A new report reveals the significance of illegal-market marijuana in the country’s marijuana industry.
Illicit market marijuana is still king in the United States. A new November report from market research firm New Frontier Data suggests that more than 72 percent of the cannabis cultivated in the country is done so illegally.
Among states having the largest illicit demand, California, New York, Texas, Florida, and Illinois round out the top five. While sheer population is a possible factor in why some states with legal marijuana made the top five, research also points to other factors.
In California, a state that is recognized world-wide for its tremendous cannabis market, the roll out of legal recreational cannabis was shaky. Many farmers who had been cultivating illegally for years simply could not afford to go legal.
High prices on licensing, state taxes, and frequent regulation changes drove some small farmers with intentions to step into the legal light back into the illegal market, while others are still transitioning into the legal market. To add to the issue, California is set to raise taxes on wholesale marijuana on Jan. 1.
According to a Los Angeles Times report, a year-end financial audit projected roughly $8.7 billion will be spent on illegal marijuana products in the state of California in 2019, compared to $3.1 billion for marijuana sold by legal businesses.
The audit conducted by the United Cannabis Business Association found approximately 2,835 unlicensed dispensaries and delivery services operating in California, compared to only 873 state-licensed marijuana retailers.
As if those numbers weren’t quite dark enough, in early November California suspended more than 400 cannabis business permits from companies operating in all areas of the state’s cannabis supply chain. The cannabis companies had failed to complete the state’s mandatory track-and-trace system, a seed-to-sale inventory program.
Elsewhere, Florida and New York have medical marijuana only laws, while Texas has a strict policy on medical marijuana. A 2018 survey from the Substance Abuse and Mental Health Services Administration indicates that among the top 10 states by largest illegal market supply, access to legal cannabis is very low, potentially creating an environment where the larger illegal cannabis industries can thrive.
Illegal Market Expected to Decline
However staggering the numbers for black market marijuana are, the New Frontier Data report estimates a drop in the upcoming years. While in 2019 only 18 percent of the total cannabis output is legal, analysts anticipate by 2025 the total legal output is expected to grow to 36.3 percent of the total demand.
The cause behind the expected decrease in illegal marijuana supply, according to New Frontier Data, is the newly legalized recreational cannabis programs in Illinois, Massachusetts, and Michigan in combination with the hopeful growth of legal markets in Florida and California.
The U.S. legal cannabis market is projected to hit $13.6 billion in 2019 revenues, growing to $29.7 billion in 2025. New Frontier Data’s report, “The U.S. Cannabis Cultivation Report: 2019 Legal and Illicit Output by State” was published on Nov. 24.
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