Municipalities that opt-out of their state’s legal, licensed cannabis system are doing more harm than good and actually encouraging illicit market sales, according to a new report from Leafly and Whitney Economics.
“Cannabis already circulates in every town in America,” write Bruce Barcott and Beau Whitney in the Opt-Out Report 2022. “A local ban on legal stores effectively creates an economic protection zone for illegal street sellers.”
The report, which analyzes a variety of sales, population and market data from the 14 states with recreational markets, shows a strong correlation between an increase in licensed stores and a decrease in illicit sales.
“The more legal regulated stores, the less illicit street sales,” it states, noting that the earliest legal states have “winnowed the illicit market down to a nub.”
There is also a correlation between stores per capita and legal market capture.
“States with roughly 20 to 40 legal regulated stores per 100,000 residents, in general, have captured 80% to 90% of all cannabis sales in the legal market,” it states. “States with single-digit stores per 100,000 residents tend to struggle to capture legal sales, with the illicit market still accounting for 30% to 50% of sales.”
It cites the example of three states that opened adult-use stores in 2022: Montana and New Mexico each opened a large number of retailers, capturing 75% of the state’s total demand, while New jersey opened a total of 26 stores and captured less than 20% of total demand. Per capita, Montana opened 39 stores per 100,000 residents while New Jersey only licensed 0.3 stores per 100,000.
The report also reiterates that teen use does not increase when state-regulated stores open and that illegal, untested products pose a greater risk to public health than those found in regulated markets.
The 20-page report also uses research from New Frontier Data to note that cannabis consumers make a legal purchase two to three times per month and are willing to travel between 12 and 14 minutes from home to shop.
“An observation made by one of the leaders of Washington State’s legalization campaign in 2012 still rings true today: When given a chance, most people prefer to follow the law,” it says. “They just need to be given the opportunity.”
— Brian Beckley