This week, the Pennsylvania Senate Law and Justice Committee voted 7-3 to reject the House-passed bill (HB 1200) that would have legalized adult-use marijuana sales in the Commonwealth. This rejection effectively halts the current push for adult-use cannabis legalization in Pennsylvania, at least under the proposed model. The bill originally passed the State House on a strict party-line vote of 102-101.
The main objection by the 6 Republican and 1 Democratic State Senators voting against advancing the bill was to a proposed state-run retail model, which would have placed all adult use recreational sales in the state-run liquor stores and overseen by the Pennsylvania Liquor Control Board. While direct control of the retail side of the cannabis industry would have been ceded to the Pennsylvania Liquor Control Board, which would also be responsible for licensing marijuana cultivation, processing, transportation, and on-site consumption businesses could be privately owned. Concerns with this model included shutting out private sector and small businesses from participating in the industry, undermining investments made by existing medical cannabis businesses and discouraging small businesses and social equity participation, and potentially cost the state $250–$300 million to set up, compared to immediate revenue generation from a private market approach. Additional concerns revolved around logistical, financial, and legal challenges, particularly since cannabis remains federally illegal, and concerns about the state’s ability to manage cannabis sales alongside alcohol.
The defeat of HB 1200 does not mean the end of legalization efforts. Several senators, including committee chair Dan Laughlin (R-Erie), support legalization but favor a private market model over state-run stores. The rejection does signal that for legalization to advance, compromise and bipartisan cooperation will be necessary, with a focus on a private retail model rather than state-run stores. Efforts are still being undertaken to include adult-use legalization in the state’s annual budget package as lawmakers look for new revenue sources to address a budget deficit.
Currently, Pennsylvania lawmakers are considering several alternative models for adult-use marijuana legalization, reflecting sharp divisions over how the market should be structured. The main alternatives under consideration are a state-run retail model, a private retail model, a hybrid approach, and expansion of the existing medical cannabis system. The private retail model currently has the broadest bipartisan and industry support, while the state-run approach has faced significant opposition and was recently rejected by the Senate committee. As MJBizDaily points out, the matter remains to be resolved and another model of the legislation is likely to be included on the agenda of the state’s annual budget deliberations as lawmakers look for ways to overcome deficits.
Legalizing adult-use marijuana in Pennsylvania would significantly affect the cannabis markets in Ohio and New Jersey, and New York to a lesser extent, primarily by reducing out-of-state demand and shifting sales and tax revenue back to Pennsylvania. Currently, a substantial portion of customers at adult-use dispensaries in Ohio and New Jersey are Pennsylvanians who cross the border to purchase legal cannabis. Current estimates suggest that up to 60% of customers at some border dispensaries in these states come from Pennsylvania. If Pennsylvania legalizes, these consumers would likely switch to local, legal options, leading to a notable drop in sales at dispensaries in neighboring states, especially those near the Pennsylvania border. Legalization presents an opportunity for Pennsylvania to reclaim this lost revenue, with projections suggesting up to $2.8 billion in sales in its first year and as much as $720 million in tax revenue. This would directly reduce the tax income currently flowing to Ohio and New Jersey from Pennsylvania residents.
Legalization in Pennsylvania would directly impact New Jersey’s and Ohio’s markets which would become more reliant on in-state customers. While their overall market size would remain robust, the rapid growth fueled by cross-border demand would slow, particularly in border regions. Dispensaries in Ohio and New Jersey located farther from the Pennsylvania border would be less affected, while those near the border could see a sharper decline in sales. However, Pennsylvania’s entry into the adult-use market would intensify regional competition, potentially prompting Ohio and New Jersey to revisit their own tax and regulatory structures to retain customers. The shift would also reinforce the trend of Northeast states adopting legalization, increasing pressure on remaining holdouts to follow suit.
Legalizing adult-use marijuana in Pennsylvania would also have notable effects on the black market for cannabis in neighboring Ohio and New Jersey. Currently, Pennsylvania’s prohibition on adult-use marijuana has allowed the black-market trade to flourish, with many residents either traveling to neighboring states for legal purchases or turning to illicit sources. If Pennsylvania legalizes, much of the demand currently fueling illicit trade and cross-border purchases would likely shift to the legal, regulated market within Pennsylvania. This could reduce the incentive for Pennsylvanians to buy from illegal dealers in Ohio and New Jersey. Price remains the leading driver of the black market though as legal cannabis is typically taxed and regulated, which can make it more expensive than illicit alternatives.
If Pennsylvania legalizes adult-use marijuana, Ohio and New Jersey and New York will see a measurable decrease in sales and tax revenue from Pennsylvanian customers, especially in dispensaries near the border. The regional market would become more locally focused, and Pennsylvania would recapture significant economic benefits currently flowing to its neighbors.
About Mariconi Flowers Ltd
Moriconi Flowers Ltd. is was formed in 2016 by experienced trial attorneys to focus on the emerging marijuana and hemp industries. With over two decades of experience in pharmaceutical industry and products liability litigation defense work, the Firm’s principals are well versed in all elements of the legal cannabis market. Since 2016, the Firm has successfully assisted clients at all levels of marijuana permitting and operations, having successfully written applications for clients operating cultivation, manufacturing, dispensary, laboratory, and related businesses across the country.
Additionally, the Firm works with companies seeking DEA licensure for psilocybin research and manufacturing.