COLUMBUS – Ohio’s legal cannabis market reached a major benchmark in 2025, surpassing $1 billion in combined adult-use and medical marijuana sales during its first full year of recreational commerce.

Adult-use marijuana sales launched in August 2024 following voter approval in November 2023. By the end of 2025, Ohio dispensaries had recorded:

  • More than $836 million in adult-use sales

  • Approximately $233 million in medical marijuana sales

  • About $1.06 billion in total statewide cannabis revenue

  • Roughly $1.09 billion in cumulative sales by early January 2026

The state now has nearly 190 dispensaries licensed to sell both medical and recreational marijuana. However, expansion remains uneven, as more than 130 Ohio cities and townships continue to prohibit adult-use retail, concentrating demand in fewer markets.

Average prices for both flower and manufactured products declined during 2025, signaling a maturing market where rising volume is beginning to pressure margins.

Ohio Lawmakers Tighten Rules with Senate Bill 56

As Ohio’s cannabis market gained traction, state lawmakers moved to reassert control.

Because Ohio legalized marijuana through a citizen-initiated statute, rather than a constitutional amendment, the Legislature retained authority to modify the law. In December 2025, lawmakers passed Senate Bill 56 (SB 56), which Gov. Mike DeWine signed into law.

SB 56 is scheduled to take effect March 20, 2026, and introduces sweeping changes affecting product design, enforcement, and revenue allocation.

Key SB 56 Provisions

THC Potency Caps

  • Flower limited to 35% THC

  • Extracts capped at 70% THC, down from 90%

These limits directly affect high-margin products such as concentrates and vape cartridges, categories that have historically driven revenue growth in mature markets like Michigan.

Hemp-Derived THC Restrictions
SB 56 sharply narrows Ohio’s definition of legal hemp, effectively removing intoxicating hemp-derived products from convenience stores and unlicensed retail. Products containing delta-8, synthesized THC, and similar cannabinoids must now meet stricter standards or exit the market.

Tax Revenue Reallocation
Ohio’s 10% adult-use excise tax remains in place, but SB 56 changes how proceeds are distributed:

  • 36% to host communities

  • 64% to the state general fund

Funding streams tied to social equity, workforce development, and substance-use programs are reduced or eliminated, reframing cannabis as a general revenue source rather than a targeted economic-development tool.

Expanded Enforcement
The law adds new penalties related to packaging, transport, hemp-derived THC, and certain out-of-state cannabis purchases—raising compliance risk for multi-state operators.Referendum Effort Stalled by Attorney General

Industry group Ohioans for Cannabis Choice attempted to block SB 56 using Ohio’s “citizen veto” referendum process. In January, Ohio Attorney General Dave Yost rejected the group’s petition summary, ruling it misleading and incomplete.

Organizers may revise and resubmit the petition, but would still need to collect roughly 248,000 valid signatures to qualify for the ballot. For now, SB 56 remains on track to take effect in March.

Michigan Market Faces New Pricing Pressure from Wholesale Tax

While Ohio tightens regulation, Michigan is contending with a major tax change that could alter regional pricing dynamics.

Effective January 1, 2026, Michigan implemented a 24% wholesale cannabis tax applied to transfers between growers, processors, and retailers. The levy is imposed before products reach the retail shelf, making it fundamentally different from a retail excise tax.

The wholesale tax is layered on top of:

  • Michigan’s existing 10% retail excise tax

  • The state’s 6% sales tax

Michigan’s adult-use market generated approximately $3.17 billion in sales in 2025, nearly four times Ohio’s adult-use total.

Ohio vs. Michigan Cannabis Tax Structure (Adult-Use)

Category Ohio Michigan
Retail excise tax 10% 10%
Wholesale cannabis tax None 24% (effective Jan. 1, 2026)
General sales tax Yes 6%
Primary price pressure Checkout Upstream + checkout

Illustrative Pricing Impact (Comparison Model)

Assumptions for illustration only: $100 wholesale product, 50% retail markup

Scenario Estimated Total Paid by Consumer
Ohio (10% excise + sales tax) $175.50
Michigan – 50% wholesale tax pass-through $194.88
Michigan – 100% wholesale tax pass-through $215.76

Key takeaway: Michigan’s wholesale tax can significantly raise shelf prices if passed through, widening the price gap with Ohio.

Border Dispensaries Face New Competitive Risk

For Michigan dispensaries within 25–50 miles of the Ohio border, pricing differentials matter. If Michigan retail prices rise while Ohio maintains lower effective prices, some consumers may cross state lines.

Border Dispensary Revenue Scenarios

(Illustrative, based on a $10M annual store)

Scenario Estimated Sales Leakage Revenue Impact
Minimal disruption 2% –$200,000
Moderate pressure 7% –$700,000
Severe price shock 15% –$1.5 million

Actual outcomes will depend on how much of the wholesale tax is passed to consumers, how quickly pre-tax inventory clears, and how Ohio’s potency caps affect product appeal.Industry Pushback: Michigan Tax Faces Constitutional Challenge

The Michigan Cannabis Industry Association and other plaintiffs have filed suit challenging Michigan’s wholesale tax as unconstitutional.

The lawsuit argues the tax effectively amends Michigan’s 2018 voter-approved marijuana law without the constitutionally required three-quarters legislative supermajority. Courts have allowed the case to proceed, meaning the tax remains in effect while legal uncertainty persists.

Industry leaders warn the tax could:

  • Raise consumer prices

  • Accelerate consolidation

  • Push buyers back into the illicit market

  • Undermine Michigan’s long-standing pricing advantage

Midwest Cannabis Enters a New Phase

Ohio’s $1 billion milestone confirms strong Midwest demand, but both states now face policy-driven inflection points:

  • Ohio: Rapid growth tempered by tighter regulation and potency caps

  • Michigan: Market scale offset by new taxes and legal uncertainty

  • Border regions: Increasingly sensitive to price and regulatory differences

Bottom Line

The Midwest cannabis market is no longer defined solely by expansion. In 2026, tax policy, regulatory design, and court rulings will matter as much as consumer demand. For operators and investors, the next year will test whether governments can rein in cannabis markets without undercutting the regulated industry itself.