By the time you read this article, our cannabis legalization map could very well be wrong. (Don’t worry! We’ll update it as fast as we can!). But with several medical-marijuana states currently eyeing legislation to legalize adult recreational cannabis use, the map of states where cannabis is fully legal could change dramatically overnight. In fact, a few states, including Delaware, Minnesota, New Hampshire, and Pennsylvania are this close to allowing regulated sales of cannabis to all adults over 21 this year. For those looking to start a cannabis business or expand an existing one into a new state, this is all great news.
However, navigating the minefield of individual state laws, changing regulatory compliance, and obstacles due to cannabis’ illegality on the Federal level make the cannabis business a challenging undertaking in any state. It’s especially complex if you’d like to expand your business across state lines and get insurance for your cannabis company. This article offers a state-by-state cannabis legalization map with direct links to each state’s legislation so you can follow each state’s evolving laws. We’ll also explain how differing state rules around money handling continue to add complexity – and risk – as the nation rolls out its patchwork of cannabis regulations one state at a time.
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Differing State Rules for Cannabis Money Handling Adds Risk for Businesses
Let’s be honest: one of the main reasons states are legalizing cannabis and regulating it heavily is to make money. State taxes, licensing fees, business fees – they all go into the state coffers to fund programs and services. According to the Marijuana Policy Project, “As of March 2022, states reported a combined total of $11.2 billion in tax revenue from legal, adult-use cannabis sales.” With so much at stake, it makes sense that each state carefully manages how money changes hands in the cannabis business. That’s one reason states mandate specific business protocols, like seed-to-sale software, for example, in order to track every single plant that is grown, processed, and turned into profit.
A lot of these efforts stem from the fact that, as you’re probably aware, cannabis is mostly a cash-only business. This is mainly because most banks (which are Federally insured) won’t provide bank accounts for business owners and won’t process credit card payments used for cannabis. States don’t want to get on the wrong side of the Feds— but they also don’t want to lose revenue.
Unfortunately, this disconnect between the large sums of cash states are entitled to and the inability to legally put it in a bank for safekeeping actually translates into an extra layer of risk for individual cannabis businesses. And one way that risk manifests is in your insurance policy, which ideally would protect you from crimes that tend to plague cash-only businesses, such as theft, money-laundering, and inventory control problems. Since each state has different rules for how businesses must handle large amounts of cash, a cannabis business’s risk must always be assessed using different, non-standardized criteria, making it an incredibly complex task to calculate a policy cost that’s sufficient to cover your losses – and that’s affordable.
From D.C. to Mississippi, Cannabis Rules Vary Widely
Currently, states vary widely in their rules around money handling, from the supply chain to the sales profit. Consider this unusual arrangement for payment in Washington, D.C. The bill legalizing cannabis in the nation’s Capitol, i71, legalized the consumption of cannabis – but not buying or selling it. Instead, you must treat it as a gift to stay in legal compliance. So dispensaries in D.C. advertise their product as “gifts,” and when you go in to make a purchase you must also buy a non-cannabis item, such as a hat or stickers. The establishment “gives” you the cannabis in exchange for your purchase of this retail merchandise. Imagine how that uncertainty translates into risk assessment for the business.
Washington D.C. is the only place with this type of workaround. But other states have idiosyncratic money-handling processes, too. For example in Mississippi, which legalized medical cannabis in February 2022, plenty of jurisdictions are opting out of participating in the legal medical cannabis economy. The state – like other new entrants into cannabis, such as New Jersey and New York, is slow to issue permits for dispensaries. So even though it’s legal, you can’t yet buy it. The longer your business is open —with no way to sell anything— the more risk you take on as a business owner.
Mobile Payment Apps to the Rescue – But Not in Every State
Help is on the horizon, though. If you’ve sold – or purchased – cannabis recently, you may have encountered a new payment system that’s being implemented in several states that allows you to use your debit card instead of cash to buy cannabis. These cannabis payment platforms are a kind of digital wallet app that you link to your checking account and, when you go to check out you tap the app to pay. Companies such as CanPay, Hypur, and Dwolla are early entrants into the market.
There are also cannabis payment processing companies designed to allow merchants to use digital transfers of money to avoid the risks of dealing in cash. Some of the fintech companies in this area include Instabill, Flowhub, and Paybotic.
While digital payment options – both for the consumer and the merchant — are not available in every state, they are becoming more widely adopted. States actually license each of these services on a case-by-case basis. But eventually, as availability of these services expands (though no one knows exactly how long it will take for the market to stabilize), safer money transfer will translate into less risk for cannabis business. And for cannabis businesses, any reduction in risk is welcome news.
Frankly, there are few things more critical than having tight controls on your business’s money operations. Because remember, we’re talking about billions of dollars that states are calculating into their fiscal budgets. But two other aspects of digital payment solutions are important for cannabis businesses, too: legitimacy and standardization. The evolution of cannabis from an illegal substance to a mostly legal substance means progress for all the supporting businesses, such as banks, insurance companies, investors, and technology companies that must work in sync to keep risk low, or at least quantifiable. Having reliable, predictable, standardized mechanisms in the cannabis industry translates into less risk and more protection – and profit – for you.
Legal Cannabis Sales by State
The 50 states’ current cannabis legalization map status can be divided into four groups: states where cannabis is completely legal (meaning medical and recreational use); states where weed is totally illegal (in compliance with Federal regulations); states where only medical marijuana is authorized (for which states issue ID cards to registered patients); and states that only allow sales of CBD oil (the oil from non-psychoactive industrial hemp plants).
|States where cannabis is fully legal for recreational use||States where cannabis is totally illegal||States where only medical cannabis is legal||States where only medical CBD oil is legal|
|New Jersey||North Dakota|
|Washington, DC||West Virginia|
Cannabis Legalization Map: Is Weed Legal in Your State? As of April 2022:
- Alabama: Medical use
- Alaska: Fully legal
- Arizona: Fully legal
- Arkansas: Medical use
- California: Fully legal
- Colorado: Fully legal
- Connecticut: Fully legal
- Delaware: Medical use
- Florida: Medical use
- Georgia: Medical CBD oil only
- Hawaii: Medical use
- Idaho: Illegal
- Illinois: Fully legal
- Indiana: Medical CBD oil only
- Iowa: Medical CBD oil only
- Kansas: Illegal
- Kentucky: Medical CBD oil only
- Louisiana: Medical use
- Maine: Fully legal
- Maryland: Medical use
- Massachusetts: Fully legal
- Michigan: Fully legal
- Minnesota: Medical use
- Mississippi: Medical use
- Missouri: Medical use
- Montana: Fully legal
- Nebraska: Illegal
- Nevada: Fully legal
- New Hampshire: Medical use
- New Jersey: Fully legal
- New Mexico: Fully legal
- New York: Fully legal
- North Carolina: Illegal
- North Dakota: Medical use
- Ohio: Medical use
- Oklahoma: Medical use
- Oregon: Fully legal
- Pennsylvania: Medical use
- Rhode Island: Medical use
- South Carolina: Illegal
- South Dakota: Medical use
- Tennessee: Medical CBD oil only
- Texas: Medical CBD oil only
- Utah: Medical use
- Vermont: Fully legal
- Virginia: Fully legal
- Washington: Fully legal
- Washington, DC: Fully legal
- West Virginia: Medical use
- Wisconsin: Medical CBD oil only
- Wyoming: Illegal