Weird: Colorado’s Legal Pot Market Is Crashing

I’ll not again that I am not against legalized marijuana. I don’t do it, but, if others want to, have at it. It’s certainly not as bad a drug as alcohol, though people do seem to be using it in some form or fashion way more throughout the day, kinda like an alcoholic sneaking sips. But, that’s their problem. But, what happens when government gets too heavily involved?

Colorado’s Weed Market Is Coming Down Hard and It’s Making Other States Nervous

On Jan. 1, 2014, Iraq War veteran Sean Azzariti made headlines worldwide as the first person in the U.S. to buy legal weed.

More than 10 years later, 3D Cannabis, the dispensary in Denver’s Elyria-Swansea neighborhood where the historic purchase was made, displays a makeshift sign announcing it is “temporarily closed.” The windows and doors on the side of the building have been boarded up. Plastic bags, discarded coffee cups and other trash collect in the corners of the abandoned parking lot.

The dismal state of the historic site is a fitting symbol of the plight of Colorado’s cannabis market. What once was a success story has now left a trail of failed businesses and cash-strapped entrepreneurs in its wake. Regulatory burdens, an oversaturated market and increasing competition from nearby states have all landed major blows, leaving other states with newer marijuana markets scrambling to avoid the same mistakes.

In 2020, the market soared to $2.2 billion. But just three years later, sales had plummeted to $1.5 billion, leading to layoffs, closures and downsizing. The market downturn has spelled trouble for state finances too: Colorado took in just $282 million in cannabis tax revenues in the last fiscal year, down more than 30 percent from two years earlier.

There are lots of issues, but, this is all a cautionary tale of how government doesn’t know how to run business. They artificially jacked the price up too high, placed too many burdens on companies, and failed to adapt. There are lots of reports that roughly 50% of the weed in states is illegally grown and sold. You have citizens allowed to grow small amounts for their own use. Why wouldn’t they? They counted on people coming from other states even with the knowledge that other states were going to pass their own legalization laws. They slapped on so many taxes that it was cheaper to buy from the black market. They gave out too many licenses, over-saturating the market.

Marijuana’s continued federal illegality is another added cost.

“280E is the biggest problem with the industry by far,” Gamet says, citing a federal tax code that prevents cannabis businesses from taking typical business deductions. “I’m very familiar with that because I’ve been audited every year since 2014. It’s a lot of lawyer expenses.”

Well, there is that. It’s still illegal federally, and Los Federales will treat it as such. It’s also a federal offense to cross state borders with marijuana.

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