Ohio just approved a statewide vote on adult-use cannabis on November’s upcoming ballot, and it’s looking like business would be booming should it be approved.

A study published earlier this month by researchers at Ohio State University suggests that Ohio could generate between $275 million and $403 million by the fifth year of operations in adult-use tax revenue, should voters move to legalize.

Establishing a Baseline

The study, titled “What Tax Revenues Should Ohioans Expect If Ohio Legalizes Adult-Use Cannabis,” used cannabis tax data from Michigan fiscal year 2021 as the main point of reference to estimate Ohio’s potential cannabis tax revenue gains, as the two states share “demographic and tax structure similarities.” 

Because Ohio does not have an established adult-use industry or tax structure, all tax revenue projections are speculative and based on variables and assumptions that could shift, researchers prefaced, calling them “best-guess” projections.

It also used data from Illinois, given its proximity to Ohio and similar population size, along with Nevada, Oregon, Washington and Colorado, “selected to provide tax revenue trends from more mature cannabis markets.”

The researchers issued their first report estimating possible tax revenues for the state in Spring 2022 and said they wanted to revisit the report given the recent ballot news. 

Researchers used Michigan as a base for cannabis pricing as well. In 2021, Ohio medical dispensaries charged an average of 40% or more than Michigan dispensaries, increasing to over 120% price differential in 2022 largely because of falling Michigan prices.

Projections for Ohio’s Budding Recreational Market

“Consequently, we have thus prepared a set of tax revenue estimates assuming price parity, as well as assuming 10% and 20% higher prices relative to Michigan to account for different possible Ohio pricing scenarios following legalization,” the report notes.

Given the baselines, researchers used Michigan data and applied a conservative rate of diminishing retail sales under three models to establish their $275 million and $403 million range. 

They also noted that the estimates don’t include collections if additional local sales don’t include any collection of additional local sales taxes or any other taxes that cannabis businesses and employees may pay, like state Commercial Activity Tax, local property taxes or state and local income taxes. It also doesn’t include fees collected from cannabis business license applicants or license holders, which can be structured in a way to provide additional significant benefits to Ohio’s expected cannabis revenue.

Authors also note that, regardless of the final tax structure, cannabis tax revenue only makes up a small proportion of the overall state revenue collection in legalization states. They cite that more mature cannabis markets have seen a tax revenue proportion from cannabis markets hovering between 1-2% of the total state revenue.

“Whatever tax structure is adopted, our analysis suggests it is reasonable to predict that Ohio would collect hundreds of millions in annual cannabis tax revenues from a mature adult-use cannabis market,” the study concludes. “But the amount of tax revenue collected would likely still represent a small percentage of Ohio’s $60+ billion annual budget.”

Voters, Advocates Prepare for 2023 Vote

Last week, advocacy group Coalition to Regulation Marijuana Like Alcohol (CRMA) approved their adult-use cannabis initiative, which would legalize cultivation, manufacturing, testing and sales for people over 21. Prospects are promising, as a recent poll conducted by Suffolk University found that 59% of voters support legalizing cannabis possession and sales.

Ohio voters recently rejected Issue 1, which was a constitutional change proposal that would have made it more difficult to enact constitutional amendments. Experts predict Issue 1’s failure will result in increased voter turnout, especially surrounding a proposed ballot measure around abortion rights heading to the polls.

CRMA spokesperson Tom Haren suggested the potential for a higher turnout could work to the cannabis initiative’s favor.

“I think people who go out to vote in November are likely to support us no matter what they vote on the abortion amendment,” said Haren. “I think we will be popular among those who vote yes (on the abortion rights amendment) and we’re going to be popular among those who vote no (on the abortion rights amendment) as well.”

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The U.S. Drug Enforcement Administration has issued a license to Ohio State University that allows researchers to cultivate psilocybin mushrooms for use in scientific studies. The license, which was awarded to Ohio State and partner Inner State Inc., a mental health and wellness research and development company, is the first license issued by the DEA for the cultivation of whole psilocybin mushrooms for research.

“This license is a major milestone not only for Inner State and Ohio State, but for the entire field of psychedelic research,” Inner State CEO Ashley Walsh said on Wednesday in a statement quoted by the Columbus Dispatch.

Multiple studies have shown that psilocybin, the primary psychoactive compound in magic mushrooms, may have extraordinary potential as a treatment for several serious mental health conditions. But studies of psilocybin normally use forms of the drug that have been synthesized in a laboratory. The new license issued by the DEA allows Ohio State and Inner State to grow whole psilocybin mushrooms to produce the compound naturally. Under the terms of the license, all cultivation of psilocybin mushrooms will take place in a federally registered facility in accordance with strict DEA regulations.

“By combining cutting-edge techniques in genomics and metabolomics, we have the opportunity to obtain a high-resolution picture of the chemical diversity of mushrooms that have remained difficult to study for several decades,” said Ohio State researchers Dr. Jason Slot and Dr. Kou-San Ju.

Researchers believe that using whole mushrooms in mental health studies could give participants the advantage of other compounds besides psilocybin, potentially offering additional therapeutic benefits. Walsh said that it is possible that psilocybin mushrooms “have multi-dimensional healing properties” that could more effectively improve the quality of life for people with severe mental illness.

Continuing research into psychedelics including psilocybin, MDMA and ketamine has shown that the drugs have potential therapeutic benefits, particularly for serious mental health conditions such as depression, addiction and anxiety. A study published in the peer-reviewed journal JAMA Psychiatry in 2020 found that psilocybin-assisted psychotherapy was an effective and quick-acting treatment for a group of 24 participants with major depressive disorder. Separate research published in 2016 determined that psilocybin treatment produced substantial and sustained decreases in depression and anxiety in patients with life-threatening cancer.

In 2017, the U.S. Food and Drug Administration designated MDMA as a breakthrough therapy for PTSD, a move that streamlined clinical trials to test the effectiveness of the drug. The following year, the FDA granted the same status to psilocybin as a breakthrough therapy for treatment-resistant depression.

Alan Davis serves as the director of the Center for Psychedelic Drug Research and Education in the College of Social Work at Ohio State University, which he launched last year with the assistance of a private donation of $1.5 million. The center has developed a 25-hour continuing education program and an undergraduate minor in psychedelic studies. In January, the center launched its first clinical trial to explore the use of psilocybin as a treatment for military veterans diagnosed with PTSD.

“Currently, there have been clinical trials completed for people with addiction, depression, PTSD, obsessive-compulsive disorder, social anxiety [and] end-of-life distress in patients who are terminally ill,” Davis told Columbus Monthly earlier this year. “All of those studies so far have shown really promising effects.”

The ongoing research suggests that treatment with psychedelics such as psilocybin, when combined with psychotherapy, can “reduce and, for some, ameliorate, the mental health problems that they are dealing with,” Davis said. “With some studies, they’ve seen that those positive effects can last six to 12 months.”

Other universities are also studying the therapeutic value of psilocybin and other psychedelics, but Davis says Ohio State is the first to create such a center in a social work setting. He added that educating professionals with social work degrees is essential because they are the biggest part of the workforce dealing directly with patients in a clinical setting.

“Usually, the only message that’s been out there is, ‘drugs are bad, drugs are dangerous, don’t do drugs,’” Davis said. “This is meant to provide that foundational knowledge for people so that they can understand all the interdisciplinary work that’s been done about psychedelics.” 

Slot believes that we can learn a lot from mushrooms, noting that government prohibition has hindered study and set back researchers decades during an era of significant advancement in the biological sciences, especially genetics. He hopes that recent efforts to destigmatize psychedelics are successful so that the research can continue to advance.

“I don’t think psychedelics are going away. They get at the nature of consciousness, of the relationship between the mind and the body,” said Slot. “These are questions fundamental to our nature.”

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