U.S. cannabis business licensing slows in second quarter

The number of active cannabis business licenses in the United States fell 2% in the second quarter of 2025, according to data released by CRB Monitor, an intelligence firm that tracks and monitors licenses in the $32 billion regulated industry.

The decline to 37,889 licensed businesses continues a multiyear contraction that began in 2022 following an initial boom.

Over the past two years, the number of active licenses nationally has dropped 13%, reflecting consolidation in mature markets and slower growth in newer ones.

Despite a brief period of stability earlier this year, a combination of declining approvals and fewer new applications is driving the ongoing cautious turn in cannabis business expansion.

“What we’re witnessing is the great rationalization of the American cannabis industry,” said Steven Kemmerling, CEO of CRB Monitor.

“The boom of initial licensing has subsided, and the market is now ruthlessly shedding excess capacity,” Kemmerling added.

“This is a painful but necessary phase that will ultimately create a more stable and sustainable foundation for future growth.”

Steep drop in approved and pending permits continues

Approved and pending licenses, considered a pipeline for future operations, plunged 14% to 4,391, the fourth consecutive quarterly decline.

That total was down 18% from the end of 2024 and 23% from a year earlier.

Pre-licensing applications also fell 4% to 5,261.

That’s a 16% drop from six months ago and 22% lower than mid-2024 levels.

Despite this overall slowdown, New York remained the country’s most active market for applications, representing nearly 9 in 10 submissions nationwide.

Nearly 4,700 applicants were awaiting decisions at the end of June, underscoring how the Empire State continues to drive national licensing activity even as other regions cool.

“The story of the U.S. cannabis market right now is a story of New York,” Kemmerling noted.

“Its unprecedented application volume is an outlier that skews the national picture,” he added.

“While it represents immense future potential, it also highlights how stagnant application activity has become in other states, including former hotspots.”

License types show mixed results

Cultivation and retail licenses, which make up nearly three-quarters of the U.S. market, were largely flat.

Cultivation permits dipped 2% to 16,343, while retail stood unchanged at 11,527.

California, Oklahoma, Michigan and Oregon accounted for almost half of these licenses.

Manufacturing and distribution licenses contracted more sharply, falling about 5% each to 5,338 and 1,399, respectively.

Vertically integrated operators, businesses holding multiple license types, have grown the fastest, more than doubling over two years to more than 2,200.

Still, the category slipped 4% in the quarter, with most of the growth attributed to reclassification of existing licensees in New Mexico rather than new business creation.

While most license categories contracted, social use clubs emerged as a bright spot.

The number of licensed cannabis consumption venues rose 18% to 80 nationwide, a four-fold increase in the past year as states such as Colorado, New Jersey, Nevada, and Michigan rolled out social consumption programs.

Sharp declines in new approvals

The number of newly approved licenses fell across all major categories.

Cultivation approvals dropped 14% to 947, a level 35% lower than a year earlier.

Retail approvals sank 8% to 2,123, marking a two-year low. Pending delivery licenses experienced the steepest fall, halving to 207.

Other sectors, including manufacturers and testing facilities, also contracted.

Manufacturer approvals fell 16% for the quarter, while testing facility approvals slipped 10%, leaving just 19 pending nationwide.

State trends diverge

In total, 19 of 46 regulated markets added licenses, while nine contracted.

Among major state markets, California and Oklahoma recorded some of the largest losses.

California shed 358 licenses, a 4% decline that brings its two-year contraction to 23%.

Oklahoma’s moratorium on new licenses and enforcement actions against noncompliant operators cut its license count another 4% to 5,564, down more than half in the past eight quarters.

By contrast, Michigan expanded 3% to 4,269 active permits, reinforcing its position as the nation’s third-largest cannabis market.

New York again led in growth, adding 153 new licenses, a 10% jump in the quarter and a 158% gain over the past year.

Other states showing gains included:

• Connecticut, up 14%.
• Washington, D.C, which doubled its licensees.
• Ohio, which launched adult-use sales a year ago and grew 9%.

Canada holds steady

In Canada, licensing levels remained comparatively stable.

Active permits rose 1% to 5,806, though the figure is still 15% below levels two years ago.

Retail remained the largest category with more than 4,100 active dispensaries, a 2% increase.

Cultivation and processing each grew 2%, while wholesale distribution collapsed by 44% to just 39 active licensees.

Applications in Canada ticked up 24% in the quarter to 140, offering a modest sign of renewed interest. Still, applications remain well below levels seen in 2023.

Cannabis industry recalibrates

The data shows legal cannabis is continuing to rationalize after years of rapid expansion.

The U.S. market is adjusting to regulatory uncertainty, oversupply and uneven demand, while Canada has entered a period of stability after sharp earlier contractions.

Taken together, the data reflects a mature cannabis industry focusing on efficiency and consolidation, with only niche segments such as social consumption offering significant near-term growth.

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