Legalizing marijuana is a “no-brainer” move to help ward off a “fiscal time bomb” in Iowa that could otherwise lead to cuts in funding for education and public safety in the state, the Democratic candidate for governor says.

“I think we should treat it the way we treat alcohol. That seems like a no-brainer to me, right?” Rob Sand, the Democratic gubernatorial nominee, said at a town hall event in Dallas County on Wednesday in response to a question from a voter who said Iowa is “losing money” to other states that have legalized cannabis.

“Alcohol is a dangerous drug. You shouldn’t abuse it. Also, we’re not going to throw you in prison for having a beer,” Sand said. “Why is it any different for marijuana? It is a dangerous drug. You shouldn’t abuse it. We shouldn’t be throwing people in prison just for using it.”

The Democratic candidate said that “when I say treat it like alcohol, I literally mean treat it like alcohol.”

He then went through a list of common objections to cannabis legalization and explained how he would respond to them.

“So when I hear people say, ‘Well, I don’t want to smell it.’ Same. You shouldn’t be allowed to smoke it in public. Simple rule: you can’t drink alcohol in public, right?

People say, ‘Well, I’m worried about kids. I’ve heard cases in Colorado where they got colorful gummies, and the kids find them, and then the kids get sick.’ I agree. You shouldn’t be able to market it to children. You shouldn’t be able to use colorful designs on your packages. And if you’re doing gummies, they can look like an eraser, right? They don’t need to be red and blue and green and look like gummy bears.

People say, ‘Well, I don’t know, Rob. It’s a lot stronger than the stuff that I was smoking in the 70s.’ To which I say, ‘I wasn’t there. Whatever you say, I believe you.’ I don’t have a basis for comparison then or now. I actually haven’t used it. But how do we handle that with alcohol? When you buy a beer, you can see what the alcohol content is on the beer, right? We treat hard liquor differently, but you can see when you buy hard liquor what the content is on that, and that way you know what you’re getting into. We can do that with marijuana as well.”

Sand, who is currently Iowa’s state auditor, said the state currently has a budget surplus, but that annual spending is overtaking revenue.

“I call this a fiscal time bomb. Our budget is nine and a half billion,” he said. “Imagine the cuts to public education and to public safety if we don’t take action to fix this.”

“So we need to do something now,” he said, arguing that legalizing marijuana is “one of the things that we should do.”

“We would have hundreds of millions of dollars every single year if we just treat marijuana the way we treat alcohol,” Sand said, adding that the thinks the state should also put an income limit on school vouchers and make data centers pay fair taxes.

“All three of those would save us hundreds of millions of dollars a year alone,” he said. “So if we do all three of them, we do them right away, all of a sudden, our time horizon on how long that surplus is going to last gets a lot longer, and we can think about other ways to help address that and get back to having a balanced budget.”

Sand also spoke about his support for legalizing marijuana at an earlier event last month, saying that he thinks cannabis should be legalized and treated like alcohol, even if he thinks it’s “dangerous.”

“Marijuana is a dangerous drug,” he said at the time. “You shouldn’t abuse it, but we also shouldn’t throw people in prison just for using it. We should treat it the way we treat alcohol. Alcohol is a dangerous drug. You shouldn’t abuse it, but we don’t throw you in prison just for having a beer when you get home.”

The Democratic gubernatorial candidate said that Iowa is “spending perfectly good tax dollars to lock people up” for marijuana while people who want to use it are driving across the border to purchase it in other states.

“They’re spending their money in Illinois, or they’re spending it in Missouri. And then they’re driving back without their money,” Sand said. “The money stays there, and the tax dollars stay there.”

Republican gubernatorial nominee Zach Lahn reportedly opposes legalizing cannabis but doesn’t appear to have spoken extensively about the issue.

Josh Turek, the Democratic nominee in a U.S. Senate race, said this month that cannabis’s longtime restrictive Schedule I status is “ridiculous.” Marijuana “should be legalized and regulated, and let’s tax it,” he said.

Meanwhile, Iowa regulators are circulating proposed rules changes to remove the residency requirement for patients in the state’s medical cannabis program while also ensuring that military veterans qualify for reduced registration fees.

The residency-focused part of the regulatory change from the state Department of Health and Human Services is meant to comply with provisions of a bill that Reynolds signed into law in June.

In addition to allowing out-of-state residents to register in the medical cannabis program if they have a certification from an Iowa healthcare provider legislation, that legislation also doubles the number of medical cannabis dispensaries that are allowed to operate in the state.

Regulators said in the new rule filing that removing the residency requirement is expected to “primarily impact qualified Nebraska residents since Nebraska is the only bordering state that does not currently have an operational medical or adult-use cannabis program.”

“Although Nebraska has taken steps to establish a medical cannabidiol program, implementation has experienced significant delays and setbacks,” the regulatory explanation says.

Beyond the residency change that is part of the bill the governor signed this year, the new rule change also restores regulatory language that was “inadvertently removed during the 2023 Red Tape Review process” that allowed proof of military veteran status to be used to qualify for a reduced patient application fee of $25 instead of the standard $100.

Under prior law, Iowa’s limited medical marijuana program allowed only five dispensaries. That has doubled to 10 under HF 990, which the governor signed.

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The Iowa Medical Cannabidiol Board, which oversees the state’s medical marijuana program, recommended in a 2023 report that the state allow more licenses “in an effort to provide Iowans with greater geographical access to medical cannabis products.”

Under the program, patients with certain conditions can obtain cannabis products containing no more than at 4.5 grams of THC every 90 days. Flower and smoking are not allowed. Healthcare practitioners can allow greater amounts of THC for patients who are terminally ill or who have experience with the program and for whom the provider believes 4.5 grams is not enough.

Separately this session, Iowa lawmakers considered a bill to create a state-regulated therapeutic psilocybin program for patients with post-traumatic stress disorder (PTSD).

Last year, the governor vetoed earlier legislation that would have allowed doctors in the state to immediately prescribe a synthetic form of psilocybin in the event of federal approval of the psychedelic substance by the U.S. Food and Drug Administration (FDA), arguing that it “surrenders state authority to make an informed determination about classification to federal officials.”

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Federally legalizing marijuana would generate $57.9 billion in new tax revenue over a decade, according to a new Yale University analysis—and additional states also moving to legalize cannabis would nearly double that haul.

The report, from the university’s Budget Lab, notes that the “cannabis market has grown into a substantial economic sector” but caveats that there is an “unusual degree of uncertainty” about the fiscal projections, however, given the “complicated legal context” of marijuana.

“Marijuana presents an appealing target for taxation,” the Yale analysis says, noting that it is considered by many policymakers to be “socially undesirable”—as is the case with alcohol and cigarettes.

“A tax levied specifically on marijuana could serve the dual purposes of discouraging use and raising revenue, thereby funding new public spending or replacing taxes on socially desirable activities like work or savings,” it says.

Researchers projected that if cannabis were federally rescheduled and an excise tax of $0.00625 per mg of THC were applied, a gram of marijuana would be taxed at $1.31. “At an average price of $8.59 per gram of marijuana, this tax would amount to about a 15% increase in the tax-inclusive price,” the report says.

The tax would result in $57.9 billion in new revenue over the course of ten years, the researchers project, If all remaining states were to also legalize marijuana in their jurisdictions, the total haul would be $111.3 billion over a decade.

The Yale report bases its estimates on existing state tax revenue to determine that the recreational marijuana market was about $25 billion in 2024

“We project that, if the market continues to grow without federal legalization or any new states legalizing, the market will reach nearly $40 billion in 2035,” it says. “The medical segment, while more established, represents the smaller share of total activity at only about 20 percent. As such, the medical marijuana segment accounts for between $5 and $8 billion in sales each year from 2024-2035.”

Uncertainties underlying the revenue estimates include how much illicit activity would convert to the regulated market under legalization, as well as the effect of taxes on consumer purchases.

Legalization would also cause some cannabis workers who are not currently paying income and/or payroll taxes to begin doing so.

“Federal legalization would likely generate income and payroll tax revenue beyond that collected through the excise tax. Workers in the illicit cannabis economy—cultivators, trimmers, distributors, and retail-facing sellers—currently earn income that is neither reported to the IRS nor subject to FICA withholding, because their employers have no lawful basis for establishing formal employment relationships at the federal level. Federal legalization would bifurcate this formerly invisible workforce into two distinct categories for tax purposes. Employees absorbed into licensed, formally structured cannabis firms—the multistate operators, vertically integrated cultivators, and dispensary chains that already operate in the state-legal market—would receive W-2 wages, generating both the employer and employee shares of FICA taxes as well as federal income tax withholding.”

People who own cannabis businesses would also enter into the tax system and be subject to self-employment taxes or federal income tax on net profit—”income streams that are currently entirely outside the federal tax base,” the report says.

“Federal legalization could result in a large-scale transfer of economic activity from the untaxed underground economy into the tax-compliant legal market,” the analysis says. “This shift holds implications for income and payroll tax revenue that is analytically distinct from, and additive to, the excise tax revenues. The scale of the illicit market that would be subject to this transition is substantial.”

Another piece of uncertainty that researchers did not attempt to account for in their calculations stems from the fact that federally legal marijuana businesses would be able to take advantage of tax deductions and credits that they are not eligible for in light of cannabis’s Schedule I status under the law known as 280E.

Despite the uncertainty, the report says, federal legalization would undoubtedly lead to new revenue.

“Federal legalization, by eliminating federal restrictions on banking access, interstate commerce, and formal employment relationships for many illicit operators, would reduce the structural advantages that sustain the black market and pull a meaningful share of that activity into the regulated economy,” the analysis says.

A separately recently published federal report from the U.S. Census Bureau shows that states where marijuana is legal have generated nearly $15 billion in tax revenue from legal cannabis sales since late 2021.

Another report from the advocacy group the Marijuana Policy Project found that states have generated more than $28.4 billion in tax revenue from recreational marijuana sales since the first markets launched over a decade ago.

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As cannabis companies look for new growth strategies, many are seizing a golden opportunity: licensing their intellectual property. Offering licensees access to manufacturing processes, brands, copyrights, trademarks, patents, or technology for adequate consideration is a creative solution to the challenge of breaking into new territories. Licensing also enables companies and brands to expand despite restrictions on interstate commerce and limits on the number of cannabis business licenses in a given state or country.

Smart businesses are joining forces to grow. Much-hoped-for federal legalization likely remains years away; in the meantime, licensing offers multi-jurisdictional operation and asset-light value creation. While this strategy requires careful due diligence, the rewards can be positive and profitable.

How can cannabis companies take advantage of intellectual property licensing? Executives need to ask the following: What is your company best at? What drives the company’s economic engine?

The answers to these questions will help your company discern its unique place in the value chain. This is your differentiated offering to the industry, and it can be anywhere in the production process from seed to sale. The chain begins with plant genetics and includes growers, processors, ancillary businesses, and retailers/dispensaries.

Within the high-velocity cannabis industry, your company may have valuable intellectual property other companies can bring to market in new ways. By differentiating your company from the competition, you will create the value licensees seek. Heavy promotion of your “value add” to your licensees will expand your brand’s footprint far beyond licensing. Bottom line: True differentiation is value creation.

Licensing is like renting your intellectual property. Like any good landlord, companies should execute careful due diligence when researching potential tenants. Once your value-add is established, do the research to make sure any partner company is the right fit for you. Ultimately, the agreement must be advantageous for both parties.

Steps to a smooth transition

A smooth onboarding process is the best way to guide your licensees and ensure the partnership will be mutually beneficial. Every partnership must start with a discovery phase, where a mutual non-disclosure agreement is signed and both parties outline their goals and expectations.

Next is the design phase to specify how the intellectual property will be used in a mutually agreed-upon application. Following the design phase, an intellectual property licensor ideally supports its licensees with clear standard operating procedures to enable smooth onboarding and scaling. The final phase is growth, where licensors support their partners’ expansion into new markets and creation of more innovative products.

Licensing operations

Once you have a strong understanding of your company and the unique differentiation you can offer licensing partners, it is vital to develop a robust content kit for your partners. This should include specific documentation about the intellectual property and other rights, content, and materials to be licensed. This kit may include, for example, patents, formulations, trademarks, designs, packaging, marketing materials, and standard operating procedures.

It is a licensor’s responsibility to ensure licensees are given the tools and resources they need to be successful. They will require a training process and materials for their employees, as well as ongoing engagement and support from your company. Your sales and media-relations teams will be integral to licensee success, because they can guide the narrative of the new market opportunity.

Ensuring the success of your licensees will open future licensing and expansion opportunities.

The licensing model at work

Solving a real pain point for your licensees is the only way to bring value to your partners—resulting in a win-win relationship. At Azuca, our mission is to solve onset, predictability, dosing, and delivery challenges for edibles. We created a range of safe, fast-acting, effective, tasty, and trustworthy formulations that allow consumers to experience a precise dose and predictable onset time every time they consume an edible. For manufacturers, our TiME INFUSION formulations are cost-effective and scalable. They deliver reduced active ingredient waste and are offered to partners in a cost-effective licensing structure. We have successfully licensed our fast-acting infusion methodologies, our branded products, and our wholesale bulk ingredients.

What doesn’t work

While licensing offers a great opportunity, bear in mind these business pitfalls: You cannot violate the Golden Rule—your company needs to treat other companies the way you would like to be treated. If the licensing agreement isn’t a win-win under which both partners experience growth and financial success, then it’s not a good fit. Additionally, misaligned expectations may yield a partnership that is dead on arrival. Sales projections, process maturity, and level of operational involvement should be understood and carefully negotiated and implemented for a successful collaboration. Finally, your company must stay true to its values.

Compliance, confidentiality, and a win-win outcome should be at the forefront of any licensing agreement. Expansion is hard-fought in the pandemic age, but creating collaborative licensing agreements with other companies can accelerate your growth and brand footprint.

Kim Rael is president and chief executive officer at Azuca, a privately held, investor-backed company serving the global cannabis industry with fast-onset edibles formulations. Azuca commercializes its own line of chef-quality, edibles products and licenses its fast-acting TiME INFUSION process, enabling a predictable and controllable experience every time. Rael holds a bachelor’s degree from Harvard and an MBA from Stanford.

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