Hoosiers spend nearly $2 billion annually on cannabis, with 16% reporting using cannabis in the prior month. This is despite Indiana’s status as the most restrictive state in the nation when it comes to cannabis policy, according to research on the cannabis landscape and policy factors in Indiana commissioned by the Richard M. Fairbanks Foundation and conducted by RAND.

Three of Indiana’s four neighboring states (Illinois, Michigan, and Ohio) now allow recreational cannabis sales, and the fourth, Kentucky, allows medical use. Intoxicating hemp products, which can contain the main psychoactive compound in cannabis, are widely sold in Indiana with minimal regulation.

While Indiana currently spends about $10 to $20 million annually enforcing its cannabis laws, legalizing adult-use cannabis would not eliminate all criminal justice costs. Additionally, the cost to the state to regulate a legal adult-use cannabis market is estimated to be in the low tens of millions of dollars annually, after a period of start-up costs that may range between $10 million and $100 million, depending on the regulatory model. Tax revenue from legal adult recreational cannabis sales is estimated to be approximately $180 million annually – roughly 1% of Indiana’s $18 billion General Fund.

If Indiana chooses to evaluate and potentially shift its cannabis policy, it has several options to consider, including maintaining the status quo of illegality; reducing criminal penalties for possession; creating a regulated adult-use market; or legalizing medical cannabis. There are several considerations related to each of these options especially given the legality of recreational cannabis use in neighboring states.