The Promise Of ‘Craft Cannabis’ Has Not Been Realized—Due To Policy Decisions Favoring Big Companies (Op-Ed)

*“The central question is no longer whether cannabis will become a major
American industry, but what kind of industry it will become.”*

*By Damian Fagon, Parabola Center for Law & Policy*

For more than a decade, U.S. cannabis legalization has been framed as an
opportunity for small producers, local brands and craft cultivation. In
most adult-use states, that promise has not been realized.

Licensing data may suggest broad participation, but small-scale cannabis
producers that survive beyond initial launch remain rare. What is commonly
described as “craft cannabis” functions far more as a marketing label than
as a stable economic segment.

This outcome is often attributed to market forces. Consolidation is treated
as inevitable, scale as efficient and the exit of small operators as a
natural feature of competition. That explanation falls short. The erosion
of small cannabis producers reflects policy design choices, particularly
the way competitive pressure has been introduced.

Across legal markets, states have required licensed producers to absorb
full compliance costs and face wholesale price competition from the outset,
well before small operators have had the opportunity to achieve basic
operating stability. Firms pushed immediately into price competition while
carrying high fixed regulatory costs and limited access to capital face
structural barriers to survival that are difficult to overcome.

Other regulated industries offer a useful point of contrast. In sectors
where small-scale production has remained economically viable, competition
has been introduced more deliberately through specific institutional
choices.

The craft beer industry illustrates this logic.

Craft breweries did not succeed because consolidation was prohibited or
because competition was suspended. They succeeded because regulatory
structures explicitly permitted early access to direct-to-consumer sales
through taprooms and on-site retail, and in some cases limited
self-distribution. These channels provided higher margins and immediate
cash flow, allowing experimentation, brand development and operational
learning before firms were fully exposed to wholesale price competition.
Distribution pressure came later, once businesses had established financial
footing.

Scale followed stability, resulting in a market in which large and small
producers could coexist.

Cannabis is not beer, and the differences are material. Federal illegality,
higher compliance burdens, product perishability and continued competition
with illicit markets shape cannabis economics in ways alcohol never faced.
These conditions make early stability harder to achieve.

Yet cannabis policy has largely moved in the opposite direction. Small
operators are licensed into markets where full regulatory compliance
applies immediately and wholesale competition begins before brands or
products meaningfully differentiate.

Under these conditions, participation is measured at licensure, while
survivability is left to market dynamics that favor well-capitalized firms.
Wholesale prices often fall faster than operating costs, and access to
capital determines which businesses can withstand prolonged losses. Many
small producers operate near breakeven from inception or exit quietly.

These patterns recur across states with different political cultures and
regulatory intentions and reflect the structural consequences of early
exposure to full-scale competition.

Debates about craft cannabis often obscure this reality by treating craft
as an aesthetic or cultural designation rather than an economic one. Craft
cannabis depends on structural conditions that allow small producers to
function as businesses rather than speculative ventures. At minimum, those
conditions include temporary access to higher-margin sales channels,
compliance requirements scaled to operational size and sufficient time to
build demand before price competition eliminates margin.

Microbusiness licenses are frequently cited as evidence that states have
made room for craft operators. In practice, many such licenses do the
opposite.

By requiring firms to operate across multiple parts of the supply chain
while meeting regulatory standards designed for much larger entities, these
frameworks concentrate cost, risk and complexity at the earliest stage of
operation. Rather than sequencing growth, they front-load exposure to the
very pressures that craft-oriented policies in other industries were
designed to delay.

Experience from craft beer and other speciality industries shows that
competition functions best when it is sequenced through concrete policy
levers. Introducing full price competition before firms have achieved basic
operating stability carries predictable distributional effects.

As federal reform moves closer, the window for shaping what comes next is
narrowing. Banking access, rescheduling and the prospect of interstate
commerce will not democratize cannabis markets on their own. By lowering
capital constraints and amplifying scale advantages, these changes are
likely to reinforce existing market structures unless states intervene
early.

Once consolidation is embedded through distribution networks, contract
relationships and interstate competition, policymakers are left managing
outcomes on terms they no longer control.

The central question is no longer whether cannabis will become a major
American industry, but what kind of industry it will become.

Market design determines more than which firms survive. It shapes what
producers are rewarded for, how products are differentiated and how closely
businesses remain tied to local communities. Markets organized around early
price competition tend to reward volume and capital over quality and
consumer accountability by design.

Where stability precedes competition, differentiation becomes possible.
Where it does not, consolidation becomes structural rather than incidental.

*Damian Fagon is a former New York State cannabis regulator and currently a
director at the Bronx Cannabis Hub and Parabola Center for Law and Policy.*

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Policy Decisions Favoring Big Companies (Op-Ed) appeared first on Marijuana
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