Legalization drives down marijuana prices, analysis finds

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 is cheaper in places where it’s legal. 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.

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

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.

As Goodwin explains, “the likely mechanism integrating cannabis markets is the thriving trade in illegal cannabis, which has long preceded recent state-level legislative actions that have legalized cannabis use.”

When prices get too high in other states, the illicit market prices for California cannabis become competition for the regulated market, pushing prices down. But due to the legal risks, there is a significant increase in cost for transporting the cannabis, so prices must be significantly higher to trigger this equalization. 

This leaves the country with prices that are weakly integrated with California’s, but still much higher. 

The exceptions are just a few western states that have their own history of cannabis production and mature recreational markets—Colorado, Washington and Oregon. These states already have prices well below those in California, which is likely why they are not impacted by California prices. 

Still, Goodwin notes that “policy changes that relax restrictions on interstate trade would likely further integrate markets, bringing higher-priced markets more in line to form a national cannabis market.”

In other words, national cannabis legalization, or other policies that allow for interstate cannabis commerce, could significantly bring down your cannabis prices.

Where the major candidates stand on cannabis reform 

Those looking to push forward cannabis legalization can help with their vote in November. Florida votes on adult-use legalization Amendment 3, for example.

Vice President Kamala Harris and her running mate, Minnesota Gov. Tim Walz, recently became the first major party ticket to explicitly support federal cannabis legalization. While Harris has prosecuted pot crimes, her position has become more progressive over time. While in office as VP, she championed pro-cannabis legislation including the MORE Act, pardons for cannabis convicts, and rescheduling cannabis. 

Now as a presidential candidate, Harris has voiced her support for completely removing cannabis from the controlled substance list, sharing on X (formerly Twitter) that “the War on Drugs was an abject failure. It’s time to legalize marijuana and bring justice to people of color harmed by failed drug policies.”  

Trump has also shifted towards a more pro-cannabis view recently, supporting adult use in Florida, as well as federal rescheduling and SAFE banking.

However, when he was president before, he directed the Department of Justice to crack down on cannabis offenses and used part of his salary to pay for a promotional campaign about the negative effects of marijuana. On the other hand, he supported a bill to protect states’ pro-cannabis laws. 

While Harris supports cannabis legalization nationally, Trump has the framed the issue as one of protecting state laws for or against marijuana. Cannabis was not a topic of the presidential debate earlier this week.