Legal weed industry in US ‘verges on collapse’ amid booming blackmarket

Beau Whitney, senior economist for the National Cannabis Industry Association, asserted that the industry is looming on a "crisis" that is "unsustainable from an economic perspective."

Due to the strain of falling prices, inconsistent state regulation, and high taxation, Whitney says "All of these issues are chipping away at the health of the industry to the point where I would describe the industry as in crisis in the United States," Daily Mail reports.

Despite an increase in sales, dispensaries report that making a profit is becoming more difficult as a surplus of marijuana supply drives down prices, which is great for stoned users but bad news for farmers and merchants.

The National Cannabis Industry Association (NCIA) warned in a report earlier this month that the legal cannabis market in the United States will collapse "if common sense, practical reforms are not enacted urgently."

As of now, 23 states have legalized the recreational use of marijuana with last year's sales surpassing $26 billion, according to Vangst.

The specific challenges the marijuana industry faces differ from state to state because the industry is governed individually in each state where it is allowed. A federal ban on the interstate selling of marijuana, however, means that any excess supply is legally imprisoned within the state where it was grown, which suggests that the industry's fragmented structure may contribute to the issue.

This has resulted in an abundance of excess supply, especially on the West Coast, which has caused prices to plummet, according to the outlet.

According to Isaac Foster, co-founder of wholesaler Portland Cannabis Market, when legal sales in Oregon first started, a pound of marijuana would have cost $3,000 at wholesale, but today it might cost $100 to $150.

Due to the enormous amount of excess marijuana being grown in Washington, which has some of the highest cannabis taxes in the nation, buyers may pay prices in legal shops that are even lower than those for illegal marijuana.

According to a poll performed by Whitney's consultancy company, Whitney Economics, only 24 percent of cannabis-related businesses nationwide are profitable, a significant decline from 42 percent last year.

Daily Mail reports that Whitney explained cannabis businesses face tax difficulties in addition to pricing pressures since federal law prevents them from deducting business expenses from income taxes like a typical corporation would. He claimed that as a result, businesses in the marijuana industry frequently pay an effective federal tax rate of up to 70 percent on top of state and local excise taxes imposed on sales.

However, some people in the sector are still holding out hope that the Biden administration will open the door to marijuana sales across states that have legalized the drug. They contend that would enable the West Coast to assist in supplying the rest of the nation due to its advantageous environment and inexpensive, clean hydropower for indoor cultivation, according to the outlet.