Policy Studies Alcohol Policy

Revisiting Alcohol Licensing Caps in 21ST Century America

by C. Jarrett Dieterle

May 5, 2021

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Author

C. Jarrett Dieterle

Resident Senior Fellow, Finance, Insurance and Trade

Key Points

Numerous states are re-thinking their alcohol licensing laws in the midst of COVID-19.

States often place onerous and outdated restrictions on alcohol licenses, such as limiting who can possess those licenses and how many licenses are available in a given area.

These restrictions can create a whole host of unintended and negative consequences, including raising the price of the licenses themselves and limiting the growth of the rapidly expanding alcohol delivery marketplace.

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Alcohol Licensing Caps in Light of COVID-19

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INTRODUCTION

Alcohol licensing has been used since the early days of colonial settlement in America to regulate both who can serve and sell alcohol and when and how they can do so. Unsurprisingly, many types of licensing restrictions create unintended effects and can hamper efforts to modernize alcohol markets for the 21st century. However, as a result of the COVID-19 pandemic, laws surrounding alcoholic beverages in the United States are being rethought and reformed. For example, many of these changes involve developments like allowing to-go cocktails from restaurants, home alcohol delivery and more open container zones within our cities. However, licensing regimes for alcohol remain an issue. Specifically, restrictions on the availability of alcohol licenses—i.e., who can own a license and how many licenses should exist in a given area—are facing increasing scrutiny. This is as it should be because many of these rules are outdated and serve merely to decrease competition. In light of this, it is time for legislators and regulators across the country to consider updating them.