Good morning.
Halfway through the week. Phew.
Let’s get to it.
-JB, JR, ZH
Today’s newsletter is 1,070 words or about an 8-minute read.
THIS NEWSLETTER MADE POSSIBLE BY:
💡 What’s the big deal?
TAXES
📈 High cannabis taxes can push consumers back to the illicit market
Driving the news: About a month ago, I wrote in this newsletter that the New York Times editorial board's argument for using high taxes to discourage cannabis use missed a fundamental flaw: there's no real illicit tobacco market the way there's a deeply entrenched illicit cannabis market.
Higher taxes don't reduce consumption, they just push consumers back underground.
What happened: This month, researchers at Ohio State's Drug Enforcement and Policy Center put data behind it.
Their new report found no apparent correlation between cannabis tax rates and usage across 14 legal states. California, with one of the most heavily taxed legal cannabis markets in the U.S. with one of the most persistent illicit markets, is the sharpest illustration of this though the study measures usage rates rather than illicit market share directly.
Why it matters: The finding fits a broader principle economists have long held: heavily taxing elastic goods, those where consumers are price-sensitive and substitutes exist, is akin to wealth destruction or what economists call “deadweight” loss. Put more simply, it means that legal, taxable transactions that would otherwise occur at a lower price point to the consumer, won’t.
When buyers can go elsewhere, they do. In cannabis, "elsewhere" is the illicit market, which means high taxes don't just underperform on revenue but actively route consumers back to unregulated supply chains. It's the worst of both outcomes.
The final word: If suppressing cannabis use is a policy goal, then higher taxes are clearly a poor way to do so (and to us, the jury’s out on whether that is a useful goal of legal cannabis programs at all).
The only thing high rates accomplish is subsidizing the illicit market and underperforming on state revenue.
States still treating the tax lever as a public health tool are solving the wrong problem. The better policy framework ties moderate rates with ramped up enforcement of unlicensed operators, and evidence-based consumer education that helps people make better decisions.
-JB
📣 Quotable
"It's become a political game for [Gov. Ron] DeSantis. Shame on him, a guy who apparently backs veterans and access to different types of medicines, is limiting the ability of a market to actually gain access to a medicine that can be tremendously helpful to people," said Verano Chief Investment Officer Aaron Miles during Tuesday morning's chat with Jeremy and Jay.
Check out the link below to hear more about Verano's Q4 results and the company's $195 million refinancing deal. $VRNO ( ▲ 5.49% )
⏩ Quick hits
The federal government will continue to screen employees for THC as per a rule that was published in the Federal Register on Mar. 13, despite the president's executive order last year to reschedule cannabis.
Pennsylvania lawmakers amended SB 49, which would establish a Cannabis Control Board to oversee both cannabis and hemp products under a single regulatory structure, to align the bill with the federal hemp ban set to take effect Nov. 12, 2026. The move is a preemptive effort to close the loopholes created by the 2018 Farm Bill that allowed intoxicating hemp-derived products to flood the market without state oversight.
New York Cannabis Industry trade groups joined forces to call on Gov. Kathy Hochul to implement seven recommendations that they say would help create a "legal and equitable market."
The Massachusetts Executive Office of Economic Development awarded 194 grants totalling $28.8 million through its Cannabis Social Equity Grant program during the course of fiscal year 2026.
🥐 Join Us in Atlantic City: Cultivated @ MJ Unpacked
We’ll be at MJ Unpacked this May at the Hard Rock Atlantic City — and we want Cultivated readers there with us.
When you register using our promo code, you’ll get:
20% off your ticket by using cultivated20 at check out
An invite to a Cultivated readers-only breakfast
Coffee, conversation, and connections with operators, founders, and investors
The breakfast is sponsored by Aquinnah Capital Partners and will be a relaxed kickoff to the event with the Cultivated community.
We hope to see you there.
💰 Earnings roundup
Cannabis earnings season continues:
High Tide reported a net loss of CAD $352,000 on $178.3 million in revenue for the quarter that ended Jan. 31. $HITI ( ▲ 6.23% )
Vireo Growth reported a $20.4 million loss on $104.5 million in revenue for Q4 of 2025. $VREOF ( ▼ 0.71% )
⚖️ Lawsuits
A federal judge ordered American Patriot Brands' former CFO to pay more than $1 million to the SEC amid allegations that he misled investors about the health of his cannabis company.
🔬 Science & research
A new study examining cannabis legalization across all 50 states found that medical cannabis laws are associated with reduced property crime, while recreational laws are associated with reduced violent crime. The research, published in Economic Modelling, used difference-in-differences modeling and found no robust evidence that legalization increases property crime once state-specific trends are accounted for. The study also notes that cannabis laws across states are heterogenous, so they can’t all be lumped together. Read the full study.
A new systematic review of 54 randomized controlled trials published in The Lancet found little evidence supporting cannabinoids as a treatment for anxiety, PTSD, psychotic disorders, or opioid use disorder, with modest benefits identified only for insomnia, Tourette's syndrome, autism, and cannabis use disorder itself. Read the full study here.
😜 One fun thing
California Gov. Gavin Newsom declared that cannabis was legal after Donald Trump mistakenly referred to him as "President of the United States."
📰 What we’re reading
How a Billionaire Friend Changes Trump's Mind About Pot | The Free Press