Cannabis sales in Montana reached $72.9 million in the first quarter of 2022, according to state Department of Revenue figures outlined by the Associated Press. The total includes both medical and adult-use cannabis sales, but adult-use sales represent the bulk of the total at more than $43.5 million.

Thanks to a tremendous number of out-of-state customers, the state has blown past predictions. In fact, the Montana budget office had predicted $130 million in cannabis sales this year, but the state is on track to reach $174 million in sales and may see as much as $200 million.

Montana imposes a 20% tax on adult-use sales and a 4% tax on medical cannabis sales, so the state could see more than $50 million annually from cannabis-derived revenues. The figures released by the state revenue department show Montana is nearing the $10 million mark in tax revenue from recreational and medical marijuana sales. The legislature’s final framework allocated the first $6 million toward the HEART fund proposed by Gov. Greg Gianforte, a new substance use disorder treatment and addiction recovery program.

HB 701, the main bill that established the current legal framework for adult-use, established a tiered canopy system. Adult-use growers with a Tier 1 license can have up to 1,000 square feet of canopy, Tier 2 licenses allow up to 2,500 square feet, Tier 3 allows up to 5,000 square feet and so on.

HB 701 says an adult-use grower can only increase their license one tier at a time, and only if they show they are using the full amount of canopy they already have and are selling the marijuana they’re already producing. However, it provided an exemption through June 30, 2023, so small existing producers can increase up to Tier 5 in one step without meeting those other requirements.

The Department of Revenue says, because of how that exemption is worded, adult-use producers are still only allowed to increase their license tier once per year, when they submit their regular license renewal. However, industry advocates said that interpretation wouldn’t give them enough ability to grow their operations over the next year and a half. Producers argue it goes against the intent of HB 701, which was to let existing marijuana providers scale up so they could compete with the new companies that will enter the market on July 1, 2023.

There is no notable activity at this time.

Although Montana is the 43rd least populous state, it enjoys a three percent patient population, which is amongst the highest in the nation.

The broad license structure creates an environment that benefits consumers and challenges operators. The highest value is likely to be created by dispensaries with strategic locations and their own supply chain.

Retailers able to reach adventure seekers flocking to Big Sky and Yellowstone stand the best chance of success in this small market.