Massive drop in cannabis cultivation permits behind licensing contraction

The American cannabis industry continued to contract in the third quarter of 2025 thanks largely to a cultivation exodus, according to licensing data from intelligence firm CRB Monitor.

The number of active cannabis business licenses in the U.S. fell to 37,555, a 1% decline from the previous quarter, continuing a multi-year slide that began at the end of 2022.

Over the past two years, the total number of active licenses nationwide fell by 13%.

Marijuana growers accounted for the majority of license losses during that period. Cultivation permits tumbled by 24%, or just over 5,000 licenses, since the third quarter of 2023, while retail licenses dropped by only 330.

At the same time, the prospect of future growth has weakened. Approved, pending and pre-licensing applications declined for the fifth consecutive quarter.

“This sustained contraction in the growth pipeline reveals a more cautious, strategic posture among entrepreneurs and investors,” CRB Monitor CEO Steven Kemmerling said.

The appetite for risk has diminished in the face of market saturation, regulatory hurdles and stalled federal reform, making capital more selective.

The exceptions are in new and emerging markets such as New York, said Kemmerling.

“Enthusiasm remains high only where new, large-scale opportunity is perceived to still exist.”

New York marijuana market expansion powers national growth

The national totals also hide a stark contrast between mature markets and newly launched adult-use states.

“While established markets like California, Oklahoma, and Michigan continue to consolidate, all meaningful growth is being driven by new adult-use frontiers – and New York is the undeniable epicenter,” Kemmerling said.

The Empire State alone accounts for the overwhelming majority of all pending retail and vertical license applications.

New York’s ongoing rollout is “completely distorting the national pipeline,” Kemmerling said.

New York led the nation in growth for active cannabis business licenses in Q3, adding 155, up almost 9% from the previous quarter. The state ended the quarter with almost 1,910 active licenses, growing 71% year-over-year.

That growth is poised to continue into 2026. New York marijuana regulators were processing some 4,600 pending permit applications at the end of the third quarter.

But pending litigation as well as leadership churn could hamper those rollouts.

Felicia Reid, who had led the Office of Cannabis Management since mid-2024, abruptly resigned at the governor’s request earlier this month amid the collapse of a major state investigation into alleged marijuana inversion involving millions of dollars’ worth of product.

New York highlights a critical truth, according to Kemmerling.

“The industry’s future expansion is now entirely dependent on the successful rollout of legalization in new, large-population states,” he said.

California and Oklahoma cannabis markets continue to cool

Licensed businesses continued in the third quarter to exit industry heavyweights California and Oklahoma, which account for 36% of all active cannabis licenses in the U.S.

California, the nation’s largest cannabis market with just under $4 billion in projected sales, still leads the nation with 8,048 licenses.

But both the number of legal businesses and legal sales have been slowly declining as the state struggles with regulatory burdens, high taxes and a strong illicit market.

Active licenses in the state fell nearly 2% from the previous quarter and 8% since the third quarter of 2024.

To put the figure in perspective, the California cannabis market has lost more licenses in the past 12 months (740) than the total number of licenses in Arizona and Nevada combined (654).

A moratorium on new permits in Oklahoma, imposed in 2022 after the state’s low barrier for entry sparked a frenzy, continues to reshape the state’s crowded market by steadily reducing the number of operators.

The market dropped more than one fifth of its licenses in the last 12 months, ending the third quarter of 2025 with roughly 5,380 active licenses.

Canada cannabis licensing relatively stable

Canada’s cannabis market, while also falling 1% in the third quarter, has remained relatively stable, with active licenses slipping to roughly 5,760.

But that stability follows a two-year decline of 15%, underscoring ongoing market maturation and consolidation.

The quarter also showed a modest uptick in new applications, though from a historically low base.

Active Canadian cultivation licenses fell 2.3% from the previous quarter to about 900 and are down 8% since the third quarter of 2023.

Cannabis retail licenses, the largest licensing category in Canada, have fluctuated since 2023 but have largely held steady at about 4,100 licenses.

Trump marijuana rescheduling may not relaunch cannabis industry growth

Markets soared after reports that President Donald Trump could soon issue an executive order classifying marijuana as a less dangerous drug began circulating last week.

Moving cannabis to Schedule 3 of the Controlled Substances Act would unlock major tax breaks for plant-touching businesses and could convince wary investors who have so far been hesitant to enter the market.

This could shift demand for U.S. cannabis businesses and licenses heading into 2026, but significant questions and uncertainty remain about its potential impact.

Until then, the data from the third quarter of 2025 confirms that the cannabis industry’s era of unchecked growth is over, Kemmerling said.

“We are now witnessing a prolonged period of rationalization, with active licenses declining for nearly three consecutive years,” he said.

“This isn’t a sign of industry failure, but rather its maturation—markets are shedding excess capacity and weaker operators, paving the way for a more stable, efficient, and ultimately sustainable sector.”

Andrew Long can be reached at andrew.long@mjbizdaily.com.