Cannabis and hemp research firm Whitney Economics lowered its U.S. cannabis retail market forecast through 2030, cutting projected sales by $21.1 billion, according to a new report released Wednesday afternoon.
The Oregon-based consultancy now forecasts 2025 U.S. legal cannabis sales will reach $34 billion, which represents 13.1% growth from 2024’s $30.1 billion in sales but down $1.2 billion from their previous projection for 2025.
“Our updated forecast from this cycle has some pretty significant changes,” firm founder Beau Whitney said in a statement. “Both short-term and long-term growth are lower than we’d expected.”
The downward revision affects nearly all states with legal recreational markets, with a few exceptions. Forecasts for the New York and Maryland markets increased $1.04 billion and $100 million, respectively, for 2025.
California faces the steepest projected decline, with 2025 revenue forecasts reduced by $606 million. Other major markets seeing substantial downward revisions include Illinois ($497 million), Arizona ($425 million), Colorado ($183 million) and Washington state ($179 million).
Whitney cited three key factors driving the reduced outlook.
Market oversupply remains a challenge. According to the report, regulators have authorized more cultivation capacity than the entire U.S. demand – both legal and illicit – can absorb. That imbalance is driving down prices, hurting state tax revenues, reducing operator profitability and increasing business failures.
“The U.S. cannabis market is oversupplied and has too much cultivation capacity,” Whitney noted.
State and local taxation policies are also dampening growth in legal markets, with the analysis finding that while consumers will pay premium prices to access regulated products, there’s a limit to what they’ll tolerate.
“Consumers are price sensitive and are willing to pay a premium in price relative to the illicit market in order to participate in the legal market, just as long as that pricing differential is not too great,” according to Whitney. The report indicated that states with higher tax burdens are seeing lower legal market participation rates versus states with more moderate cannabis taxes.
Competition from alternatives, especially hemp-derived cannabinoids, is further eroding market share. The proliferation of substitutes, combined with illicit suppliers and cross-state commerce, has created more options for price-conscious consumers outside traditional regulated channels.
Whitney Economics noted that its previous forecasts have high reliability, with its 2024 projection 95.6% accurate from when published in the first quarter of that year.
It’s a sobering outlook for an industry that once projected much steeper growth trajectories. While the legal market continues to expand, the pace has slowed considerably due to persistent regulatory challenges and market dynamics that favor alternatives to state-regulated cannabis.
“Lower prices, lower participation and more substitutes will result in lower revenues,” Whitney said. “As such, we were forced to reduce our forecast.”
High taxes, federal inaction and market oversupply push consumers to illicit or alternative options, the report says. Read More
