After more than two years, Montana’s adult-use cannabis market is looking to pump the breaks on new licenses as municipal road blocks continue to challenge new opportunities for the nascent cannabis industry.
The state legislature’s Economic Affairs Interim Committee recently considered legislation that could extend an ongoing moratorium on new cannabis licenses in Montana until the summer of 2027. An initial draft of the bill was submitted during the committee’s June 17 meeting with support from current license holders.
“This is a starting point for the bill and it probably needs some feedback,” said the committee’s staff attorney Jameson Walker when presented the initial draft before the committee.
Retail outlets concentrated in the few municipalities that have allowed legal cannabis have created a financial dilemma for local businesses.
Voters in Montana legalized adult-use cannabis in 2020 through a ballot initiative with 57% of the total vote. Following the voters’ mandate, the state allowed commercial sales of adult-use cannabis to start on Jan. 1, 2022.
The original enacting legislation allowed medical license holders to convert to adult-use, while new entrants had to wait until mid-2023 to apply. That date was pushed back to 2025 in March 2023 via HB 128.
However, the market has still flourished. There are currently 320 cultivation, 423 active adult-use retail and 165 processing licenses in Montana as of June 25, according to the CRB Monitor licensing database.
“The industry has generally kept up with demand for cannabis products since 2020, and four years later we are just approaching a point of overproduction,” said Pepper Peterson, CEO of Montana Cannabis Guild. “Montana has always had the benefit of watching the successes and failures of more mature legal cannabis markets in neighboring states. We have seen how oversupply has destroyed markets in Oregon and Washington. It is our intent to avoid those same market failures in Montana.”
Of those dispensaries, about 35% are concentrated in Billings, Bozeman and Missoula, while the three cities account for about 22% of the state’s population. Between just Bozeman and Missoula, the two cities host a fourth of all dispensaries while housing only a tenth of the state’s population.
“Missoula also has too many bars and too many casinos. Most Montana towns do,” said Peterson. “This is the result of poor planning and zoning on the part of local governments. It’s pretty typical of local governments in Montana to take a traditionally laissez-faire attitude towards zoning. Sometimes the bars were there before the towns and churches and schools showed up, so a libertarian attitude towards local control persists.”
The draft legislation would extend the current moratorium that is scheduled to last until next summer for two additional years.
Adam Arnold, owner of Montana cannabis chain Collective Elevation, told the committee that the Department of Revenue currently has a backlog of cannabis license inspections and renewals. He argued that the agency would struggle to enforce regulations for new licensees at current staffing levels.
“There’s going to be a gold rush of new, unregulated dispensaries if you guys just fully lift the moratorium. You can already see that there’s an issue in cities like Missoula that are trying to cap licenses,” he said.
“Since 2020, Montana’s cannabis market has not faced major price fluctuations or price collapse from over supply because state law restricted how, where and by whom cannabis could be produced and sold. Specifically Montana prohibits outdoor cannabis cultivation by all but a handful of licensees who were grandfathered in upon passage of HB 701 in 2021,” said Peterson. “That, among other restrictions like tight rules on locations and facilities, has limited over production of cannabis substantially.”
Peterson also suggested there was an increase in interest from municipalities to regulate cannabis businesses as they continue to spring up.
“Local control means some towns adopt ordinances before others, and often towns don’t understand what they can legally do in regards to cannabis businesses,” she said. “Cities and counties have reached out seeking guidance from the state recently, including Missoula and Cascade counties. So this freeze is the legislative response to those questions from local governments.”
The legislation is still preliminary, and it would likely have until 2025 at the earliest before it could be formally filed.
