A new study published in the American Journal of Agricultural Economics reveals that national cannabis legalization could significantly lower weed prices, especially in higher-cost U.S. markets.

Led by economist Barry Goodwin from North Carolina State University, the analysis suggests that legalizing cannabis nationwide would allow cheaper weed from states like California to flow into other markets, benefiting consumers across the country, reported Leafly.

California Sets The Standard For Cannabis Prices

Goodwin’s study tracked cannabis prices across 15 states with various degrees of legalization. The research found that California plays a leading role in setting cannabis prices nationwide. As one of the largest producers, California grows far more cannabis than it can consume, and this surplus often flows illegally into other states. Thus, prices in California have dropped significantly, with ounces of shake going for as low as $23 in Los Angeles this month.

“California’s influence on cannabis prices extends far beyond its borders,” the report notes. Much of the price integration between states can be attributed to the illegal trade of California, which competes with regulated markets and keeps values down in states where cannabis is still illegal.

Transporting cannabis across state lines is currently illegal at the federal level; the study suggests that national legalization would create a more cohesive market. “Policy changes that relax restrictions on interstate trade would likely further integrate markets, bringing higher-priced markets more in line to form a national cannabis market,” Goodwin explains.

Chart from Goodwin (2024)

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Further Impacts

For the investor community, these findings are crucial since the price crunch will be of consequence.

States that have legalized cannabis, like Oregon and Washington, already boast some of the lowest values in the country.

However, many states, particularly in the Midwest and Northeast, continue to experience much higher costs due to limited supply and market restrictions.

If national cannabis legalization were to pass, prices in these high-cost states could drop significantly. Currently, high transportation costs and legal risks prevent cannabis from fully equalizing across states. But legalization would allow markets to open up impacting competition dynamics in a profound manner.

Cover: AI generated image