Hawai‘i’s Cannabis Industry Is Arrested In Development

In Hawaiʻi, cannabis is both legal and illegal, with some of the industry regulated by the state for medicinal use but the vast majority left to an underground network.

This network, which is not taxed or regulated, flourishes in the Hawaiian Islands. A 2022 report from the state Department of Taxation estimates the total market in the Islands for cannabis is $240 million a year. Only 21% is fully legal.

The report estimates that more than three-quarters of the state’s cannabis industry is grown and sold in a “gray market.” This realm “is distinguished from a black market due to its higher levels of social acceptance and ambiguous legal treatment. In a black market, the possession and sale of a product is clearly illegal, and legal enforcement is strong. In a gray market, the legal classification is more ambiguous, and enforcement measures are not consistently applied.”

Like many residents, I see the gray market in my day-to-day life: A few months ago, I spied an advertisement for cannabis seeds casually sitting on the counter of a coffee shop in Pāhoa on Hawaiʻi island.

Recreational cannabis in Hawaiʻi is prolific but unregulated and nominally illegal. Medicinal cannabis is regulated but confined to customers with qualifying health conditions. However, that does not mean all qualified customers seek their medicinal cannabis from a legal source.

Folks who want to legalize cannabis for recreational use believe it should be tested, taxed and regulated. Opponents fear that legalization of cannabis for personal adult use could hurt the state’s tourism industry, create new enforcement challenges, and add threats to public health.

Cannabis is widely used in Hawaiʻi, but there’s no consensus among lawmakers, businesses and the general public on whether Hawaiʻi should change existing cannabis laws.

There is a simple reason for this hazy status quo: Beyond the smoke, Hawaiʻi’s plans for cannabis are arrested in development.

MARIJUANA’S HAWAI‘I ROOTS

Cannabis is a plant, while marijuana is a drug made from the plant, usually containing psychoactive compounds like THC. Varieties of cannabis are also cultivated for other uses, such as hemp used to create fibers and CBD oil with low levels of THC.

In Hawaiʻi, the history of cannabis informs our current debate over its purpose, permitted uses and regulation.

The plant or its seeds likely arrived in Honolulu in the 1930s. Military officials, worried about how service members were likely transporting it from the West Coast into the territory, pushed for more enforcement of what they saw as a dangerous drug.

“Honolulu now has slowly and quietly become a new field for the use of the treacherous drug,” The Honolulu Advertiser warned in 1932, “to such an extent that army officials, backed by civilian police and other officers, are paying special attention to the location and seizure of supplies of it.”

Initial federal efforts to regulate cannabis resulted in the Marihuana Tax Act of 1937, which national leaders hoped would stifle the recreational consumption of cannabis while still promoting related crops with commercial applications like hemp fiber or hemp seed.

For Hawaiʻi, the Marihuana Tax Act mandated the enforcement of cannabis laws for the first time. In October 1937, the sale of marijuana became illegal in the Territory of Hawaiʻi. The next month, officials from the Federal Bureau of Narcotics launched their first Honolulu raid.

Hawaiʻi’s initial war on marijuana was led by A.M. Bangs, supervisor of the territory’s Narcotics Enforcement Branch. Bangs said “the lower class of young people” were using the drug, which was both being smuggled into Hawaiʻi and grown locally, including in Oʻahu’s Pauoa Valley.

A public education campaign warned people of marijuana’s dangers. In downtown Honolulu, placards described the dangers of smoking marijuana and at least one storefront window displayed a cannabis plant to let passersby know what to look for.

In 1970, the federal Controlled Substances Act (CSA) classified marijuana as an illegal narcotic. Nonetheless, Hawaiʻi grappled with exploding demand for locally grown marijuana in the 1970s, a demand filled by illegal plantings statewide.

By August 1978, Operation Green Harvest had taken shape as a collaboration of the Hawaiʻi National Guard, county police and federal agents. Law enforcement officers frequently flew in helicopters searching for plants across the Islands and Green Harvest became a mainstay of Hawaiʻi’s war on drugs.

The decline of the sugar industry in the second half of the 20th century left thousands of acres of agricultural land fallow and cannabis filled the void. “On all the Neighbor Islands,” The Advertiser wrote in 1978, “sugar fields are popular pot-growing sites, since the inner part of the fields can be used for pot, leaving the perimeter to grow as a cover.”

Guy Paul, then police chief of Hawaiʻi island, estimated 250,000 pounds of marijuana were being exported from the island annually—which The Advertiser said would mean the illegal cannabis industry had surpassed sugar as “the Big Island’s chief export industry and top dollar-producing activity.”

Then-state Rep. Neil Abercrombie said in a 1978 interview with ABC News that “the marijuana crop here is the major unsubsidized agricultural crop” and that it’s run on “a free enterprise, entrepreneurial, cottage industry kind of approach. It’s the bastion of free enterprise, and it’s able to take care of itself without having the government come and bail it out.

“We grow the finest marijuana in the world here—[it’s] quality.”

Barack Obama, a student at Punahou School in the 1970s, freely admits to smoking marijuana then.

As U.S. president, he clarified his views in a 2014 interview with The New Yorker: “As has been well documented, I smoked pot as a kid, and I view it as a bad habit and a vice, not very different from the cigarettes that I smoked as a young person up through a big chunk of my adult life. I don’t think it is more dangerous than alcohol.”

Even so, he was wary of its legalization. “Having said all that, those who argue that legalizing marijuana is a panacea and it solves all these social problems I think are probably overstating the case. There is a lot of hair on that policy.”

THE RISE OF REGULATED CANNABIS

Efforts to loosen the state’s regulation culminated in 2000, when the Hawai‘i Legislature became the first in the nation to legalize medical cannabis. (Other states had earlier legalized it through voter referendums.)

The implementation of medical marijuana policy stalled within the Department of Public Safety until 2013, when then-state Sen. Josh Green secured passage of a bill that established a Medical Use of Cannabis Program within the Department of Health. Abercrombie, who by then was governor, signed it into law. Many applied for licenses, including well-connected residents and officeholders across Hawai‘i, celebrities like actor Woody Harrelson, a part-time resident of Maui, and lots of outsiders.

At the time, the lack of safe, medically regulated options for patients qualified by medical professionals to use cannabis was considered dangerous.

One December 2014 report from the State Auditor found that state-regulated medical marijuana dispensaries were non-existent. The dilemma jeopardized the “health, safety, and welfare” of individuals who were qualified by state law to use marijuana for medical purposes. “Because the sale of marijuana is illegal under state law, there is no place within Hawai‘i to legally obtain medical marijuana, which forces qualifying patients to either grow their own medical marijuana or seek out black market products.”

The result was an oxymoronic conundrum. Medical cannabis was legal, but there was no legal place to buy it.

“It took a long time for Hawai‘i to catch up and allow dispensaries to open up,” says T.Y. Cheng, the president of Aloha Green Apothecary. He also serves as the president of the Hawai‘i Cannabis Industry Association, which represents the majority of all licensed medical cannabis businesses across the state. An attorney by trade, he returned home to Hawai‘i to help organize Aloha Green and applied for a license. Today, Aloha Green is one of the eight licensed cannabis businesses across Hawai‘i.

The licensees are limited to specific counties. Aloha Green and two others are based on O‘ahu, two each are based on Hawai‘i island and Maui, and one is on Kaua‘i. “The process was very competitive,” Cheng says. “There was a lot of [mainland and international] interest in these licenses. I think the state did a really good job in selecting teams that had a really strong local connection and could try to keep as many funds here in Hawai‘i as possible, which is very commendable of the state.”

For individuals who have received permission from a health professional to use medicinal cannabis in the State of Hawai‘i, navigating this tight market comes with challenges. Alexa, who asked that she only be identified by her first name, has procured medicinal cannabis from both regulated and unregulated sources.

Alexa is authorized by a licensed medical professional to use cannabis to treat ailments ranging from early arthritis to stomach issues to pain from muscle spasms. Often, she says, certain medicines cause stomach discomfort or other adverse side-effects that require medicinal cannabis for relief. “It can be a bit of a dog chasing its tail kind of a thing,” Alexa jokes, “especially when you are in the throes of a bad health issue where I just need some kind of relief to function.”

Since Alexa began using medicinal cannabis in 2013, the regulatory landscape in Hawai‘i has been confusing. When she first began using medicinal cannabis, she couldn’t rely on state-regulated dispensaries.

“It definitely is cheaper to buy from your local dealer. When there is no other option, you find somebody that is reliable, someone you are comfortable with, who you trust, who can explain where their supply is coming from.”

Alexa says that much of the unregulated supply in Hawai‘i traditionally came from dispensaries in California with an excess of medicinal cannabis. However, in recent years she has grown worried about the contents in unregulated weed. “I have found that, especially in recent years, a lot of street weed tends to be sprayed with a THC booster that gives me an allergic reaction in my mouth, so I just stay away from street-anything at this point.”

Patients must choose from either safer but limited and more expensive marijuana options or more potentially unsafe but readily available and cheaper options.

Today, 24 states have legalized cannabis for recreational use by adults; Hawai‘i is one of 42 that permits marijuana for medicinal uses. But Hawai‘i is the only state with a Democratic Party trifecta — control of the governor’s office and both chambers of the state Legislature – yet no recreational cannabis program for all adults.

RECREATIONAL USE IS EXPLORED

To manage the state’s medicinal cannabis market, the Office of Medical Cannabis Control and Regulation opened within the Department of Health in 2018.

While the OMCCR took shape, legislation was passed in 2021 to create a task force to explore the legalization of marijuana for recreational use.

The current program manager for the OMCCR is attorney Andrew Goff. He began his career in cannabis regulation as a state deputy attorney general; before joining the Department of Health, he advised the Department of Agriculture on hemp products.

“There’s a certain stigma associated with cannabis,” Goff says. “People just associate it with the ‘Cheech-and-Chong’ types, but it can be used in a medical capacity for a therapeutic use, or to treat your actual condition or to treat the symptoms of your condition.”

He says one of the biggest obstacles surrounding the OMCCR is the lack of understanding among people about the permitted uses of cannabis: “Overall, the challenge is a lack of public education on cannabis in general – what it is, what it does and how it can be used medicinally.” Combating the stigma while coordinating cannabis production with licensed medical dispensaries is a juggling act, he adds.

State Rep. David A. Tarnas, who represents a stretch of Hawai‘i island from Kohala to Waikoloa, has long fought for a resolution to the debate over recreational cannabis. His solution is the regulation of recreational cannabis through legalization.

Tarnas first served in the state House from 1994 to 1998, then returned two decades later and now serves as chair of the House Committee on Judicial and Hawaiian Affairs.

“As I look to other states for best practices,” he says, “I find that it’s most efficient to have one state agency responsible for all things related to cannabis, which would include industrial hemp, hemp-derived products, but also involve medical cannabis and adult-use cannabis.” Tarnas plans to focus on reforming cannabis’s regulatory framework in 2026.

Typically, regulated industries in Hawai‘i are administratively attached to the Department of Commerce and Consumer Affairs, but the OMCCR remains part of the Department of Health.

Licensed medical cannabis dispensaries must compete for customers from a licensed set of clientele. Both dispensaries and patients are regulated by the OMCCR. As of September 2025, there were 29,057 in-state patients statewide with “329 cards,” which licenses them to legally buy cannabis for medicinal purposes. Even when patients gain licenses to buy from regulated medical marijuana dispensaries, they still might choose to buy through the gray market, where it’s cheaper.

Big Island Grown – one of two dispensaries on Hawai‘i island – continues to combat competition from unlicensed and unregulated cannabis producers. “The nonregulated cannabis industry is prolific on both the Big island and throughout the state of Hawai‘i,” says Jaclyn Moore, CEO and co-founder of the company. “The majority of the cannabis sold in the state is through the nonregulated market and is not tested for potency or pesticides.”

Protecting the health of users is one argument for legalizing and regulating the cannabis industry. Another is preventing sellers from targeting their products to children in their marketing and labeling, as a 2015 National Institutes of Health study said had happened in Hawai‘i with e-cigarettes.

“What we really want to see happen with any legislation that would go forth is that we have a public health focus before we have a profit focus,” says Rick Collins, project director at the Hawai‘i Public Health Institute, a nonprofit that began in 1996 as the Coalition for a Tobacco-Free Hawai‘i. This is especially crucial for people under 21, who would be barred from using cannabis recreationally in several bills introduced to legalize recreational cannabis.

While the legalization of cannabis for personal adult use failed in the 2025 Legislature, an effort to shore up the struggling legal cannabis industry succeeded. House Bill 302, which was nearly vetoed by now-Gov. Green before being signed into law as Act 241, aims to open up the range of permitted uses for medicinal cannabis. Such legislation could increase the number of licensed medicinal cannabis users across Hawai‘i.

“Our laws will probably change around that, too,” acknowledges Goff. “That is going to impact the things that can be imported, the things that we can sell here, and even the things that we make here that we can sell on the mainland.”

THE FEDERAL PICTURE

While Hawai‘i continues to debate the future of recreational cannabis, the federal debate over the future of cannabis rages. The Trump administration’s plans for cannabis are unclear, stoking confusion among state regulators.

On Nov. 12, 2025, President Donald J. Trump signed House Resolution 5371 into law. While the measure ended the longest federal government shutdown in U.S. history, it included a provision that recriminalizes most hemp-derived THC products. Such inconsistencies between federal and state rules will create more problems for state regulators like Goff. For now, the OMCCR is awaiting more guidance from federal regulators.

Such confusion only compounded a month later, when the Trump administration appeared to move in the opposite direction.

On Dec. 18, 2025, President Trump issued an Executive Order to remove barriers to the use of cannabis for medicinal purposes. Even though an overwhelming majority of U.S. states have programs that permit medicinal cannabis, the Trump administration admitted that “decades of Federal drug control policy have neglected marijuana’s medical uses.”

Trump’s move is dramatic in its clear support for legalizing medicinal marijuana at the Federal level. “The Federal Government’s long delay in recognizing the medical use of marijuana does not serve the Americans who report health benefits from the medical use of marijuana to ease chronic pain and other various medically recognized ailments.”

Cannabis continues to be classified as a narcotic under Schedule One of the Controlled Substances Act. Under the CSA, any drug, substance or chemical is set on a five-point “schedule.” According to the Drug Enforcement Administration, a drug’s classification under Schedule One is defined as “drugs with no currently accepted medical use and a high potential for abuse.”

To the Trump administration, this does not make sense. According to the national political website Politico, Trump faced pressure to issue the Dec. 18 executive order from longtime ally Howard Kessler and Kim Rivers, CEO of Truliev. Truliev is Florida’s largest medical marijuana company. Their successful lobbying has made the de-regulation of medicinal cannabis a bipartisan issue at the national level.

Before leaving office in January 2025, the Biden administration was already moving in the same direction, calling for the re-scheduling of cannabis. “This is the same schedule as for heroin and LSD, and even higher than the classification of fentanyl and methamphetamine – the drugs that are driving our overdose epidemic,” then-President Joe Biden declared in an October 2022 statement.

Biden directed then-Secretary of Health and Human Services Xavier Becerra to evaluate the re-classification of cannabis. On August 23, 2023, Dr. Rachel L. Levine, the assistant HHS secretary for health, sent a letter to then-DEA Administrator Anne Milgram. Levine advised that cannabis be moved from Schedule One to Schedule Three, finding credible scientific support to justify the use of cannabis for such uses as “the treatment of pain, anorexia related to a medical condition, and nausea and vomiting.” As part of this review, the Assistant Secretary of Health found that more than 6 million Americans were authorized to use medicinal cannabis on the recommendation of a health care professional.

The National Institute on Drug Abuse (NIDA), a part of the National Institutes of Health, concurred with these findings. With this said, NIDA continues to also monitor the health impacts of cannabis, including its impacts “on the developing brain and on mental health.” Their existing research focuses on “prevention and treatments for cannabis use disorder, the potential therapeutic uses of cannabis, and the public health impacts of cannabis policies.”

As a result of the Biden administration’s findings, the U.S. DEA, which is part of the U.S. Department of Justice, initiated a process on May 21, 2024 to formally modify federal rules to re-schedule cannabis. More than 40,000 comments were received from stakeholders across the United States.

The push to re-schedule cannabis stalled, but since his declaration in December, Trump has directed Attorney General Pam Bondi to hasten the re-scheduling of cannabis from Schedule One to Schedule Three.

For legal medicinal cannabis dispensaries in Hawai‘i, re-scheduling cannabis could carry positive economic consequences. According to OCMMR Administrator Goff, at least one section of the federal tax code limiting deductions for cannabis business may no longer apply. As a result, legally operating, state-regulated dispensaries could potentially deduct business expenses.

Nevertheless, recent federal changes will not immediately challenge their mission. “Like other states, Hawai‘i developed its regulatory framework in the absence of a clear federal system and through years of experience overseeing cultivation, manufacturing, testing and dispensing for registered patients,” Goff explained in a later statement. “A change in federal scheduling does not alter state program requirements, which remain in effect unless and until modified through state legislative or rulemaking processes.”

States like Hawai‘i still exercise a great deal of latitude over their independent programs, Goff’s statement said. “Hawai‘i’s medical cannabis program will continue to operate under state law, with a focus on continuity of care for patients, regulatory clarity for licensees, and strong public health protections, as federal policy evolves.”

THE INCONSISTENCIES OF REGULATION

When the federal government began soliciting comments on re-scheduling cannabis in May 2024, Dr. Clifton Otto submitted testimony that carefully documented Hawai‘i’s struggle to clarify the regulatory inconsistencies between state and federal agencies. Otto is a physician certified to add patients to Hawai‘i’s medicinal cannabis registry.

For over a decade, Otto has been involved in debates over the establishment of a sustainable medicinal cannabis program, including a stint as a member of the Medical Dispensary Task Force established in 2014 to create a framework for permitted medical dispensaries across the state.

“I got into this in 2011 because of a family friend with colon cancer, and I got to see first-hand how this person was benefitting from cannabis,” he explains. “They were using it to reduce their nausea and boost their appetite during chemotherapy.”

Inconsistencies between agencies at the state level, along with conflicts between state and federal law continue to hasten confusion.

One recent example concerns a patient’s right to take medicinal cannabis between islands. It is widely believed that the state’s jurisdictional limits are only 12 miles from any coastline – but the distance between many Hawaiian Islands are more than that.

That means a person must technically leave the state’s jurisdiction to reach another island. Is it still legal for that person to possess medicinal cannabis?

“Dispensaries in Hawaii are authorized under state law to transport samples and products to other islands in violation of federal law, which jeopardizes sample integrity and patient safety,” warned Otto in a Nov. 7, 2025, letter to Hawai‘i’s Department of Transportation. It is a politically tricky issue for the DOT, as federal regulations barred pilots from transporting marijuana. On Nov. 28, 2025, the DOT formally declined to engage in any discussion about the transportation of medicinal cannabis.

The fog of regulatory inconsistency frustrates medical professionals like Otto. “The state has the authority to decide how medicine is practiced within the state, and the state decided that cannabis has medical use, but the state is very conflicted on cannabis and has not properly stood up for the state’s authority over medical cannabis.”

There is currently no clear mechanism for managing between state and federal rules and regulations. “We’re conflicted. We’re stuck in the middle. Our tendency is to always wait for the federal government to do something.”

It appears the federal government is slowly moving to permit medicinal cannabis as a regulated drug at the national level. In Otto’s opinion, the state must prepare for this future.

THE COST OF CANNABIS

The regulatory confusion sprouting from the future of medicinal cannabis interweaves with the debate over the future of recreational cannabis.

For Honolulu Prosecuting Attorney Steve Alm, the national experiment with recreational cannabis legalization provides warning signs. Alm opposes such legalization on the grounds that it will pose enforcement issues, hurt public health and damage Hawai‘i’s international image.

“When I talk to the business groups,” Alm says, “they’re concerned with employees showing up for work high – and they know there’s marijuana out there now. I think the feeling, though, is that if it is made legal [for recreational usage], it’s just society kind of saying, ‘This must be safe or we wouldn’t be legalizing it’ – and we’re going to have more usage.”

Alm has further echoed the warnings of State Attorney General Anne Lopez, whose department furnished recommendations about the potential establishment of a Hawai‘i Cannabis Authority in 2024. Driving while high is one worry.

“If cannabis is legalized in Hawai‘i, and even if the Department’s recommendations regarding high driving and open containers are adopted,” the Department of the Attorney General warned, “it is reasonable to anticipate an increase in traffic accidents and fatalities involving cannabis-impaired drivers, as well as an increase in the raw number of traffic fatalities.”

The potential impact of recreational cannabis legalization on tourism is another lingering concern. In some countries – like Japan – cannabis consumption is stigmatized, and some opponents fear legalization would discourage potential Japanese travelers. As an example, Alm cites the recent resignation of Suntory Holdings CEO Takeshi Niinami in September 2025 as a result of his alleged purchase of a product containing THC, a psychoactive component of cannabis.

Many Japanese tourism industry leaders express similar worries, including Tetsuya “Ted” Kubo, president and CEO of JTB Hawaii, which mostly serves visitors from Japan. In 2025, Tina Yamaki, then-president of Retail Merchants of Hawaii, also expressed opposition for similar reasons.

However, other indications suggest many tourists from the continental U.S. are open to cannabis tourism. A September 2025 report from MMGY Travel Intelligence for the Hawai‘i Tourism Authority found that 43% of potential visitors to Hawai‘i were interested in recreational cannabis experiences while on vacation. Potential activities include “modern cannabis lounge activities,” along with “sampling cannabis for the medicinal and therapeutic benefits.”

There are two cannabis markets in Hawai‘i, both of which are not naturally aligned to one another. Advocates for medicinal cannabis may not naturally advocate for legalized recreational cannabis usage.

“I don’t really think there is such a thing as recreational cannabis,” Otto opines. “I think people who are saying they are using it recreationally are really self-medicating. They are self-medicating for anxiety, depression, insomnia, and I think you could argue that there is a certain medical benefit to euphoria that can help under certain medical conditions.”

Cannabis is a powerful drug that is capable of being used as a medicine. To that end, it is also a widely used drug enjoyed for recreational use across Hawai‘i.

One irony is that even in many states that have legalized recreational marijuana, the underground market continues to flourish, often due to a combination of high taxes on legal cannabis, complex regulations and the illegal market’s lower prices. Lower taxes and simplified regulations could stymie the perpetuation of Hawai‘i’s existing gray market. Cannabis will not disappear in the near future.

There are existing models for regulation from other states built with safeguards for youth, to regulate growers and to protect the general public. Hawai‘i may not have the capacity for such regulation.

Nationally, regulated cannabis industries can generate revenue for state and local governments. The Marijuana Policy Project tracks state tax revenues from existing regulated cannabis programs. Since 2014, states have generated an estimated $24.7 billion in revenue from regulated, adult-use cannabis sales.

Depending on the design of a state’s regulated program, however, such systems can still drive cannabis sales into the underground when they are too burdensome. States like Alaska have some of the highest cannabis tax regimes in the country, which sometimes drive cannabis growers and producers to continue operating in the ‘gray market.’ However, states like Alaska, Colorado, Nevada, Oregon and Washington have seen regulated cannabis sales grow to constitute more than one percent of all state tax revenues in a fiscal year.

Rhode Island, a state of similar population size to Hawai‘i, currently tracks statewide revenue from regulated cannabis through its Cannabis Control Commission. In 2025, sales from regulated recreational cannabis totaled more than $101.56 million dollars, while regulated medicinal cannabis revenues totaled about $18.45 million dollars.

Hawai‘i’s revenues are limited because the recreational market remains unregulated. Between licensing fees and the general excise tax (GET), the State of Hawai‘i had collected an estimated $19.25 million in tax revenues from the state’s regulated medicinal cannabis market from 2016 through 2024, according to a January 2025 report submitted to the State Legislature.

The regulation of Hawai‘i’s flourishing, underground recreational cannabis industry may be long overdue. However, the gambit is risky. Although the state may reap certain fiscal benefits, the risks to public health are still present. To that end, regulation offers the certainty of monitoring elements of what already flourishes.

With cannabis, such revenues will come at a cost.