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We break down which U.S. states require legal cannabis operators to have vertically integrated operations and which don’t.

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What U.S. states require licensed, legal cannabis operators to have vertically integrated operations and which don’t?

Here is a breakdown of such requirements for adult-use and medical regimes.

Adult-Use

Currently, the only adult-use state that requires that a cannabis entity be fully integrated via license is the state of Arizona.
In Arizona, this means that a cannabis licensee is able to cultivate, manufacture or retail cannabis under a single license, though they are not actually required to do all those activities. Licensees are allowed to participate in a wholesale market where cannabis licensees sell each other biomass, in-process goods (e.g., raw oil) or finished goods for sale at retail.

There are several adult-use states, such as California, that have either vertical licenses (e.g. California’s “microbusiness licenses”) or allow for vertical integration through the owning of several licenses, but Arizona is the only one that requires it.

Interestingly, this is due to Arizona’s adult-use market closely mirroring its pre-existing medical cannabis market.

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Medical

In the medical cannabis industry, required vertical integration is not the norm but is found in these six states: Delaware, Florida, Louisiana, Minnesota, New Hampshire and Virginia.

Florida is unique in that it requires a licensee only sell at retail the products that it has cultivated and/or manufactured itself. There is no wholesale market for cannabis in that state, other than with special permission due to some type of unavoidable disaster (e.g., a loss due to a hurricane, etc.). Other medical states that require vertical integration operate similarly to Arizona.

Of course, several more medical-only states allow for vertical integration through integrated or combined licensing, but the above six states are the only ones that require it.

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