The U.S. cannabis industry saw another contraction in the second quarter of 2025, with the number of active business licenses falling 2% to 37,889, according to new figures from CRB Monitor. The decline extends a multiyear trend that began in 2022, as the once-explosive market continues to recalibrate amid consolidation, regulatory hurdles, and shifting demand.

A Market Entering Its Next Phase

Over the past two years, the national license count has dropped 13%. Analysts say this reflects a transition from the boom-and-bust cycle of early legalization toward what industry leaders describe as a more rationalized marketplace.

“What we’re witnessing is the great rationalization of the American cannabis industry,” said Steven Kemmerling, CEO of CRB Monitor. He emphasized that while the slowdown is painful for operators, it is also necessary to create a more stable and sustainable foundation for future growth.

Fewer Approvals and Applications

The contraction is not limited to active permits. Approved and pending licenses—often considered the pipeline for new businesses—plunged 14% in the quarter to 4,391. That figure represents a 23% decline compared with a year earlier.

Pre-licensing applications also dropped 4% to 5,261, marking a 22% decline year-over-year. The drop in applications highlights waning investor enthusiasm and increasing caution from entrepreneurs entering the sector.

Despite the slowdown, New York stands out as an anomaly. Nearly 4,700 applicants are awaiting decisions there, representing close to 90% of all pending applications nationwide. “The story of the U.S. cannabis market right now is a story of New York,” Kemmerling said, noting the state’s outlier status compared with the stagnation seen elsewhere.

License Types Show Diverging Trends

Cultivation and retail licenses, which make up nearly three-quarters of the national total, were relatively stable. Cultivation permits slipped 2% to 16,343, while retail licenses held steady at 11,527. Four states—California, Oklahoma, Michigan, and Oregon—continue to account for nearly half of these operations.

By contrast, manufacturing and distribution licenses fell more sharply, each declining by about 5%. Vertically integrated licenses, which allow businesses to hold multiple types of permits, have grown quickly in recent years, more than doubling to over 2,200 since 2023. However, that category slipped 4% in the quarter, with much of its growth stemming from reclassifications in New Mexico rather than new entrants.

One notable bright spot was cannabis consumption venues. The number of licensed social-use clubs climbed 18% to 80, a fourfold increase over the past year as states such as Colorado, New Jersey, Nevada, and Michigan rolled out new programs.

Sharp Declines in New Approvals

The slowdown is most evident in new approvals, which fell across all major categories. Cultivation approvals declined 14% to 947, 35% lower than the same period last year. Retail approvals dropped 8% to 2,123, marking a two-year low.

Delivery licenses experienced the steepest fall, plunging 50% to just 207 pending approvals. Other sectors, including manufacturing and testing facilities, also posted declines, with manufacturer approvals down 16% and testing facilities slipping 10% to only 19 pending nationwide.

State by State Divergence

The contraction was uneven across states. Out of 46 regulated markets, 19 expanded while nine shrank.

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

• Oklahoma continued its steep downturn, with enforcement actions and a moratorium on new licenses cutting the total 4% to 5,564—more than half lower than two years ago.

• Michigan bucked the national trend, expanding 3% to 4,269 licenses, solidifying its position as the nation’s third-largest cannabis market.

• New York surged 10% in the quarter, adding 153 new licenses for a year-over-year increase of 158%.

• Other growth states included Connecticut (+14%), Washington, D.C. (license count doubled), and Ohio (+9%), which launched adult-use sales last year.

Canada Maintains Stability

North of the border, Canada’s cannabis licensing picture was far steadier. Active permits rose 1% to 5,806, though the total remains 15% below levels recorded two years ago. Retail dispensaries, numbering more than 4,100, led the way with a 2% increase. Cultivation and processing both rose 2%, while wholesale distribution collapsed 44% to only 39 licensees.

Applications in Canada showed some renewed activity, climbing 24% in the quarter to 140. However, interest remains well below the levels of 2023, suggesting that the Canadian market has entered a plateau phase after several years of volatility.

The Road Ahead for Cannabis Licensing

The data underscores a maturing North American cannabis industry that is shifting focus from rapid expansion to efficiency and survival. Oversupply, uneven demand, and regulatory barriers are forcing companies to consolidate and rationalize operations.

While most license categories are contracting, niche areas such as social-use clubs show promise. In the U.S., much of the near-term growth potential may hinge on how New York implements its high volume of applications and whether other states revisit restrictive licensing caps.

For now, the broader picture is one of contraction, caution, and recalibration—signaling that the cannabis industry is no longer in its early boom phase, but entering a period of adjustment and strategic realignment. 

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