[#item_full_content] Economy Up in smoke: Marijuana markets struggle amid economic hurdles Industry groups are calling on state lawmakers to make regulatory changes. Sophie Quinton 06:00 AM, Jul 24, 2026 Various marijuana buds for sale are displayed at The Green Cross cannabis dispensary in San Francisco, Wednesday, March 18, 2020. (AP Photo/Jeff Chiu) Legal marijuana markets in many states are struggling to excel in an oversaturated, heavily regulated environment, putting entrepreneurs out of business and leading to depressed tax collections. Thanks to slowing consumption growth and plummeting prices, the total value of cannabis sold legally in the United States dropped last year for the first time ever, according to Whitney Economics, a cannabis consulting, data and economic research firm. The dollar amount sold in older markets, such as Colorado, Oregon and Washington, has been falling for years. Some industry insiders say the combination of federal prohibition, state regulations, state marijuana excise taxes and black market competition make it almost impossible for legal pot businesses to succeed. “Having reliable access to [legal] cannabis that is competitive with the illicit market requires a stable industry and a stable business environment,” said Adam Smith, executive director of the Marijuana Policy Project, a legalization advocacy group. “We don’t have that anywhere.” Marijuana industry groups are calling on state lawmakers to scrap unnecessary regulations, cap grower licenses and lower taxes in order to help struggling businesses. Colorado lawmakers have streamlined regulations in recent years. California lawmakers have cut excise taxes. John Hudak, director of the Maine Office of Cannabis Policy, said some level of pain may be inevitable as markets mature and supply and demand find an equilibrium. “The market is going to do what the market does,” Hudak said. Entrepreneurship is a risky business no matter the industry, he noted. And many cannabis growers, processors and sellers launched businesses with unrealistic expectations. “There were so many hyped-up promises about what legalization was going to mean for an individual business,” Hudak said. “Some people have gotten very, very rich out of cannabis. And other people have lost their shirts.” Making money in the legal marijuana business has never been easy. Growing, selling and possessing marijuana remains illegal under federal law. That means state-licensed marijuana businesses cannot legally sell their products across state lines or export them overseas. They cannot claim valuable federal business tax breaks. And they struggle to access banking services and bankruptcy protections. State and local laws designed to avoid a federal crackdown and protect businesses from crime — such as seed-to-sale tracking systems, which ensure plants are not diverted to the illicit market — further drive up the cost of doing business. Licensed marijuana businesses must compete with not only the illicit market but also similar products derived from hemp, a nonpsychoactive form of cannabis that can be legally grown across the United States. Rock-bottom prices have made a tough industry even more challenging. In Colorado, the first state to legalize recreational marijuana, sales peaked in 2021 during the COVID-19 pandemic. The industry has contracted ever since. Dispensaries sold $1.3 billion of medical and recreational marijuana last year, 41% less than in 2021, according to the Colorado Department of Revenue. That’s in part due to falling prices. A gram of recreational marijuana flower has sold for $3.15 this year on average, 34% of the price it commanded in 2021 The number of licensed growers in the state shrunk by 43% from March 2021 to March 2026, to 672 facilities. The number of licensed dispensaries shrunk by 9%, to 955 facilities. The number of people licensed to work in the industry dropped by 40%, to about 25,000 people. Some industry insiders say state leaders have created an oversupply problem by allowing excessive marijuana cultivation. Total market demand for legal pot in the United States is about 15-20 million pounds per year, according to Beau Whitney, chief economist at Whitney Economics. Yet across the 40 states with legal medical or recreational marijuana programs, regulators have authorized 122 million pounds of production per year, he said. “That’s like 10 times the amount you have to satisfy current legal demand,” Whitney said. Meanwhile, retail options are limited. States generally let local governments ban dispensaries. About half of local governments in states that allow adult use have opted out of recreational pot sales, according to the Cannabis Business Times, a trade publication. “Funnelling all the marijuana through a dispensary is a failed model,” said Whitney, who wants policymakers to allow marijuana to be bought in grocery stores after an ID check, like beer or wine in some states. Industry groups in some states, such as Michigan and Oregon, have lobbied lawmakers to cap the number of new retail and production licenses. Oregon paused new producer, processor and retailer licenses in 2019 amid an oversupply crisis and has yet to lift it. Oregon’s license cap has stabilized the market somewhat but has not prevented supply from increasing and prices from continuing to fall, state data shows. The cap has also supported existing operators while shutting out newcomers. Grocery store sales may not meaningfully expand the market for legal weed, Hudak said. Stores would have to be located in towns that allow marijuana sales. And store owners — which are major corporations in many cases — would have to be willing to stock a federally illegal drug on their shelves. “Do I think part of the solution is more towns opting in? 100%,” Hudak said. To encourage local governments to allow dispensaries, Maine will help cover costs associated with opting into the program, such as paying legal fees or holding public meetings. Marijuana business groups are also lobbying state lawmakers for relief from taxes and regulations, and fighting periodic proposals to hike cannabis excise taxes. Mason Tvert, spokesperson for Colorado Leads, a cannabis industry group, said tax rates are a constant discussion in the state. “Officials have to be reminded of this: They can’t treat marijuana businesses or consumers as an ATM,” Tvert said. Federal prohibition remains the industry’s overarching problem. While nationwide legalization seems as far-off as ever, some relief may be on the horizon. Federal regulators currently classify marijuana as a Schedule I drug, the most dangerous category of controlled substances. Trump administration officials are considering downgrading it to Schedule III. That would classify marijuana as a moderately addictive drug with accepted medical uses, putting it in the same category as ketamine and Tylenol with codeine. Moving to Schedule III would not allow recreational pot sales. But it would allow marijuana businesses to deduct expenses on their federal income tax returns, make it easier to research cannabis and crack open the door to medical marijuana exports. Schedule III could be game-changing for California businesses, said Jesse Redmond, chief strategy and investor relations officer for LEEF Brands, a California-based company that is publicly traded on the Canadian securities exchange. LEEF Brands has been working on federal permits and certifications it would need to export medical marijuana products internationally starting next year, Redmond said. International and, potentially, interstate commerce could let California operators sell for higher prices elsewhere. “I think that great reset happens when California has to compete with other markets,” Redmond said. 
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