Good morning.
A reminder that yesterday was the deadline for all parties to file their final briefs in the high-stakes rescheduling proceedings. No firm timeline for the judge’s final ruling yet.
Let’s get to it.
-JB, JR
Today’s newsletter is 1,117 words or about a 9-minute read.
THIS NEWSLETTER MADE POSSIBLE BY:
💡 What’s the big deal?
LEGALIZE IT
Federal cannabis legalization could raise $57.9 billion over a decade
What happened: Yale’s Budget Lab estimates that federal legalization paired with a potency-based excise tax of $0.00625 per milligram of THC would generate $57.9 billion in federal revenue over ten years, assuming no additional states change their own cannabis laws.
If every remaining state legalized alongside the federal government, that figure nearly doubles to $111.3 billion.
Why it matters: The model treats cannabis like alcohol and tobacco, taxing potency rather than retail price, and folds in a separate mechanism: pulling activity out of the illicit market.
Yale pegs the current formal recreational market at roughly $25 billion (2024), with the illicit market still absorbing about 75% of total U.S. cannabis activity, some $100 billion combined, per Whitney Economics data cited in the report.
Section 280E, the tax code provision barring cannabis businesses from deducting ordinary expenses, would go away under either scenario modeled, though Yale didn't quantify that effect due to a lack of data.
What's next: The revenue keeps compounding well past the initial ten-year window.
Yale projects the 2046-55 decade would bring in $258.5 billion in federal excise revenue under full legalization, more than double the $111.3 billion projected for 2026-35.
The estimates assume implementation starting in 2027 and depend heavily on how much illicit-market activity actually converts to the legal sector, something Yale flags as a major source of uncertainty.
The final word: This is a handy number showing what’s at stake when we talk about federal cannabis reform in the US. Billions of dollars of tax revenue, jobs, and economic growth.
-JB
📣 Quotable
“I don't know the details of it, but let's talk later,” Texas Attorney General and Republican nominee for Senate Ken Paxton said of the state’s hemp-derived THC ban. Paxton has long been an opponent of THC and cannabis reform in the state more broadly.
His opponent, Democratic nominee James Talarico, has hit the press circuit with full-throated support for legalization. Republican operatives told Cultivated last week that the THC issue could help “at the margins,” for a race likely to be decided at the margins.
💭 Thought bubble
Here’s a free econ Phd thesis idea for any grad students out there who read Cultivated:
The cheapest ounce of marijuana in Ohio is $112 while the cheapest ounce in Michigan is $6.99, according to a new analysis. Of course, that could be promotional pricing, but the point remains: There are vast price differences for the exact same product across state lines.
Nothing sums up the regulatory complexity of cannabis in the U.S. quite like that price disparity between neighboring states. I’m not sure there’s any modern commodity really like it, save for post-Prohibition alcohol, where each state market has its own regulations, tax regime, demand profile, licensing regime, marketing restrictions… I could go on. Plus, cannabis can’t cross state lines.
In normal markets, supply is liquid: it wants to move from low prices to high. If that interstate barrier were removed, prices would quickly normalize.
Until then, Michigan operators are forced to contend with rapid price compression, which has already led to the failure of multiple businesses and could be an ominous portent for other state markets. Plus, Michigan lawmakers want to add another tax on cannabis to fund road repairs. That new tax will land directly on these operators.
-JB
📊 Insights
LIT ALERTS
How Challenger Brands Break the MSO Stranglehold in Pennsylvania
Pennsylvania is the East Coast's most overlooked market, largely because it operates a medical-only regime.
But, the Keystone State generates huge sales volumes that rival mature recreational states.
Here's the problem: only 3 out of the top 20 flower brands are non-MSO entities. GTI, Curaleaf, Cresco, TerrAscend, Trulieve, Jushi, and Verano have locked down the market through vertical integration, massive canopy, and guaranteed shelf placement.
Yet some brands are breaking through.
Terrapin proves local heritage and affordable pricing can survive MSO pressure. Flower Foundry shows boutique genetics still matter. And Double Bear's cross-category expansion is building resilience that single-category players simply can't match.
For operators navigating Pennsylvania's barriers to entry, understanding how these challengers are winning is essential.
⏩ Quick hits
Georgia set to approve cannabis delivery by mail
Georgia's Access to Medical Cannabis Commission is set to vote in September on a rule allowing mail and courier delivery of cannabis products to card-carrying patients. The move follows a 22% jump in registered patients since expanded THC limits and leaf and vape products took effect in July.
Connecticut scraps its THC potency tax for a flat 10.75% rate
Starting Oct. 1, Connecticut replaces its THC-based cannabis tax with a flat 10.75% excise tax on gross receipts, ending a system that hit high-potency edibles and concentrates hardest. The state's 6.35% sales tax and 3% municipal tax stay in place, and medical sales remain exempt.
Massachusetts flags 13 cannabis flower products for inaccurate THC labels
The Massachusetts Cannabis Control Commission audited 63 flower products from 62 producers and found 13 fell outside the acceptable THC range, triggering recalls, relabeling, retesting, or destruction. Regulators hold a public hearing Aug. 25 on testing rules before a broader regulatory update begins in September.
Maryland weighs turning cannabis equity office into permanent statewide hub
A new report from Maryland's Department of Service and Equity Management (DoSEM) recommends repurposing the state's Office of Social Equity, created under the 2023 Cannabis Reform Act to run social equity licensing rounds, into a permanent, statewide equity coordination office once that licensing work wraps up.
👨⚖️ Lawsuits
Judge lets Virginia's THC hemp ban take effect ⚖️
A Richmond judge denied a bid by seven hemp businesses to block Virginia's new law capping hemp products at 2 milligrams of total THC per package, letting it take effect at midnight Aug. 15. The law, tucked into the state budget, closes the "25:1 CBD-to-THC ratio" exception that had let many intoxicating hemp products stay legal.
🧪 Science & research
Retail cannabis legalization boosted farm jobs 9%
A Texas Tech working paper found retail legalization increased agricultural employment about 9% in legalizing states, with no significant bump in wages. The gains were concentrated almost entirely in states that legalized in 2017 and 2019, states that came later to the party saw little to no effect.
📰 What we’re reading
Rachel Bell, Curator of High Art | New Yorker