Fall in the legal marijuana market generates uncertainty in Colorado and California

The states of Colorado and California face the rapid contraction of the marijuana market and its consequent loss of millions of dollars in tax revenue, a situation that could be repeated in dozens of states. USA who have followed in their footsteps of legalizing its consumption for both curative and recreational purposes.

“Marijuana sales in the pioneer states of legal recreational marijuana, such as Colorado in 2014, are now affected because there are already 24 states that allow recreational marijuana use among adults and there are 38 states in total with legal medical marijuana”Jerry Joiner, national expert in the cannabis industry, told EFE.

In this state, marijuana sales (both recreational and medicinal) fell from US$2.2 billion in 2020 to US$1.5 billion in 2023, almost a 23%causing the closure of dispensaries and layoffs of employees, according to this year’s data from the Marijuana Control Division, dependent on the Colorado Department of Revenue.

For Colorado’s coffers, that meant going from a collection of 366 million in 2020 from the marijuana tax to 282 million in 2023, 30% less.

The situation is repeated in California, where, according to official data from Santa Barbara County (one of the largest marijuana producers in that state), tax collection was reduced for the third consecutive year, which is now a 24% lower than in 2020.

The authorities anticipate that this year in California the collection of the tax on the sale of marijuana will only be enough to cover the administrative costs of controlling that industry, without leaving a surplus for other projects, such as street repairs or educational subsidies.

“The problem is the increase in the availability of products,” Joiner said.

A study released earlier this year by the University of Colorado (CU) in Boulder had already detected and anticipated this problem. For example, the price of a gram of marijuana was reduced from $4.83 in 2021 to $3.43 in 2023. And since the end of the pandemic, a 10% less than licenses for dispensaries.

In states like Colorado and California the trend of declining sales will continue. But other states, like Michigan, will continue to collect billions of dollars in taxes. In the case of Michigan, in 2023 the state received $3 billion from the marijuana sales tax, according to Joiner.

“This is 3 billion more than Michigan did not have in 2019, when it legalized marijuana,” Joiner pointed out.

For this expert, the problem in Colorado was the simultaneous issuance of large numbers of dispensary licenses in the first years of the new industry, so that, when new markets emerged in nearby states, many of those dispensaries had to close due to lack of customers. or investors.

Lack of diversity in the business

Another element is the lack of diversity in the legal marijuana market. According to data from the National Hispanic Cannabis Council (NHCC), more than 80% of dispensary licenses issued in the United States are for whites, with only the 5.7% for Latinos.

In Colorado, where Hispanics represent the 22% of the total population, only the 7% of licenses are for this community. And in California, with a 40% of Hispanics, that figure is reduced to 3.2%.

“The disparate number of licenses granted to Hispanic entrepreneurs reveals the obstacles to Hispanic success in the industry.” cannabis”, according to an NHCC report published in 2021.

But the main reason for the decline in the marijuana industry, Joiner said, is “the quagmire of rules, regulations and taxes on legal marijuana.”

He stressed that this “has allowed the ‘legacy market’ (black market) to continue to flourish and unscrupulous people to continue putting unsafe products in the hands of consumers.”

Even so, the current situation of the legal marijuana industry offers opportunities, especially in business ventures. “side business”such as services to tourists, cooking classes that include marijuana, growing seminars, and general education and training, according to Joiner.

At the same time, the entire industry could change if the federal government legalizes marijuana and, in doing so, allows dispensaries to access traditional banking services.

“I anticipate some type of legalization at some point and believe the industry will be banked in the future. I think some of these tax issues will be resolved. And if marijuana becomes a national industry, we could see interstate commerce since it is currently illegal to transport marijuana across state lines.”Brian Lewandowski, from CU-Boulder, said in a statement.

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