state lines in
droves to purchase flower and finished products. Indeed, the
Governor's budget proposal specifically identified lost revenue
as a factor in the decision to move forward, stating:
"Pennsylvania is currently at a competitive disadvantage,
losing out on critical revenue and new business to our
neighbors."
The proposal also notes that "Executives from neighboring
states with cannabis stores on the border have reported that up to
60% of their customers are from Pennsylvania." This revenue
leakage is especially prevalent in the densely populated eastern
part of Pennsylvania where residents need not travel far to reach
dispensaries just across the border in New Jersey and New York. The
Governor's budget proposal estimates that legalizing adult-use
cannabis will yield $250M in annual revenue and will "generate
$1.3B over the first 5 years as the marketplace gets up and
running."
And, critically, it appears that the Governor and legislature may
be aligned on this issue to a degree not seen in prior years. In
December, Representatives Rick Krajewski and Dan Frankel published
a House Co-Sponsorship memorandum signaling an intention to
introduce adult-use cannabis legislation that prioritizes:
- Expungement and restorative justice for those affected by draconian drug policies;
- Reinvestment of funds into communities disproportionately harmed by the war on drugs;
- Public health protections, such as limiting excessive THC levels, prohibiting predatory marketing and packaging, preventing accidental ingestions by children, and other recommendations developed by our nation's leading scientists; and
- Providing sustainable cannabis businesses opportunities for local and diverse operators.
Notably, the Pennsylvania House Health Committee, chaired by
Rep. Frankel, held six hearings in the 2023-2024 legislative
session to examine the successes and failures of cannabis programs
in other states. Even among conservative lawmakers, there appears
to be growing consensus that the time is now to legalize adult-use
cannabis. In the 2023-24 session, several bills proposing to
legalize adult-use cannabis were co-sponsored by Republican
lawmakers, including Senator Daniel Laughlin and Representative
Aaron Kaufer.
Although this renewed inertia toward legalization is welcome news,
there is still a long road ahead in Pennsylvania and many important
questions about a future licensing framework and market operation
remain unanswered, among them:
- Will medical cannabis licensees be allowed to convert (and when)?
- Will there be caps on adult-use licenses?
- Will adult-use licenses be awarded by lottery or competitive applications?
- Will vertical integration be permitted?
- Will there be any limitations on product formulation or routes of administration?
- Will municipalities be permitted to opt out?
It's likely that these fundamental questions will not be answered for several months and the path forward will remain in flux. We will continue to monitor progress in real time and provide updates as they occur.
Originally published by 18 February 2025
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