Federal cannabis legalization is a justice issue, but it’s also a pocketbook issue. A new analysis published in the American Journal of Agricultural Economics found that national legalization would likely reduce cannabis prices in higher-cost US markets. Simply put—weed would be cheaper in the US if legalized. For cannabis supporters wondering how their votes in the next election could impact the future of cannabis, take note. 

A super-majority of American voters support cannabis legalization, and support remains high in states with established adult-use markets. Some of those voters are lucky enough to stop by their local shop or place a delivery order, but many others continue to acquire their cannabis through the illicit (illegal) market.

This analysis suggests that national legalization could benefit states with legal cannabis just as much as states with no cannabis legislation—not only by changing the law, but also changing the access to legal cannabis from other states. 

Tracking cannabis prices across states

This analysis from economist Barry Goodwin at North Carolina State University focused on cannabis prices across US markets. Goodwin collected data from 15 states with varying degrees of cannabis legislation to see whether the cost of cannabis in one state impacted prices in another. Wholesale weekly price data came from Cannabis Benchmarks, which conducts a national survey of cannabis prices each week. 

Cannabis is still illegal at the federal level, so transporting it or selling it across state lines remains a felony offense. Even when two states both have legal cannabis laws, cannabis commerce between them is still explicitly illegal. Understanding how cannabis price integration exists between states can also inform how the illicit market impacts cannabis prices across the country. 

California sets the cannabis price standard 

Results show that California plays a huge price leadership role across the country. And prices have plunged under legalization, with ounces of shake going for as low as $23 per legal ounce in Los Angeles this month.

As a long-established epicenter of cannabis production and culture, California produces far more cannabis than it can consume. Much of that (as in millions of pounds) gets illegally exported to other states.

I find that California, which is a leading cannabis exporter, plays a price leadership role. 

_{Goodwin, 2024}

Goodwin found that prices began to decline in 2018 as legalization took effect in California and penalties collapsed for cultivation.

prices tended to drop substantially beginning in 2018, which again was a period of expansion in the legalization of cannabis in many states. 

_{Goodwin, 2024}

The blue lines show prices falling in legalization states that permit enough farms and stores to meet demand. (Goodwin, 2024)

Previous research also indicates that one-third of California cannabis growers never applied for a cannabis license because of the regulatory barriers and high cost of entry to participate in the legal market. They kept growing, though. The flooded market swamped demand and lowered prices. Prices went back up in 2020 during the pandemic, then fell even further afterward.

The results show how California’s influence on price extends to much of the country, even to the most geographically distant, like Maine. The majority of states price their cannabis far higher than California.

Source: Emily Earlenbaugh – leafly.com