How Does a State’s Legalization of Marijuana Affect MSO Dispensaries?

Legalization of marijuana by individual states has consistently led to a decline in the number of patients at medicinal marijuana dispensaries, the cannabis business model of MSOs like Harvest Health, Curaleaf and Cresco Labs, according to a recent report by Associated Press. The AP study analyzed data from the four states with sufficient data, Oregon, Nevada, Colorado and Alaska.

MSO Dispensaries Legal Recreational Marijuana

“Lots of people have started trying to figure out how to make these concentrates and edibles themselves in their kitchen,” said a provider of free medical cannabis to children with epilepsy. Or they can just smoke flower. This becomes cheaper once a state legalizes recreational marijuana, even more so when home growing is allowed.

When States Legalize Recreational Marijuana, MSO Dispensaries Lose Patients and Sales

Each state’s new marijuana laws will differ. The law recently passed by Illinois has been widely praised by the industry, as it lets established dispensaries go to the head of the line for permits. Even so, there will be many new retail operations competing to sell flower and vape products.

Because some states will make it easier to obtain a retail license, the successful model of Cresco Labs and other MSOs — to open in a state with high barriers to entry, as well with as big demand and low supply — won’t work in all cases anymore, and revenue might decline in the future. (This might explain why Cresco is trying to acquire Origin House for its well-known brands, as Cresco has said that branding is its new focus; perhaps they were already aware of what AP just reported and want to get ahead of the curve.)

Trading and Investing in MSO Dispensary Stocks

If what has happened to the revenue of dispensaries reported on by AP occurs in Illinois, Massachusetts and other states that already have legal recreational marijuana, that is an important thing to consider when speculating on MSO stocks. Also consider the prospects of other states legalizing recreational marijuana, and which MSOs operate there.

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