A marijuana license is only as valuable as its ability to generate revenue for the license holder (or holders) as well as the various third parties who are able to profit indirectly from that marijuana license. New laws in Oregon are making marijuana licenses even more valuable in comparison to other states.

Think of it this way. A marijuana license in a state that has legalized both medicinal and recreational marijuana (like Oregon) is a lot more valuable than a marijuana license in a state that has only legalized medicinal marijuana because it has greater revenue-generating potential. It’s simple math. The size of the market is significantly larger in the former state than the latter. Therefore, sales and profit potential are higher.

There are many factors that contribute to the value of a marijuana license, and with the passing of new laws in Oregon, several new valuation boxes have been ticked in favor of the state’s license holders.

Industrial Hemp Production Laws Affect Marijuana License Values

Industrial hemp is a form of marijuana that has a maximum of 0.3% THC concentration and is intended for medical use. A wide variety of industrial products can be made from industrial hemp as well, including clothes, paper, batteries, and more.

Allie Beckett of Marijuana.com reports that Oregon legalized hemp production in 2009, but the barriers to entry into the market were so high that only 13 producers actually obtained licenses. Everything changed when a new industrial hemp bill was signed into law in late March of this year that makes it much easier for farmers to grow industrial hemp for medicinal purposes and obtain licenses to do so. Furthermore, the new laws no longer require a 2.5 acre canopy and now allow farmers to grow industrial hemp in greenhouses and start plants from clones.

With the passing of the new laws, industrial hemp licenses in Oregon are valid for one year and the requirements to obtain one are much easier than they were in the past:

• $500 fee
• Provide applicant’s name
• Identify GPS coordinates of proposed growth plot
• Renew the license annually
• Allow the Oregon Department of Agriculture to inspect the farm and take samples at any time to ensure crops don’t exceed the 0.3% maximum THC concentrate

Beckett also reports that the Oregon Industrial Hemp Farmers Association expects to grow at least 200 acres of industrial hemp in 2016, and the Oregon Farm Bureau (OFB) and Oregonians for Food and Shelter are advocating the bill with the goal to have industrial hemp regulated the same as any other agricultural commodity.

Bottom-line, more flexible growth methods, an easier application process, and greater expansion opportunities equal higher revenue-generation potential and increased license values.

Marijuana Extracts and Edibles Purchasing Laws Affect Marijuana License Values

Also in March, Oregon passed laws that allow anyone who is over the age of 21 to purchase marijuana extracts and edibles directly from Oregon marijuana dispensaries and allows recreational marijuana retailers to sell medical marijuana to patients tax-free. Previously, only medical marijuana customers could buy edibles and extracts, so the new law significantly expands the market.

Noelle Crombie of The Oregonian reports that by the end of 2016, the Oregon Liquor and Control Commission will take over the regulation of the production, processing, and sale of recreational marijuana, but until then, recreational sales will continue to be overseen by the state’s health authority. Shifting authority away from the health authority should provide additional flexibility and focus that will allow the recreational market to expand even further.

Ultimately, marijuana grower and retailer licenses in Oregon become more valuable when the market expands and the recreational market separates from the medicinal market. As a result, the value of these licenses in Oregon become far more valuable than licenses in other states.

The Oregon Pattern

These aren’t the first laws passed in Oregon that increased the value of marijuana licenses. Earlier in March, Governor Kate Brown signed two other bills into law that increased the value of Oregon marijuana licenses. Those laws:

• Removed some license paperwork requirements
• Increased access to medical marijuana
• Removed the two-year residency requirement for licenses
• Allowed marijuana-related businesses to deduct business expenses on their state tax returns

Each of these changes directly and positively affected the value of marijuana licenses in the state. A more open market where businesses are allowed to expand and increasing customer demand is met is a far more attractive market for any investor, business owner, employee, and consumer that a closed market where customer demand can’t be met.

Oregon is setting the bar high for marijuana license value. The question is—can other states keep up?