Will Ohio lawmakers change adult-use cannabis laws despite what voters approved?

This story was republished with permission from Crain’s Cleveland Business. 

Since the passage of Issue 2, Ohio Rep. Matt Huffman (R-Lima), former Ohio Senate president and newly elected speaker of the House, and other legislators have expressed interest in making some potentially drastic changes to the state’s marijuana laws.

As recently as December, Huffman said that he is still interested in pursuing a bill that would address some “fundamental flaws” in the voter-approved law — one similar to a bill that passed the Senate last year before stalling in the House.

But cannabis operators fret that some of the changes that have been discussed could negatively impact them, including raising marijuana tax rates and setting lower caps on THC potencies for consumer products. A recently introduced bill targeting the recreational marijuana program includes provisions that would alter both of those.

While medical marijuana is subject only to sales tax, adult-use products are subject to that plus a 10% excise tax. This creates an effective tax rate in Ohio for non-medical products of approximately 15.25% to 17.5%, depending on the tax where the sale takes place.

Senate Bill 56, however, introduced by Sen. Stephen Huffman (R-Tipp City) at the end of January, looks to increase the excise tax from 10% to 15%. If passed, that would bring the effective tax on adult-use marijuana to a range of 20.25% to 22.5%.

Meanwhile, a proposed budget by Gov. Mike DeWine calls for increasing that excise tax to 20%.

David Bowling, executive director of OHCANN, the trade organization representing cannabis businesses, said the concern is that an even higher tax rate could have a chilling effect on sales by discouraging cannabis consumers from participating in the state’s legal industry.

“We need to compete with these alternative sources of cannabis,” said Pete Nischt, a vice president with Akron-based Klutch Cannabis. “And we are talking not only about Michigan, but stuff imported from out West, illicit stuff and intoxicating hemp. We’ve been pretty clear that increasing the tax rate right now would be devastating.”

As far as whether Ohio’s tax rates should be increased or kept where they are, Speaker Matt Huffman said: “I don’t have an opinion on that right now.” He did acknowledge, however, concerns with taxes pushing away customers if set too high.

Tax rates are a topic that legislators will be discussing in more detail along with how those tax proceeds are distributed, which could be changed from the framework put in place by Issue 2, he said.

To that end, S.B. 56 calls for the elimination of the social equity and jobs fund created by Issue 2, which allocates 36% of tax proceeds from the adult-use program to that fund.

Aside from taxes, Bowling said that lowering potency limits could be equally “devastating.”

For the medical program, lawmakers imposed a THC cap on manufactured products like vapes and concentrates of just 70%. Issue 2 calls for a cap on potency of no lower than 90% on non-medical products.

It’s peculiar that the THC limit on medical products would be lower than adult use. Typically, medical products would carry a higher potency.

However, S.B. 56 would bring that 90% THC cap in the adult-use program down to 70%.

Operators worry how consumers would respond to these restrictive limits as products with lower THC potencies may be viewed as lower quality, Nischt said. And when customers can get marijuana without these same restrictions through other channels, restricting potency on legal products is another factor that could push customers away.

“There is a level of concern about the new structure in Columbus, and that level of concern is that the new speaker, Matt Huffman, who is a very reasonable and smart guy, has publicly declared that he wants to put corrections into Issue 2,” said Andy Rayburn, CEO of Eastlake-based Buckeye Relief and president of OHCANN.

“If they start to attack things like THC content, for example, which had been discussed across last year, that will of course affect consumers and greatly limit our ability to sell certain products,” he said. “That will push people back to the illegal market where they can buy the THC they prefer.”

Similar to the tax question, Huffman said that he doesn’t presently have a view of his own on THC potency restrictions and that it’s another question for legislators to mull.

“What limits are or shouldn’t be, I don’t think I have an opinion about that,” he said. “But I think we will come to a pretty good place through this process.”

Industry stakeholders remain hopeful they can continue to have a seat at the table when any legislative changes are discussed.

“We hope to continue to work with both bodies, the House and the Senate, and continue to explain the market realities of what certain actions would be, like changing THC content, which would be a return to a bunch of consumers going to illegal markets or driving to Michigan,” Rayburn said.

In terms of marijuana policies or related laws, “I don’t think cannabis evolution is going to be done in 2025,” Bowling said.

“That’s probably more of a five-year plan than a one-year plan,” he said. “But a year from now, I think we will be in a more settled state.”