Cannabis legalization spurs innovation, but not always in ways that benefit patients or public health

Innovation in health care saves lives. But not all health innovations have enough evidence to actually benefit patients.

Barriers to innovation are often higher in illicit or restricted markets, including cannabis, stem cells and cryptocurrencies. Researchers face higher costs, limited access to raw materials and data, and stricter regulations.

Cannabis illustrates a particularly confusing tension between regulatory restrictions on one hand and research and innovation on the other.

While the U.S. federal government still classifies cannabis as having “no accepted medical use,” many states have legalized it for medical or recreational use. Meanwhile, the Department of Health and Human Services obtained a cannabis-related patent in 2003 covering potential medical uses of cannabis compounds for protecting the brain from damage or degeneration. The patent was exclusively licensed for commercialization.

Research and innovation on cannabis can take many forms. Clinical trials may study cannabis products as medical treatments, the effects of cannabis on its users, or factors related to abuse and dependence. Meanwhile, cannabis-related patents can be filed for wide-ranging purposes, such as chemical formulations, methods for production or new consumer products like edibles, beverages or vaporizers.

But do these innovations actually benefit consumers and patients?

We are economists studying how institutional changes affect innovation in different markets. Our recently published research found that legalization of recreational cannabis use appears to spur innovation, but primarily in ways that expand commercial opportunities rather than scientific understanding or health benefits for patients.

Cannabis’ evolving legality in the US

Cannabis is a plant that contains chemical compounds called cannabinoids. One such compound, tetrahydrocannabinol, or THC, produces psychoactive effects, while another compound called cannabidiol, or CBD, is often used to relieve anxiety and pain. However, there has been insufficient evidence on how effective cannabis products are in treating medical conditions, as well as a lack of consistent medical and dosing guidance.

At the federal level in the U.S., cannabis has been classified as a Schedule I drug for over a half-century. This classification indicates that the federal government considers cannabis to have a high potential for abuse and no accepted medical use.

As a Schedule I drug, there are significant restrictions on cannabis research. Researchers who seek to conduct cannabis-related clinical trials must obtain approval from both the Food and Drug Administration and the Drug Enforcement Administration, a process that can take over a year. They are also limited to using select varieties of cannabis obtained from federally authorized cannabis suppliers, and are generally prohibited from studying products available in state-authorized markets.

There are ongoing pushes to relax these restrictions. Meanwhile, cannabis has been legalized to varying extents in many states. California became the first state to pass a medical cannabis law in 1996, allowing qualified patients to grow, possess and use cannabis for medical purposes. Many states followed suit in the late 1990s and early 2000s. As of June 2025, 40 states allow medical cannabis use.

A number of states also allow recreational or nonmedical cannabis use among adults, which is regulated in similar ways to alcohol. Colorado and Washington enacted the first recreational cannabis laws in 2012, and there are 24 states that permit adults to use cannabis recreationally as of January 2026.

Altogether, the legal landscape for cannabis in the U.S. has varied considerably across states and over time. States with more permissive laws can lower the costs of medical research and product development with cannabis, even if federal drug scheduling continues to restrict access. For instance, one group of Washington State University researchers asked participants to independently purchase and smoke cannabis from a legal dispensary before returning to their lab for study.

State legalization and cannabis innovation

To systematically examine how state legalization affects cannabis-related innovation, we compiled and analyzed datasets tracking cannabis-related clinical trials and patent applications.

We distinguished different types of cannabis-related innovation. Specifically, we categorized cannabis-related clinical trials based on whether they focused on its potential as a treatment, its usage and effects, or its role in drug abuse. Similarly, we categorized cannabis-related patents based on whether they focused on chemical compounds, medical uses, methods or products.

We also assessed public health concerns across three measures: patents explicitly involving THC; patents with a high risk of misuse; and patents targeting consumers directly, such as high-potency formulations, edibles or vaporizers.

Then, we compared changes in cannabis-related innovation over time in states that legalized cannabis earlier with those in states that did so later or not at all. We measured innovation by counting the number of cannabis-related clinical trials and patent filings. We distinguished between medical and recreational legalization to assess how different policies affect innovation.

Overall, we found that when states legalize cannabis for recreational use, cannabis-related patents increase – but mostly in commercial-oriented areas rather than health-focused ones. Patents were concentrated in market-oriented innovations like cultivation equipment and consumer products, rather than in clinical or science-based research. We also found some evidence that these innovations may raise public health concerns.

Legalization did not result in meaningful increases in clinical trials. This suggests that barriers to cannabis-related clinical research – such as limited access to research-grade cannabis, limited funding and stigma around working with a federally controlled substance – remain substantial.

Gaps between research and product

As 420 – signifying April 20, a day celebrating cannabis culture – approaches each year, public attention turns toward the legal status of cannabis.

The legal landscape has evolved rapidly over the past few decades, and further changes are in the pipeline. Both the Biden and second Trump administrations have made efforts to reclassify cannabis as a Schedule III substance, which would indicate that it has an accepted medical use and low-to-moderate potential for dependence.

These reevaluations of the legality of cannabis come at a critical time. There has been an explosion of recreational cannabis products in recent years, including increasingly potent strains and a wider variety of ways to use cannabis. Meanwhile, critical research on the health and safety of cannabis use has lagged due to heavy restrictions accompanying Schedule I status.

This gap between medical research and product innovation can have significant public health consequences. The 2019 to 2020 outbreak of lung injuries related to e-cigarette or vape use was linked partly to the use of unregulated or illicit cannabis vaping products. These harms highlight the risks of allowing product innovation for controlled substances to outpace scientific understanding.

Policies that significantly reduce obstacles to clinical research can in turn help close the widening gap between cannabis markets and addressing their public health implications.