Surprising Facts About the Marijuana Industry

Marijuana, or cannabis, is now legal for recreational use in 18 states and the District of Columbia, and for medical use only in another 18 — and President Biden has pardoned all individuals convicted on federal charges of simple marijuana possession. But because the stuff is still classified by the federal government as a Schedule I substance, businesses and local governments have largely had to forge their own paths in regulating the long-illicit drug for recreational and medical markets. The product's novelty and complicated legal standing make the marijuana industry like no other.

Related: I Tried Cannabis-Infused Ice Cream – Here's What Happened

Legal cannabis sales reached $25 billion in 2021, up 40% in just a year, according to BofA Securities. Five years earlier, it was estimated at just $10 billion.

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With major urban centers such as San Francisco and Los Angeles now in the mix, legal marijuana sales are expected to keep growing — to $43 billion in the United States alone by 2025,  New Frontier Data says, and $71 billion globally by 2028, according to a report by Grand View Research.

The decline in arrest rates due to marijuana legalization doesn't come at the cost of public safety, studies have shown. Incidents of violent crime, particularly robbery and murder, declined by an average of 13% after medical marijuana legalization in southern border states, where illicit drug markets have historically been controlled by Mexican cartels, according to the Center for American Progress. Colorado saw a 6% drop in violent crime following full legalization.

Contrary to its Schedule I designation, the National Academies of Sciences, Engineering, and Medicine found conclusive or substantial evidence that cannabis is effective in treatment of chronic pain, multiple sclerosis, and chemotherapy-induced nausea. There's also moderate or limited evidence it can improve outcomes in patients with sleep disturbances, HIV-associated weight loss, post-traumatic stress disorder, and social anxiety disorders.

U.S. veterans are among the most ardent groups pushing for marijuana legalization, as they stand to benefit considerably from its medical uses in easing the effects of post-traumatic stress disorder. In a recent survey, 92% of members in the American Legion — the largest veteran group nationwide — supported funding medical marijuana research, while 82% said marijuana should be made a legal treatment option for veterans.

Laxer medical marijuana laws nationwide contributed to a reduction in the nation's alcohol consumption, according to a study conducted by three universities. Counties in states where medical marijuana was legal showed a nearly 15% reduction in monthly alcohol sales in a 10-year period.

As in any industry, cannabis businesses want to distinguish themselves from competitors, but that can be hard under state restrictions for weed-related advertising. Major online platforms such as Facebook and Google don't allow drug promotions, while radio and television outlets have their own broad restrictions, forcing advertisers to rely on industry-specific magazines such as High Times or billboards in select locations. Though regulations vary by state, the nation as a whole is still a long way off from seeing weed ads run alongside alcohol commercials on prime-time television.

In 2014 — the first legal year for cannabis sales in Colorado, the first fully legal state — branded cannabis accounted for 19% of the state's market. By 2021, brand share had surged to 38%. The trend toward branded pot is even stronger for edibles, as the top five brands owned more than 40% of the edible market in Colorado as well as Washington, Oregon, and California.

There's another way pot brands can make themselves stand out: celebrity endorsements. Many big names in music and movies have jumped on the cannabis industry bandwagon, with famous tokers such as Willie Nelson, Snoop Dogg, and Tommy Chong lending their image to brands such as Willie's Reserve, Leafs by Snoop, and Chong's Choice.

Cannabis enthusiasts are eating rather than smoking their weed more than ever before under legalization. Revenue from flower (or dried cannabis) sales fell below 50% of the market for legal cannabis for the first time in 2017, implying that consumers are willing to pay higher prices for healthier consumption methods. In Oregon and Colorado, the market share of edibles rose to 24% in the first eight months of 2018, and some specific edibles products saw even more explosive growth. For instance, according to BDS Analytics, chocolate edibles saw a growth of 135% in Colorado during the same period. 

Most of the health benefits of cannabis use can be linked to compounds called cannabinoids, or CBD for short. CBD can be extracted and isolated from THC, marijuana's main psychoactive compound, to make oils and tinctures for patients who want the anti-inflammatory or relaxant properties of the drug without feeling stoned. These CBD products are widely available in legalized states and used as home remedies for nausea, anxiety, acne, chronic pain, and even epilepsy.

They don't make up as much of the market, but many other forms of cannabis consumption have gained steam since legalization, including topical oils that are applied to the skin and sublingual doses that dissolve under the tongue. Low-dose products for medical patients or smokers who prefer a milder high have also gained in popularity, with their growth hitting 83% in Colorado at the end of 2017.

Pot isn't just for people anymore, as many shops and dispensaries have begun marketing CBD products for dogs, cats, and other pets. Veterinarians are prohibited from giving advice to pet owners regarding medical cannabis use, but there's evidence that CBD can help animals in much the same way it helps humans, providing relief from seizures, gastrointestinal issues, chronic pain, and cancer symptoms. The same can't be said for THC, the main psychoactive ingredient in cannabis.

Cannabis sales may be rising consistently, but the price per gram has been plummeting in states such as California because of oversupply — as much as 50% in a year. Across the country in Massachusetts, high prices that had led some to keep buying illegally were beginning to level out in late 2021.

If you're looking for the nation's cheapest weed, head to Oregon, where a high-quality ounce of the green stuff on average sells for $210. It's followed by Washington ($233) and Colorado ($242). With data from Price of Weed, the Oxford Treatment Centers found also that an ounce of medium-quality weed is cheapest in Mississippi ($170), while a single joint is cheapest in Oregon for the good stuff ($5) or Mississippi for an average toke ($4).

Even higher than the sales of recreational cannabis will be the industry's overall economic impact, which is based on a multiplier of 3.5, meaning every dollar spent on retail marijuana creates another $2.50 in economic benefit for the state. According to the 2018 Marijuana Business Factbook, the industry's impact will be more than $75 billion this year.

A breakdown of legalized states' recreational and medical sales totals analyzed for 2020 by The Motley Fool show California is by far the biggest market with $3.8 billion total, while Colorado places second at $1.7 billion. Michigan has only a slight edge ($1.21 billion) over Florida ($1.2 billion), and Washington is the only other state over the $1 billion mark ($1.1 billion).

There were 56,516 opioid overdose deaths in the U.S. in 2020, according to the National Center for Health Statistics, many among people who became dependent upon the drug through prescription painkillers. Multiple studies have shown that cannabis could be a viable, non-habit-forming alternative to opioids for chronic-pain patients. Research also shows CBD may even prove to be an effective treatment for opioid addiction and other use disorders thanks to an ability to reduce cravings and withdrawal symptoms.

It's not just speculation that medical marijuana use can ease opioid addiction; thanks to states' legalization efforts, there is practical evidence to support the claim, too. Opiate-related deaths decreased by nearly one-third in 13 states in the six years following legalization of medical use.

For decades, federally approved research into the potential medical benefits of cannabis were limited by a rule stating the cannabis researchers use must come from a University of Mississippi farm. The Drug Enforcement Administration relaxed its rules in 2016 so other facilities could apply to grow research-grade cannabis, lowering the cost of research and better reflecting the ecological range of recreational weed strains. The applications made little progress, however, under Trump's notoriously anti-drug former Attorney General Jeff Sessions. Things might be looking up, however — a bipartisan congressional group filed the Medical Marijuana Research Act, and it passed the House of Representatives in April 2022.

Obviously cannabis producers, processors, and sellers are raking in profits, but how much are states themselves making off this industry's tax revenue? In 2018, excise taxes on marijuana and related products in Colorado and Washington — the first states to legalize recreational use — generated $267 million and $319 million in revenue, respectively. Though not insignificant, those amounts accounted for only 2% of total revenue in Colorado, and 1.2% in Washington. But sales tax revenue saw a jump in 2021 to more than $3 billion, according to a study by The Marijuana Policy Project.

Cannabis may have its medical applications, but most consumers buying it are still just looking to get high. In states with significant sales of medical and recreational cannabis, Arcview Market Research and BDS Analytics found recreational topping medical consistently — such as Colorado's expected take in 2020 of $1.4 billion for recreational and just $300 million for medical. Medical sales this year are expected to total up to $7.3 billion, but recreational up to $14.8 billion.

The legal cannabis business may be booming, but it's still puny compared with a black market for marijuana that's existed for decades. “In California, Illinois, Massachusetts and other states with legal recreational dispensaries, black market marijuana sales not only continue, but often outpace legal sales. Huge busts of illegal operations regularly make the news,” Modern Farmer reports. The problem will last as long as the federal ban exists and illegal operations can send their product into states where pot isn't sold openly, experts say. Expensive and arduous regulatory hurdles are other reasons some growers may stay in the black market.

One of the major benefits of legalization for state governments is the tax revenue cannabis sales can bring in. But a too high tax rate pushes consumers to buy more-affordable options through the black market, which is why Colorado, Oregon, and Washington have all taken steps to reduce marijuana tax rates and make legal channels more competitive with illegal ones. 

The industry is growing with stunning speed — up 33% in jobs since 2021, according to Leafly, making 2022 the fifth year in a row of jobs growth over 27%. That's an estimated 428,059 Americans working in the legal cannabis industry. MJBizDaily has long seen marijuana-industry job growth outpacing even other fast-growing fields such as tech and health care.

Employment in cannabis is so high in part because states' regulatory systems require a lot of expertise to navigate, giving rise to weed-related businesses beyond the standard pot shops and grow facilities. Some of the more novel specializations in the cannabis industry include manufacturing child-proof packaging, developing 420-friendly business parks, meticulously tracking revenues, and navigating tax codes.

Because cannabis is still federally prohibited, it can't be certified organic by the Department of Agriculture like other crops. The cannabis industry has thus developed its own forms of certification to confirm the bona fides of environmentally conscious farms and help set them apart from the competition. These independent certification companies include Clean Green, the Cannabis Conservancy, and Certified Kind.

In addition to certification, the cannabis industry has also given rise to a number of higher educational options, so producers, processors, budtenders, and medical consultants can obtain degrees as testament to their expertise on marijuana treatment and law. Some of these outlets, such as THC University, are online and devoted exclusively to cannabis education, while other established schools, including Seattle Central College, have simply added departments to teach the subjects. Oaksterdam University offers online and in-classroom experiences.  

News outlets once proclaimed loudly that legalized marijuana had led to an increase in traffic accidents in Colorado, Oregon, and Washington, based on findings by the Highway Loss Data Institute that didn't establish any hint of causation between the two. Separate studies by Columbia University and the University of Texas, in contrast, showed that legalization didn't increase overall traffic fatality rates or the number of nonfatal accidents.

The number of traffic searches conducted in Washington and Colorado decreased sharply after legalization, according to Stanford University's Open Policing Project. That's because suspected marijuana possession is often the pretext for such searches, which can result in police seizure of cash and property regardless of whether drugs are found.

Until recently, black people have been as much as three times more likely to be arrested for public consumption and other cannabis-related offenses, despite consuming it at roughly the same rate as whites. A study out of the University of California, San Diego, last year suggested that's changed, examining FBI Uniform Crime Report data for 37 states between 2000 and 2019 to find that arrests for possession overall were down markedly — and racial disparities in arrests as well. Yet black Coloradans were still arrested at twice the rate of white people on pot charges in 2019, according to the state's Department of Public Safety. 

Not only have minorities suffered more from marijuana prohibition, they're now profiting less from its legalization — despite efforts to prioritize ownership benefits for those who suffered disproportionately during the long U.S. war on drugs. For example, minority cannabis company executives plunged to 13% in 2021 from 28% just two years earlier, according to research by MJBizDaily.

The federal government may not recognize cannabis businesses as legal, but they still collect income taxes from them through a tax code provision called 280E that keeps owners of pot businesses from deducting the kinds of expenses allowed for owners of other kinds of businesses. The U.S. government collects billions from marijuana business owners.

A few billion dollars is chump change compared with what the federal government could make in tax revenue from full marijuana legalization. According to the analytics firm New Frontier Data, if pot was legalized in all 50 states, it would generate up to 1 million jobs and around $132 billion in total sales tax revenue between 2017 and 2025.

Because cannabis remains federally illegal, banks aren't allowed to provide financial services to pot shops and other marijuana-centric businesses, which forces the entire industry to operate in cash. Some states have drafted bills, such as Oregon's SAFE Banking Act, that would free up banks to serve the cannabis industry, but the real win would be a federal version. After winning support from the U.S. House of Representatives, though, it still faces resistance in the Senate.

The cannabis industry's cash-only economy also renders businesses uniquely vulnerable to embezzlement and theft, since anyone can use states' online databases to find pot shops and growers who are forced by banking restrictions to keep thousands in cash onsite. Many businesses have thus had to invest in fortresslike facilities and complicated access protocols to account for the resulting security risks.

Two-thirds of Americans want to see weed legalized on a national level, according to Gallup. That's up from 60% in 2016, 36% in 2006, and 25% in 1995, the year before California became the first state to allow medical cannabis use. Yet the federal government's efforts to act on this are still slow, to say the least.

America has spent more than $1 trillion in the war on drugs declared in 1971, according to a University of Pennsylvania study, and this year alone will cost a historic $41 billion. So little has changed since a 2013 report by the American Civil Liberties Union finding that enforcing marijuana prohibition costs taxpayers $3.6 billion annually, with one marijuana-related arrest occurring once every 37 seconds. Costs and incarceration rates have remained steady even as individual states liberalize their approach to cannabis, with nearly 660,000 people arrested for marijuana-related infractions in 2017, contributing to an overall incarceration rate that is the highest in the world.

One primary concern surrounding recreational pot legalization was that the new legal landscape would encourage higher use rates of cannabis and other drugs among impressionable teens. That hasn't been the case in Colorado, where the rate of adolescent marijuana use was below both the national average and the percentage of teens who smoked pot before Colorado voters approved legal consumption for adults. Rates of teen alcohol, tobacco, and heroin abuse were down as well. Teen drug use nationally fell during the coronavirus pandemic, and its easing may reveal whether the Colorado model holds true elsewhere.

Canada recently legalized recreational marijuana use and sales, and American cannabis companies have taken notice, with many already planning international expansions. Quite a few have already pursued reverse-takeover deals to begin trading public stocks in Canada.

The federal government has taken less kindly to Canada's plans for legalization, as U.S. border guards have reportedly issued lifetime travel bans to Canadians as recently as 2019 for even being remotely connected to the nation's legal cannabis industry — or admitting to taking drugs ever. Confusingly, the federal government has taken no similar retaliatory measures against Americans working in legal cannabis thus far.

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