Emerging East Coast State Markets to Buoy Cannabis Industry as Legalization Stalls

As many as 18 states are poised to consider some level of cannabis legalization.

While the most-seasoned legal recreational state markets saw declines in revenues for the first time in 2022, recently legalized states on the East Coast are expected to fuel growth for the time being, according to a report by New Frontier Data.

Legal U.S. cannabis sales hit $30 billion in 2022 and are expected to surpass $35 billion in 2023, according to the firm’s findings. Even if state-level legalization continues without federal policy adjustments, sales could climb to $71 billion by 2030.

If the market’s overall momentum slows down, sales could still hit $58 billion.

The report, “2023 U.S. Cannabis Report: Market Updates & Projections,” shed light on current and predicted sales, consumer base, supply, and pricing for U.S. recreational and medicinal cannabis markets.

“As more established markets across the country stabilize, the U.S. cannabis industry will be buoyed by new markets coming online,” New Frontier CEO Gary Allen said in a statement.

Allen maintained that even with a potential slowdown in the entrance of new markets to the industry, a solid 9% compound annual growth rate is expected until 2030. And given that nine markets exhibit a robust drive towards legalizing recreational use and another nine are likely to legalize medicinal cannabis, he said, market expansion could be even more substantial.

If all 18 new states successfully pass legalization measures, 96% of Americans will live in a state with some form of legal cannabis access.

“While it is difficult to pinpoint when federal legalization may occur, or what form it might take, it seems clear that expansion of the legal market will continue to create further public support and social normalization that adds pressure on lawmakers,” New Frontier wrote in the report.

Still, the firm noted political resistance in traditionally conservative states have opposed legalization endeavors.

“Without federal action on rescheduling or banking reform in the near term, it remains highly likely that the current patchwork model of state legalization will perpetuate through at least 2025,” New Frontier wrote.

The report found that registrations for medical programs increase in medical-only states that neighbor newly legal recreational-use states and decrease in states that legalize recreational use alongside existing medical programs.

Additionally, an estimated 54 million U.S. adults will consume cannabis in 2023 across both legal and unregulated markets, with that number expected to grow to 69 million by 2030.

The total number of registered U.S. medical cannabis patients surpassed 4.5 million in 2022, and New Frontier projects that there will be 5.2 million registered patients by 2030, without accounting for new markets.

Inflation, onerous taxes, and competition from illicit markets are pressuring mature legal cannabis markets. Average U.S. consumer price per ounce of flower has fallen 10% since 2010, dropping from $325.46 to $294.15.

A potential recession could worsen consumer spending, as well, but as the legal market grows and offers cost-competitive alternatives to the illicit market, spending is expected to recover eventually.

“Taken collectively, near-term uncertainty on the broader economic climate, along with medium-term uncertainty on precisely when the next crop of states will legalize or when federal reform might happen, will have little impact on the surging levels of demand for legal cannabis, and do little to deter the broader transition of consumers in legal market from purchasing within regulated channels,” the report said.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.

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