An Argument Against Regulating Cannabis Like Alcohol

Abstract

As cannabis prohibition comes to an end in the United States, federal and state governments must decide how to regulate its cultivation, distribution, and sales. One particular option, supported by some alcohol wholesalers and distributors, is a regulatory system based on that of the alcohol industry, whereby the government mandates a distribution system consisting of three mutually exclusive tiers: manufacturers, distributors, and retailers. This paper, however, argues against creating a regulatory framework for the nascent adult-use cannabis industry modeled after the government-mandated, three-tier distribution system established for alcohol post-Prohibition as it inherently stifles innovation and quality. Essentially, the three-tier distribution system creates an unnatural layer of government-mandated middlemen, distributors and wholesalers, who perpetuate market inefficiencies that benefit themselves, along with large corporations, to the detriment of consumers and small-to-medium-sized businesses. The beer industry, now dominated by two breweries offering largely undifferentiated products, provides a cautionary tale regarding the effects of the three-tier distribution system to those developing the regulatory structure for the adult-use cannabis industry.

Keywords: cannabis, distribution, three-tier, alcohol, marijuana, regulation