Tracking the Economic Growth Of the Budding U.S. Cannabis Industry
The cannabis industry in the United States has seen remarkable growth and transformation over the past decade, particularly since several states legalized recreational cannabis use in 2014. What was once a niche and controversial market has blossomed into a burgeoning economic force, generating billions in revenue and creating hundreds of thousands of jobs across the country.
According to data from the annual Leafly Jobs Report, the legal cannabis industry supported 428,059 full-time equivalent jobs in the U.S. in 2022, a 32% increase from 2020. Total legal cannabis sales surpassed $33 billion in 2022, up from just $7.9 billion in 2017— representing an astounding 319% growth in five years.
This explosive economic growth has translated into a significant revenue stream for state governments embracing legalization. Cannabis tax revenue for states reached $3.7 billion in 2022, up from just $1 billion four years prior (Marijuana Policy Project, 2023). With more states legalizing and the market continuing to rapidly expand, projections suggest the legal U.S. cannabis industry could exceed $50 billion in annual sales by 2026 (Marijuana Business Factbook, 2022).
As the cannabis industry continues to mature, market dynamics are shifting rapidly. Large multi-state operators and publicly traded companies are increasingly dominating the landscape, while smaller businesses face mounting competition and regulatory hurdles. Despite the impressive growth numbers, the cannabis trade still faces significant challenges with federal laws classifying cannabis as an illegal substance, creating banking obstacles and taxation issues for plant-touching companies.
While the economic windfall from cannabis legalization has been substantial for states, the lack of federal legalization continues to create significant challenges. The legal cannabis trade operates in a regulatory grey zone, classified as illegal by federal law despite legalization in well over half of U.S. states. This has created major hurdles around banking, taxation, operating across state lines, and operating costs.
Cannabis companies are unable to take key federal deductions, such as the ability to deduct payroll expenses from revenues due to IRS tax code 280E. In some states they face effective tax rates of 70-90%, stifling profitability. Access to traditional banking services is limited, creating security risks and inefficiencies of operating on a cash-only basis. Interstate commerce is prohibited, meaning companies cannot transport cannabis products across state lines. This has led to a patchwork of regulations, supply chains, and market environments that fragments rather than unifies the industry.
Without the regulatory clarity of descheduling or federal decriminalization of cannabis, the economic growth potential of this blossoming industry will remain constrained. While state-level legalization has sparked an economic boom, national cannabis policy reform is needed to fully unleash the industry's job creation, tax revenue, entrepreneurial, and economic capabilities across America.
The tides have clearly shifted in favor of cannabis legalization being an economic catalyst. What was once dismissed as a fringe market has proven to be a jobs engine and tax revenue boon for states eager to capitalize on this budding industry's emergence into the mainstream economy. The cannabis sector's momentum and mainstream momentum is undeniable. But it is shackled without a permanent and consistent federal policy to replace the current prohibition that has lasted over 80 years. Unlocking those chains through legalization will create an economic boon of historic proportions as the green wave spreads and this burgeoning industry's economic impact continues exponentially growing in the years ahead. We find ourselves in a dynamic era for cannabis growth, one that will no doubt be a wild ride to observe or participate in.
