Which State Will Be The First To Legally Import/Export Cannabis In The U.S.?

Importing and exporting cannabis illegally between states is not a new thing in the U.S. Far from it. Ever since cannabis was federally prohibited in the 1930’s illegal cannabis sales have occurred in the U.S. with much of the cannabis involved having crossed one or more state borders along the way before making it to the end consumer.

Oregon lawmakers made history this year when they passed the first-ever cannabis import/export bill (not including hemp). The Craft Cannabis Alliance was instrumental in getting the bill passed and educating Oregon lawmakers on the benefits of cannabis import/export reform. The organization’s Founder and Director, Adam J. Smith, recently published an in-depth article about why other states need to be allowed to adopt measures similar to what Oregon’s Legislature passed in 2019. The article is a must-read.

The cannabis oversupply situation in Oregon was covered by mainstream media outlets numerous times in recent years. A lot of the media hysteria and hype is unwarranted considering that a significant amount of the oversupply is no longer usable and is simply lingering in Oregon’s seed-to-sale tracking system. However, that’s not to say that the recently passed reform measure was not needed.

Cannabis is an agriculture crop. it will likely always be regulated differently than tomatoes, but it’s ultimately a crop. Virtually all legal crops are imported and exported in some fashion between states. Demand for cannabis is very strong nationwide, so it is only logical to expect that at some point there will be a regulated system to help supply meet demand via interstate cannabis commerce.

A handful of states are exploring the idea of following in Oregon’s footsteps. Many cannabis observers are asking each other ‘when will the first legal cannabis import/export actually happen? When it does happen, which states will be involved?’

I have stated previously that I expect Oregon and Nevada to be the first states involved, with Oregon exporting sungrown cannabis to Nevada. That is still my prediction. For starters, Oregon is ready to enter into an interstate agreement right now, pending federal permission from the U.S. Department of Justice or via an act of Congress.

Nevada shares a border with Oregon and has allowed legal adult-use cannabis sales for awhile. Some cannabis observers have pointed out, and understandably so, that Nevada’s industry cultivates its own cannabis and so, therefore, its industry (and policymakers) would likely oppose allowing imports, and adamantly at that.

It’s a very valid point, however, it doesn’t take one important factor into account. Cannabis consumers want to make purchases, and if there is no supply at regulated outlets to make a purchase due to a shortage, they will turn to other sources, including the unregulated market which still exists and likely always will exist in Nevada.

Even if a consumer doesn’t turn to the unregulated market, they would immediately go to a competitor to purchase cannabis if their preferred outlet is out of stock or charging higher prices due to a shortage. As a desert state, Nevada’s climate is not ideal for cultivating quality cannabis under the sun, and that could be problematic over time.

A series of setbacks among large cultivators in Nevada could easily result in a situation where cannabis is in short supply, similar to what is currently going on in parts of Colorado, or occurred in California after large wildfires destroyed huge cannabis farms. The demand for cannabis in the state of Nevada will remain constant if/when a shortage happens. What will the state do to help fill the void?

Entrepreneurs, regulators, and even lawmakers have a vested interest in keeping Nevada’s legal cannabis industry humming along in order to keep consumers from turning to the unregulated market. Importing cannabis legally from another state is a logical solution to the problem if/when it happens, and Oregon is the perfect partner to help fill the void if that ever proves to be the case in Nevada.

A policy allowing Nevada to import legal cannabis from Oregon would not necessarily be designed to replace Nevada’s cannabis cultivation sector. Rather, it would be geared towards helping supplement it. In some instances, it may make more financial sense to import cannabis from Oregon to the Nevada market. After all, Oregon’s cultivation community is capable of producing a tremendous amount of world-class cannabis at likely a cheaper price than any other state.

However, many consumers would still likely prefer to buy locally-sourced cannabis. After the local sources run out, entrepreneurs would then turn to Oregon to help fill the void to keep the supply steady. Eventually, most states will have cannabis from a laundry list of other states on regulated shelves in their jurisdictions, just as they do a number of other consumables (including alcohol). Yet, before that happens, two states will have to be the first to put things in motion.

That could happen even prior to federal permission being granted. After all, it wouldn’t be the first time that Oregon and Nevada defied federal cannabis law. It’s not likely, but it’s certainly not a far-fetched concept either.

One wild-card scenario is worth touching on in this discussion. A way that I can see cannabis imports/exports occurring in a scenario that doesn’t involve Oregon or Nevada could possibly be via a social-equity multi-state program. This type of public policy concept would involve social-equity cultivation licensees in one state exporting their cannabis to social-equity licensees in another state.

When a state initially passes a reform measure creating a legal cannabis industry, it takes quite a bit of time for cannabis companies to go from obtaining a license and starting a cannabis cultivation facility all the way to actually selling products to the end consumer. In states with no regulatory framework in place, that process could take years.

With enormous startup costs and the length of time involved until a sale is made in the scenario described, many would-be cannabis entrepreneurs simply wouldn’t have the resources to get involved in the cannabis industry in a meaningful way. That is especially true for members of communities disproportionately affected by cannabis prohibition.

State-to-state equity programs would not only help mitigate the issues described, but it would also give social-equity licensees a significant headstart over people and entities with huge resources, which is something that the cannabis industry, regulators, and lawmakers everywhere should all be embracing. I would personally love to see it happen.

For the time being though, it seems like other states are unlikely to beat Oregon and Nevada to the punch. If that did happen, it would take a perfect storm. Nevada is home to a huge demand for cannabis in a desert climate, and Oregon has the ability to cultivate world-class cannabis on the other side of the state border. Oregon also already has a policy in place (albeit without the regulations). That scenario does not exist anywhere else in the United States right now.

California is another likely candidate to help fill any potential supply voids in Nevada. After all, California can also cultivate world-class cannabis and also shares a border with Nevada. However, Oregon is much farther along on the policy side, and California is still working on addressing its own intrastate commerce hurdles and issues, so I think a California-to-Nevada scenario is far less likely to occur than an Oregon-to-Nevada scenario.