Virginia is for (cannabis) lovers 🌿

VIRGINIA
Virginia is for (cannabis) lovers 🌿

Driving the news: Virginia lawmakers are set to unveil proposed regulations for the state’s legal cannabis market on Tuesday.

The state first legalized cannabis in 2021, but still bans regulated sales. The outgoing Gov. Glenn Youngkin, a ‘Just Say No’ Republican, has twice vetoed bills that would have created rules governing commercial cannabis sales.

Gov.-elect Abigail Spanberger, a Democrat, spoke in favor of regulated cannabis sales during the campaign.

What’s in the rules: The proposal will be formally introduced ahead of the 2026 legislative session and sales would begin on November 1 of next year.

The framework set to be unveiled today would strike local opt-out clauses, increase local taxing authority, and build a licensing regime that favors small state-owned businesses rather than publicly traded multistate operators.

State taxes would be 8% while municipalities could levy an additional 3.5% if they choose. Fifty percent of cannabis licenses would go to “micro-businesses,” and all license holders would be capped at five total retail/grow/processor licenses, reports the Virginia Mercury, in an effort to avoid consolidation by existing medical cannabis operators.

Microbusinesses would as well be able to apply for direct-to-consumer licenses, allowing them to ship cannabis to customers’ homes. 

What they’re saying: “We all recognize that we need to regulate, control and tax marijuana, so that we have a revenue that can help the community reinvest… and the racially disparate impacts of the prohibition or the War on Drugs,” State Rep. Paul Krizek, the chair of the legislature’s Joint Commission on the Future of Cannabis Sales, said. 

Why it matters: Virginia is a large, purple state right next to the nation’s capital. It’s also something of a political bellwether for the rest of the country.

The Virginia market opening up is a strong symbol for an industry and a movement sorely looking for a win as progress toward federal reform has slowed to a crawl under President Trump. 

It’s also a massive market opportunity for both MSOs and small businesses, with nearly 9 million people. And since DC still doesn’t allow cannabis sales, it’s likely to get spillover customers from inside the Beltway. 

Our take: Balancing the objectives of tax revenue, eroding the illicit market, and creating jobs and economic opportunity for both small and large businesses alike is a core challenge with cannabis policy that no state has gotten quite right.

Virginia is lucky that it can learn from the mistakes of the states that legalized before it like New York and California. 

While generating tax revenue and supporting small businesses are worthy goals, Virginia policymakers should look closely at New York’s experience: without adequate supply on day one, even the best-intentioned social equity programs can collide with basic supply-and-demand reality.

One smart approach would be to incentivize operators to launch quickly by phasing in taxes. Start low, say 1-3%, and gradually raise the rate each year as the market stabilizes and supply catches up. That way, policymakers and regulators can balance tax revenue with shoring up the legal market. 

-JB

“There’s a place for it,” Raymond Baker, the mayor of Sidney, New York, told The New York Times about a Stiizy facility coming to town. “If a company is legitimate, it’s good for our tax base and it’s good for our village.”

Stiiizy moved into Sidney’s long-vacant book factory, giving the struggling village new jobs just as its mayor — once skeptical of cannabis — began warming to the industry’s economic potential. But the company’s ties to the Omnium licensing probe now threaten that progress, leaving Sidney’s revival tethered to the outcome of a still-unfolding investigation.

The New York Times reports from Stiizy.

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Cannabis-related lobbying hits near-record totals in KY 🥃

Kentucky groups spent $9.1 million lobbying the governor last year, a near-record total driven by major government contractors, health-care companies, and a new wave of medical cannabis operators fighting for influence over the state’s rollout. Big players like Cresco Labs, Dark Horse Cannabis, and industry advocates are now joining the fray as scrutiny intensifies over how Kentucky awarded its first medical cannabis licenses. Read more.

Communities near dispensaries 🏥

New research from Washington State finds that living near a licensed cannabis retailer is linked to higher rates of cannabis use disorder — and, for many Medicaid patients, greater hospitalizations and co-occurring mental health diagnoses. Still, the study authors express clear limitations to the date, including limited information about individuals’ healthcare history.

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