This report presents educational information and insights for those who are evaluating Indiana's cannabis policies or considering potential alternatives. The authors highlight options, provide insights about the government costs of prohibiting or regulating cannabis, qualitatively compare various policies, estimate tax revenues under various scenarios, and offer thoughts for those seeking to design cannabis policies in a changing world.

Considering the Consequences of Changing Cannabis Policy in Indiana

Beau Kilmer, Gregory Midgette, Rosanna Smart, Jonathan P. Caulkins, Roland Neil, Ben Senator, Wendy Hawkins, Anna Newell

ResearchPublished Apr 29, 2026

Indiana is typically considered one of the more restrictive U.S. states when it comes to cannabis. In recent years, both Republican and Democratic lawmakers in Indiana have introduced multiple bills to change some of its cannabis laws and policies. Given the policy environments in Indiana's bordering states and the proliferation of intoxicating hemp products, the policy questions, in many ways, are more complex than those faced by some other states that have moved away from a prohibitive approach to cannabis. Indiana also has more options to consider because the state does not have an existing medical cannabis industry.

This report presents educational information and insights for those who are evaluating Indiana's cannabis policies or considering potential alternatives. The authors highlight cannabis policy options for Indiana, provide insights about the government costs of prohibiting or regulating cannabis, qualitatively compare eight different changes with cannabis policy, estimate cannabis tax revenues under various scenarios, and offer some final thoughts for those in Indiana seeking to design cannabis policies in a changing world.

Key Findings

  • Indiana has many broad options with multiple design choices if it decides to change its policies on cannabis. Options range from reducing the penalties for a cannabis possession arrest to regulating and licensing supply and sales to adults.
  • Indiana is not limited to approaches implemented in other states.
  • Indiana's criminal justice costs for enforcing cannabis laws — currently estimated at $10 million to $20 million annually — would not be zero under legalization.
  • If Indiana decides to legalize adult-use cannabis in a manner similar to other states, annual regulatory costs could be in the low tens of millions of dollars. But if the goal is to have a well-regulated market with minimal illegal supply, Indiana could choose to spend even more on enforcement, especially in the early years.
  • State tax revenues from legalizing cannabis sales will depend on several factors. To give one illustrative scenario, annual tax revenue could be around $180 million five years after implementation assuming (1) a retail tax structure similar to Michigan's, (2) moderate growth in cannabis use, and (3) Indiana's licensed retailers capture half the total market for cannabis in the state.
  • If Indiana decides to change its approach, it could be gradual and build in flexibility. For example, the state could initially limit the types of products and/or THC levels allowed for adult-use sales. The state could also incorporate a sunset provision that offers an escape clause if Indiana wants to make it easier to potentially revisit its policy change.

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Kilmer, Beau, Gregory Midgette, Rosanna Smart, Jonathan P. Caulkins, Roland Neil, Ben Senator, Wendy Hawkins, and Anna Newell, Considering the Consequences of Changing Cannabis Policy in Indiana. Santa Monica, CA: RAND Corporation, 2026. https://www.rand.org/pubs/research_reports/RRA4439-2.html.
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This research was sponsored by the Richard M. Fairbanks Foundation and conducted in the RAND Drug Policy Research Center.

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