Harvard Economist: Excessive Cannabis Regulation Is “Back Door Prohibition”

Massachusetts voters will face a proposal to roll back adult-use cannabis sales this November, nearly a decade after approving legalization. For Jeffrey Miron, an economist at Harvard University and vice president for research at the Cato Institute, the debate raises a question for regulators: Can a legal market compete with unlicensed sellers when government policy makes its products more expensive and harder to buy?

“Thus excessive regulation is just back door prohibition,” Miron wrote in a September 21 commentary published by the Cato Institute. He argues that restrictions intended to control cannabis can also preserve demand for the unlicensed market.

The cost of competing legally

Miron points to three disadvantages facing Massachusetts operators: a combined tax of roughly 20% on legal purchases, retail bans in more than a third of the state’s cities and towns, and the cost of complying with regulations. Consumers who find licensed products too expensive or inconvenient, he argues, may continue buying from unlicensed sellers.

That is a business problem as well as a policy problem. Licensed retailers bear the cost of testing, labeling, and compliance. If those costs widen the gap between legal and unlicensed prices, the legal market has a harder time capturing the sales that legalization was meant to bring under oversight. Miron presents that relationship as an economic argument; his commentary does not estimate how many Massachusetts purchases are diverted by any one tax or rule.

Federal policy adds another layer. An April 2026 Justice Department order moved qualifying state-licensed medical cannabis and FDA-approved marijuana products to Schedule III. The broader rescheduling process remains separate, leaving adult-use cannabis businesses without the same change in federal status. Miron also points to restrictions on interstate commerce, banking access, and the federal tax treatment of cannabis businesses as costs that state legalization alone cannot resolve.

What the ballot debate is about

Supporters of the Massachusetts rollback have raised concerns about youth access and high-potency products. Miron does not dismiss those concerns. He argues in the Boston Herald that ending legal sales could push some consumers toward products sold without the testing and labeling required in the regulated market.

His proposed approach retains minimum ages, rules against impaired driving and accurate labeling while reducing restrictions that make legal businesses less competitive, and calls for federal legalization.

For operators, the stakes extend beyond the fate of Massachusetts dispensaries. The vote will put a question facing every state market in sharper focus: whether regulators can address safety concerns while giving licensed businesses enough room to win customers from unlicensed sellers.