The cannabis market is changing. What Virginia can learn from that.

If things had gone a different way in 2021, Virginia would now have cannabis stores across the state.

If things had gone a different way in 2024, Virginia would now be gearing up for those cannabis stores.

Of course, things did not go a different way. In 2021, Democrats, who had legalized personal possession of cannabis and planned to come back to Richmond the following year to legalize retail sales, lost control of the House of Delegates.

By 2024, when Democrats were back in control of the House, the party eagerly advanced legislation to legalize retail cannabis, only to meet the veto pen of Gov. Glenn Youngkin, the Republican who had also won in that 2021 election.

The practical effect of this is twofold. First, cannabis will be one of many issues before the candidates for governor in 2025 (as well as legislative candidates). Second, given the current politics of the matter, it would probably require both a Democratic governor and a Democratic General Assembly to enact retail cannabis.

So far, 24 states have legalized recreational cannabis. However, Virginia is the only one where only personal possession is legal, not retail sales (some haven’t started retail sales yet, but have still legalized it). Some of those 23 states where retail sales have been legalized are ones we’d certainly call Republican states — places such as Missouri and Montana — but only one of those 23 states saw retail marijuana legalized through the signature of a Republican governor. That was Phil Scott of Vermont, who certainly isn’t the model of a conventional Republican governor. In most of the other states (and all of the states that lean to the right) retail cannabis was legalized through a referendum, a mechanism to enact laws that Virginia doesn’t have (and which underscores a point I’ve made before — that there are a certain number of Republican voters who are quite fine with cannabis even if Republican politicians are more skittish).

Even if Democrats do manage to hold the House of Delegates and win the governorship next year, the reality is it will probably be 2027 before we see retail cannabis in Virginia. That calendar would look something like this: The next governor takes office in January 2026 and signs into law a bill passed by the General Assembly that would take effect in July 2026, as new laws typically do. However, every iteration of previous retail bills in Virginia envisioned a lead time to set up the rules of that new market and allow localities to hold referendums to opt out if they chose to, much as some don’t allow liquor by the drink. We’d probably be looking at January 2027 — or possibly July 2027 — as a start date.

If the next governor is a Republican, or if Republicans win back the House of Delegates next year, and those Republicans aren’t of a mind to allow retail sales, then Virginia would have to wait longer — conceivably until the next governor after that, who would be elected in 2029 and take office in 2030.

For those who think legalizing weed stores is a bad idea, delays of that sort are just fine. For those who think Virginia should adjust its laws to accommodate reality, that’s a lot of money in the meantime going into the pockets of black market dealers — and not being taxed. How big is that market? Since by definition it’s unlicensed, nobody knows; but New Frontier Data, which studies cannabis, last year estimated the figure at $2.4 billion. Earlier this year, former Republican Del. Greg Habeeb, who represents the Virginia Cannabis Association, upped that figure to $3 billion.

If even the lesser of those two figures is true, that would still be bigger than Virginia’s biggest legal agricultural commodity — broiler chickens accounted for $1.6 billion of cash receipts in 2022, according to the Virginia Department of Agriculture and Consumer Services.

Meanwhile, the world has a way of moving on, regardless of what politicians do or don’t do. Four news items recently have helped highlight the changing landscape of cannabis, all of which policymakers in Virginia might find of interest regardless of how they stand on the issue:

1) More people now use cannabis on a regular basis than use alcohol

The key word here is “regular.” More people still drink alcohol than light up a joint (or chew an edible), but the most recent U.S. National Survey on Drug Use and Health zeroed in on those “regular” users. Specifically, those who use either alcohol or cannabis on a daily or near-daily basis.

Pot use bottomed out in 1992. Some might point out that corresponds with the “Just Say No” campaign popularized by first lady Nancy Reagan during the 1980s, a campaign that lingered on into the early 1990s. Whatever the reason, in 1992, previous studies have shown that 10 times as many people used alcohol on a daily or near-daily basis as cannabis. (In scientific lingo, that’s abbreviated as DND, which confused me at first because the first thing I think of when I see DND is the fantasy board game Dungeons and Dragons.)

Cannabis has been gaining on alcohol ever since, with a steep rise in the past decade that corresponds to when states have been legalizing cannabis. The most recent study, which has data from 2022, shows cannabis passing alcohol for the first time.

Even aside from those daily or near-daily users, less frequent cannabis users are more likely to use cannabis than less frequent alcohol users. In 2022, the median drinker used alcohol four or five days a month, while the median cannabis user turned to weed 15 to 16 days a month. That paints a picture of someone who cracks open a beer or pops the cork on a bottle of wine every weekend versus someone who tokes up about half the month. The study, authored by Jonathan Caulkin of Carnegie Mellon University, emphasizes that we can’t attribute the surge in cannabis use completely to legal changes. We could simply be seeing “manifestations of changes in underlying culture and attitudes,” he writes. However, it’s clear he says, that “cannabis use now appears to be on a fundamentally different scale than it was before legalization.”

Thought experiment: 54% of Americans now live in a state where cannabis is legal. How high — no pun intended — might these figures go as that percentage climbs toward 100%?

2) Michigan now tops California as the nation’s biggest retail cannabis market

If your first thought when you think about a cannabis user is some pot-smoking California (or Colorado) hippie, it’s time for an attitude adjustment. The state that now sells the highest number of cannabis products is in the Rust Belt: Michigan, a state that’s only been in the retail weed business for four and a half years.

The key word here is “products.” California generates more dollars through its cannabis sales (more than $1 billion worth in the first three months of 2024 alone versus $786 million in Michigan), but Michigan sells more actual cannabis. That speaks to several things that Virginia ought to keep in mind as it ponders legalization. California’s cannabis costs more because the state has high taxes and lots of regulations. That also opens the door to a bigger black market because unlicensed dealers don’t have to worry about such things. Michigan, meanwhile, has one of the lowest cannabis taxes in the country: 10% versus 15% in California. For what it’s worth, the tax rate in the cannabis bill that Youngkin vetoed was 8%, lower than any other state except Rhode Island at 6% and Illinois at 7%, according to the Tax Foundation , although some states tax by the ounce or the milligrams of the chemical THC rather than the sale price. “As a result,” writes the San Francisco news site SFGate , “legal cannabis is affordable and convenient for customers.” However …

3) Legalization in Michigan has increased the size of the black market, not decreased it

In theory, lower prices for licensed weed should help drive out unlicensed dealers. But in Michigan, exactly the opposite has happened. Michigan State Police say the black market there is bigger than ever. Lt. Tom Kish of the Marijuana and Tobacco Investigation Section says plant seizures in Michigan have gone up since legalization, and that seizures in 2024 are running ahead of this time in 2023 — 16,000 plants last year, 9,000 so far this year.

Legalization has helped remove some of the stigma around cannabis and, from a practical standpoint, made it easier to sell. Kish says several other things have driven up the size of the black market in Michigan, two of which are unique to that state. The first is a court ruling that has reduced penalties for illegal grows. The second is an inconsistency in the law. Michigan allows people to grow up to 12 plants. Each plant can produce a half-pound to a pound of pot, so in Michigan that’s six to 12 pounds. However, the law limits people to personal possession of 10 ounces in their home. “Do you think people are just throwing it away?” Kish asks. Of course not, he says, they’re selling it. Michigan also has seen a problem that other legal cannabis states often do, as well: The state also has seen a proliferation of large illicit growing sites, some of whom have tried to sneak their product into the legal market by making it cheaper than licensed grows.

Here in Virginia, cannabis advocates said that legal retail sales were necessary to reduce the black market; but when Youngkin vetoed the legalization bill, he warned the legalization would increase the size of the unlicensed market instead. “Your governor is right,” Kish said. “It will 100 percent increase the black market.”

Meanwhile, Kish also points out something that pro-legalization advocates in Virginia do: Black market marijuana often isn’t safe. Illicit growers are rushing to produce a cash crop and often aren’t concerned with the details, he says. Michigan police are finding many of those illegal grows are full of mold and pesticides that make the weed unsafe to consume, or even be around. Police now wear personal protective gear during raids, he says. We’ve seen something similar here in Virginia. When a series of “adult share” stores briefly opened across the western part of Virginia, we at Cardinal sent one of the samples to the lab at Virginia Commonwealth University, which found the joint moldy and a health hazard.

Virginia already avoids one Michigan problem: The Old Dominion limits people to four plants apiece. And we don’t have that court ruling that Michigan did that has reduced penalties for unlicensed grows. However, Michigan does pose a question for Virginia: Is there a way to both legalize retail sales and reduce the black market, or do they go hand in hand?

4) Cannabis prices are going down

That’s good news if you’re a consumer; not good news if you’re a seller or investor. The reason is the age-old rule of supply and demand: Supply is up; and while demand is up, too, the markets are oversupplied. Politico recently looked at the collapsing market in Colorado, one of the first two states (with Washington) to legalize weed: “Colorado’s weed market is coming down hard and it’s making other states nervous.” Of note: Colorado’s tax collections from cannabis are down 30% from just two years ago. Part of that is unique to Colorado: As one of the first states to legalize cannabis, it benefited from “cannabis tourism.” Now that more states have legalized jazz cabbage (my favorite euphemism), that’s significantly reduced those sales.

However, there are other factors involved, too, including what Politico calls “the spread of cheap, largely unregulated intoxicating hemp-derived products.” This highlights something not always well understood: Hemp and marijuana are all the same plant; they just have different levels of THC, the chemical that produces the buzz. In general, you can’t get high from smoking hemp, but there is some THC in some hemp, and some are using it to produce “intoxicating hemp” products that have challenged regulators and pitted hemp interests against marijuana interests in the so-called “farm bill” that Congress hopes to pass this year.

Ideally, that will get sorted out before October, but many of these other issues will remain, which is why Cardinal News has partnered with Roanoke College to put on a conference about cannabis on Oct. 15 in Salem. We’ll be announcing the full list of speakers soon, but the goal is to present a wide range of viewpoints as we address the political, economic, health and legal aspects of cannabis. For instance, on our political panel, we have legislators who have voted both for and against legal cannabis (state Sen. Aaron Rouse, D-Virginia Beach; Del. Paul Krizek, D-Fairfax County; Del. Chris Obenshain, R-Montgomery County; state Sen. Mark Peake, R-Lynchburg; Del. Michael Webert, R-Fauquier County). We have information about sponsorships and early bird registrations available now. To take advantage of a $25 discount off the $150 ticket, use the promo code “early bird” before Aug. 1.

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