Is Legal Confusion Killing Ohio’s Cannabis Boom? Here’s Why Local Towns Are Saying ‘No’ to Pot Shops

As Ohio inches closer to fully embracing legalized cannabis, municipalities like Xenia find themselves caught in a legal gray area. While state law permits both medical and recreational cannabis, the ongoing conflict between state and federal legislation has created confusion, prompting local governments to take a cautious approach.

Xenia City Council recently introduced legislation that would ban adult-use cannabis dispensaries and cultivators from operating within the city limits. This move follows a one-year moratorium on recreational cannabis operations enacted last December, which allowed the city to assess the potential impact of non-medical marijuana businesses. With uncertainty swirling around state rules and federal legality, Xenia is not alone in its hesitancy. Across Ohio, 107 municipalities have imposed moratoriums, with many small towns following a similar pattern.

At the heart of Xenia’s decision lies a significant problem: the persistent clash between state and federal cannabis laws. Although Ohio has legalized medical and recreational cannabis at the state level, the federal government still classifies marijuana as a Schedule I substance—alongside drugs like heroin and LSD. This classification deems cannabis illegal under federal law, creating a precarious situation for states that have chosen to legalize its use.

For Xenia Law Director Donnette Fisher, the core of the issue revolves around this legal disconnect. “The issues that exist with medical marijuana also exist with non-medical marijuana,” Fisher explained during a recent city council meeting. “Namely, the conflict in laws between the federal and state level.” As a result, local officials are wary of fully embracing recreational cannabis, fearing potential legal and financial ramifications.

Ohio municipalities like Xenia are particularly sensitive to the legal ambiguity surrounding cannabis. Even though voters in Xenia narrowly supported Issue 2, which legalized recreational marijuana statewide, local officials remain cautious. With federal law still looming over their decisions, city councils are left to navigate a patchwork of conflicting regulations.

Xenia’s proposed ban reflects concerns about unresolved issues at the state level as well. The Ohio Department of Commerce is still finalizing regulations on everything from ownership and security to advertising and transportation for cannabis operators. This lack of clarity only deepens local officials' concerns, leading to actions like Xenia’s proposed prohibition on recreational cannabis businesses.

“The state general assembly was going to pass some laws to combine medical and recreational marijuana, but that never happened,” Fisher said. This delay has left local governments in a holding pattern, unsure of how to proceed without clearer guidance from the state and facing the broader backdrop of federal prohibition.

For many local governments, the uncertainty around federal cannabis law presents a major roadblock. Even in states where cannabis is fully legal, the federal government’s stance means that cannabis-related businesses struggle to access banking services, insurance, and even some property leases. This complicates operations for local dispensaries and cultivators, who often face higher risks and costs.

For small municipalities like Xenia, this conflict also raises concerns about enforcement. While Ohio law might permit cannabis businesses, federal law could still bring legal action. Local police forces are often left to decide whether to enforce state or federal regulations, further complicating the issue.

Xenia’s approach to cannabis is not unique. Throughout Ohio, municipalities are grappling with similar concerns. Many are reluctant to allow recreational cannabis operations to establish themselves within their borders until the state provides more comprehensive rules, or until federal law shifts to align with state policies.

According to the Drug Policy and Enforcement Center, 107 municipalities across Ohio currently have active moratoriums on cannabis businesses. Most of these jurisdictions are small towns with populations under 10,000. These local governments represent about 14% of Ohio’s total population, showing that even as legalization spreads, many areas are hesitant to fully embrace it.

Xenia’s voters may have supported legalization, but without clarity on how federal and state law will interact, the city council is opting for a cautious path. Fisher summed up the challenge succinctly: “It’s hard to move forward when the rules are still in flux at multiple levels.”

While Xenia debates its next steps, the broader question of how Ohio—and the rest of the country—will navigate this legal limbo remains unanswered. The state may continue to refine its cannabis regulations, but until federal law changes, many local governments will likely maintain their cautious stance.

As more states across the U.S. move toward legalization, the pressure on the federal government to reconcile its outdated cannabis policies with modern state laws is growing. Until then, municipalities like Xenia will remain stuck in a legal tug-of-war, unsure of how to balance federal prohibition with the state’s progressive stance on cannabis.

For now, Xenia’s proposed ban reflects the broader uncertainty gripping Ohio’s cannabis industry. As long as the conflict between state and federal law persists, Ohio’s cannabis future will remain in a legal limbo.

Should federal law change to align with state cannabis legalization?