Municipal Options

Licensing
Section Overview
I. Industrial Hemp Licensing (see part 1 document)
i. State of Wisconsin Industrial Hemp Pilot Program
ii. Local considerations: Industrial Hemp
II. Marijuana Licensing
i. State Licensing Scenarios: Medical and Full/Recreational
ii. Local Scenario
III. Discussion

I. Marijuana Licensing

Licensing of marijuana is different in every state and can vary between medical and recreational.
Licensing can help to offset the costs to regulate marijuana and also to restrict the production, supply,
and sales. In many states, local governments are allowed to impose local licensing regulations and fees
for both medical and recreational marijuana. The licensing types, limits, and fees vary widely, but some
municipalities are able to issue local licenses for growers, processors, and retailers.

Since Wisconsin has not legalized marijuana yet, no formal decision has been made about licensing,
though licensing is likely to be regulated by the state. 1 If the State of Wisconsin controls medical and/or
recreational marijuana licensing, it’s unclear what regulatory controls local governments would retain.
The State of WI could honor local land use and zoning, as it does for hemp. States with full legalization
often allow municipalities to restrict medical and recreational separately. This section discusses licensing
examples from other cities and states on a spectrum of least restrictive to most restrictive, similar to
land use & zoning. The marijuana market is sensitive to heavy licensing and regulation, and state and
local-level decisions can affect legal consumption rates and the potential for economic impact. The
purpose of this section is to briefly inform the City of Milwaukee about potential outcomes of different
scenarios and provide local licensing considerations.

II. ii. State Licensing: Medical and Recreational Marijuana

State licensing polices exist on a spectrum of restrictiveness, from least restrictive (Co) to most
restrictive (MN), though many states fall somewhere in between. Licensing can be restricted in a
number of ways including:
 Limiting the number of Licenses available
 Licensing fees
 License Types
 License application requirements

» Limiting Number of Licenses

1
Department of City Development, City of Milwaukee conversation. February 2019
 The most direct way licenses restrict marijuana is through license limits or caps at the state or local level.
For example, the State of Minnesota (medical 2010) only issues two licenses for the entire state. License
limits can also be based on population density (e.g. 1 retailer per 3000 residents) or by by area and
location. For example, the State of Ohio (medical 20xx) divides the state into “districts” and each district has a set
number of licenses.2

» License Types
Different license types can be used to only limit certain business types, such as issuing fewer licenses for
large cultivators and more for smaller cultivators. One crucial license type is “vertically-integrated”
which allows the license holder (business) to cultivate, process, and sell marijuana. The two licenses
issued in Minnesota issues are also vertically-integrated meaning two companies control the cultivation,
processing, and sales of marijuana for the entire state. Finally, the cost of different licenses and the
application requirements can intentionally or unintentionally restrict businesses.

» Licensing Fees
Licensing fees can range from hundreds of dollars (MA; CO) to hundreds of thousands of dollars,
depending on the state, and the license type. Fees can be tiered based on business size, number of
plants, etc) (table xx). For example, Massachusetts licenses medical marijuana cultivators based on the
size of their business, grouped in eleven different tiers. The fees begin at $625 and go up to $25,000.
Ohio also issues different licenses for different sized cultivators. Ohio only has two tiers, however, that
cost $20,000 for smaller cultivators, and $200,000 for larger cultivators, annually. The high cost in some
states has excluded many local, small businesses from benefiting or entering the marijuana industry.

» License application Requirements

Application requirements like business tenure, criminal background checks etc. exist to ensure a safe
and profitable market but can be more restrictive than intended. For example, many states require a
criminal background check and will not issue a license for any convicted violation of the Controlled
Substance Act, including small-scale marijuana possession. Minorities have disproportionately high
conviction rate (despite similar rates of use), and this requirement can exclude minorities from entering
the industry, exacerbating inequity.3

Table xx: Example of Licensing Types and Tiers

Colorado
Minnesota
» 1,400 Table
cultivator licenses
xx: Example of tiered license Types and Fees
» State licensing fees » Two vertically integrated licenses for the
o $2,500 medical cultivator entire state.
o $4,000 recreational cultivator » Vertically-integrated licene: licensee
2
Local fees allowed (up to $5000) must b cultivator, processor, and retailer
» http://www.mml.org/pdf/resources/med-marihuana_opt-in-out_MAY2018.pdf
3
High licensing fees exclude lower-income residents and disproportionately exclude minorities, as race and income are highly correlated in the
United States. Harris, Kirk. JD; PhD. Planning Law. University of Wisconsin Milwaukee. Fall 2017.
State Policies

Examples of the Range of State Restrictions

[include PowerPoint spectrum with all examples]

 Vertically-integrated License – The same company is allowed or required to grow, process, and
sell marijuana. More than one company holds a vertically-integrated license, but companies can
generally not process or sell between one another. 4

Least Restrictive
- Colorado (Medical 2000;Retail 2012)
The State of Colorado exists on the less restrictive end with no caps on licenses, including
cultivator’s licenses, which are highly restricted in other state. Colorado also has multiple licensing
tiers with different fees, based on business size. Multiple tiers of licensing and fees can help small
and start-up businesses compete with large, established corporations.
 Michigan (Medical 2008-2016)
Michigan did not have a statewide system to regulate marijuana from 2008, when medical was
legalized, until October 2018.5
 Michigan legalized medical marijuana in 2008 as a state, but did not vote to impose a statewide
regulatory system until 2016. The absence of any statewide regulatory system created
inconsistencies and confusion. Licensing and land use was a “patchwork of local rules” and
raised legal disputes including “ a court ruling that for a time outlawed sales from storefronts. 6

Moderately Restrictive –
- Ohio (Medical 2016) –
o Licensing Fees & Tiers The State of Ohio is an example of a more moderate, but
fairly restrictive state for licensing. The state restricts the number of all licenses,
with fewer cultivators licenses than processors and retailers and fees as high as
$200,000 (table xx)
o Regulatory system - Ohio legalized medical marijuana in 2016 but retail sales
did not start until 2019, in part, due to long application processes, failed
inspections of cultivators, and lawsuits from those denied a license. 7
- Massachusetts (Medical 2012; Full 2016)
- Licensing Fees & Tiers - Massachusetts is even less restrictive than Ohio and provides eleven
different tiers of licenses and fees. Fees are also much more affordable, ranging from $625D
to $25K. (source)
- Florida (Medical 2016)
 Florida also requires vertical integration, like Minnesota, but issues 14 licenses.
 License transfers - they also have not prohibited license transfers meaning out-of-state
corporations can acquire and hold licenses to increase demand and sell the license at a

4
https://www.cannabisbusinesstimes.com/article/the-pros-and-cons-of-vertical-integration/
5
The vote to impose a state regulatory system was in 2016, but the new system was not running until 2018.
6
https://mjbizdaily.com/michigan-medical-marijuana-case-heads-to-state-supreme-court-could-decide-fate-of-mmj-dispensaries/
7
Medical Marijuana Prohibition Fact Sheet (MPP download)
 much higher price. Before medical sales ever began in Florida, a license resold for $40M.
The same happened in New York where a medical license sold for $26M. 8

Table xx: State of Ohio Licensing Fees by Type (Medical; 2016)

Most Restrictive
- Minnesota (Medical 2010)9
Minnesota only grants two vertically-integrated licenses for the entire state. The two companies granted
licenses lost $4 million in 2016 & $10 million in 2017 and demand has been significantly lower than
anticipated.10

Local
All states that have full legalization allow municipalities to first decide to either permit or prohibit
marijuana sales and land uses. [source] In some states, like Michigan, municipalities that opt-in can also
implement local licensing fees and processes and land use and zoning ordinances. 11 When permissible,
local officials across the country have concentrated on licensing and its interconnectedness with zoning,
enforcement, distribution management, and local revenue. 12 The same tools at the state level can be
applied at the local level. A comparison of Seattle, WA and Denver, CO is provided to demonstrate the
impact of licensing restrictions at the local level.

Seattle, WA vs. Denver, CO (full legalization) 13

» Denver, CO (less restrictive)
 Denver permits approximately 500 retailers, or one retailer for every three thousand
residents.
 The illegal market share has fallen to 30 percent.
» Seattle, WA (more restrictive)
 Seattle limits retailer licenses to 21, or approximately one per thirty thousand residents
 70 percent black market due to lack of access market.

8
https://www.forbes.com/sites/kriskrane/2018/04/25/cannabis-cultivation-will-be-a-race-to-the-bottom/#68be6eff4184 
9
https://www.mprnews.org/story/2014/12/01/minnesota-medical-marijuana

10
In part due to limited access, a limited number of qualifying medical conditions, and only pill and oil products. (source)
11
http://www.mml.org/pdf/resources/med-marihuana_opt-in-out_MAY2018.pdf

12
https://www.generalcode.com/local-governments-join-medical-marijuana-debate/
13
(Beals, 2018). MPG (put in full source)
 - Takeaway – limiting licenses by density can impact legal sales, revenue, and business
development by decreasing access, increasing price, and driving sales to the illegal market.
- Consideration - Research has found that for recreational use, at least one legal retailer is needed
per 7,500 residents.

III. Discussion

This section again, is just a snapshot of the main options so that the City of Milwaukee has information
and suggestions for lobbying at the state level and for possible adoption at the local level, if allowed.
Many of the requirements and limitation help ensure the health and safety of the broader public and
can prevent from excessive corporate speculation and profit. Yet, states and cities must be mindful of
the unintended consequences of some restrictions.

Recommendations for both Advocacy (State) and Adoption (Local)

 Equity Programs – Cities like Oakland, California have adopted significant equity programs
where a percentage of licenses are preserved for minority-owned businesses, with more
affordable fees. This ensures minorities are not disproportionately excluded. (source).
- License Limits – we recommend doing a market analysis and further research before licensing
use too steeply. Moderate limits can be helpful, but in some states (e.g. MN) few licenses
reduced access and demand making the industry unprofitable.
- Tiered-licenses and fees - A tiered approach can protect businesses of diverse sizes. We
recommend advocating to the state for this approach.
- Vertical licensing - advocate for further research if state considers vertical-integration. While it
has some benefits, (easier oversight) it can exclude new/small businesses.
- Rolling application – can help stagger volume of applications and be more efficient/consistent
and help avoid bottlenecks in licensing process. 14
- Residency requirement - to prevent out of state corporations from monopolizing the market
before local businesses can compete, a minimum residency requirement should be considered.
- Prohibit Transfer or resale – license can be specific to an individual (not just a company) to
restrict transfers. This can also ensure every licensee has been probably vetted through the
application process.15
 Time limits – In addition to prohibit transfers, states/cities can void a license if it doesn’t
obtain a certificate of occupancy within a set period

City-specific Considerations 16
 Land Use & Zoning - If the State of Wisconsin does not grant municipalities any local licensing
controls, it’s possible that land use and zoning restrictions can be used to direct businesses and
licensing approvals at the state level.

14
http://www.viewpointcloud.com/blog/local-government-resources/a-local-governments-guide-to-successful-marijuana-regulation-and-
licensing/

15
http://www.mml.org/pdf/resources/med-marihuana_opt-in-out_MAY2018.pdf
16
http://www.mml.org/pdf/resources/med-marihuana_opt-in-out_MAY2018.pdf
  Consider specific ordinances - Local code of ordinances might have general standards but
medical marihuana may have aspects that require unique attention. Should be addressed
specifically in ordinance or in process and when thinking about permitted uses. Other cities and
states with legalized use can provide great examples, but many regulations will likely need to be
tailored to an individual community.17
- Establish objective criteria and processes – If the city can restrict licensing, objective criteria and
processes are important to avoid potential legal challenges. This is especially important if more
applicants than licenses (first come, first served, lottery, objective scoring system etc.)18

17
http://www.viewpointcloud.com/blog/local-government-resources/a-local-governments-guide-to-successful-marijuana-regulation-and-
licensing/

18
Michigan Medical License handout for recommendations ””