The Cannabis Control Commission is contemplating slowing the already long-delayed awarding of 20 new retail cannabis dispensary licenses after local industry stakeholders raised concerns that new dispensaries will hurt their profit margins.
The discussion is set for a meeting at 1 p.m. on Friday, March 13, posted to the commission’s website late on March 10, along with a slew of proposed rule changes.
Cannabis Control Commission Commissioner Robert Jacquard said at a Feb. 13 meeting that “a lot of stakeholders” are complaining that new licenses being issued that “come online at the same time could result in the price of the product dropping so precipitously that no one would be able to profit by it.”
Neither Jacquard nor Administrator Michelle Reddish have publicly said who these stakeholders are, but the only organizations in the state that stand to drop prices in the face of competition are the eight dispensaries, six of which are partially or fully vertically integrated, meaning they grow their own product.
Neither Reddish, Jacquard nor Commissioner Layi Oduyingbo said anything about how consumers might feel about more competition in the market bringing prices down, although Oduyingbo did say the concern from the “stakeholders” was their margins.
Of those dispensaries, most are concentrated near each other, with two in Warwick and one each in Providence, Central Falls and Pawtucket, as well as one each in Portsmouth, Exeter and Foster.
The state only has eight dispensaries, but it has 57 cultivators – just over seven cultivators for each of the eight dispensaries.
While 24 licenses are supposed to be issued, no worker cooperatives applied in Zone 1 and Zone 4, and no general retailers applied in Zone 1, meaning the Cannabis Control Commission will only issue a maximum of 20 licenses through the lottery system. In all, 98 applications were submitted.
Attorney Lisa Holley, who represents cultivators and retail license applicants, said many cultivators are just breaking even and have expanded in anticipation of the increased demand in the state as new dispensaries open.
“I’ve had to counsel clients to shut down all but one room so they can pay the bills, and they hoped once these licenses came they could ramp up again,” she said. “These cultivators are barely staying alive.”
The eight dispensaries in the state are marking up their product 100% to 120%, Holley said.
That does not exactly indicate what the profit margins for the eight dispensaries are in the state, but it does give a very good starting point.
To compare, New York University’s Stern Business School compiles a list of margins by industry. General retail has a gross margin of 33% and grocery has 26%.
When Rhode Island first legalized the retail cannabis industry, the saying at the time was, “We’re not here to pick winners and losers, we’re here to regulate,” Holley said.
“To me, this seems like there’s a shift in ideology, to picking winners and losers,” she said. “In a capitalist, free-market society, the regulators shouldn’t be picking who succeeds, shouldn’t be price setting. They are the regulators. I think the idea that they’re not here to pick winners and losers, it’s fallen off their radar.”
When Rhode Island legalized the recreational sale of cannabis, it created a regulated market, only allowing 24 licenses to be issued, which gave a leg up to the existing medical marijuana dispensaries, which could quickly begin selling for recreational use.
Meanwhile, in neighboring Massachusetts, there is no cap on licenses. There, the price-per-gram has fallen to $4 as competition mounts, while in Rhode Island, it’s closer to at least $10 a gram, according to the Massachusetts Cannabis Control Commission.
“It just doesn’t make any sense to me,” Holley said. “It’s confounding.”
The Cannabis Control Commission is supposed to hold a lottery for 20 licenses after vetting the 98 applications.
For most of the applicants, the prospect of an ever-increasing timeline is painful, because it costs them more money every month that they are waiting for the lottery.
Every application required applicants to either own the space they plan to open their dispensary in, or to have a lease or promissory lease agreement. That means that applicants are paying to hold properties vacant, waiting for the Cannabis Control Commission to hold the lottery.
If the two sitting commissioners go forward with the proposal to slow down the release of licenses, that means those applicants will have to spend even more money on leases and other expenses, all in the hopes that they’ll win the lottery.
A report by economist Beau Whitney, commissioned by applicants and released March 10, pushes back on the idea that the existing dispensaries in the state will shutter if they face a little competition, and asserts that instead, more licenses will mean a growth in the market.
The lack of access in Rhode Island means that the industry, and tax revenue, are actually languishing, he wrote.
The average revenue a retailer needs to make to “remain viable” is $3.6 million, and the average sales per license in 2025, for the eight licenses, was $15 million, the report states. Average revenue for retailers in Rhode Island was the third-highest in the country, Whitney wrote in the report.
“There are roughly 7.25 cultivators for every retailer, so there is enough supply capacity to support any additional retailers that come on line without impacting the current retailers in operation,” Whitney wrote.