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Young people 5x more likely to choose weed over cigarettes

Plus, the persistent illicit market in California, and more

Happy Thursday, everybody.

We’re sorry for the typo in yesterday’s newsletter (bonus points if you can find it and email us back). 

We also use some fun econ stuff to discuss how to move more consumers into the legal market. (Fun might be a strong word, but you get where we’re coming from.) 

Okay, let’s get to it. 

A 6.5-minute read from JB and JR

💡What’s the big deal?

Younger Americans are more than 5x more likely to choose weed over cigarettes

Driving the news: Young people like pot — a lot. That much isn’t surprising.

What is surprising, however, is just how much they like cannabis more than tobacco: Twenty-six percent of Americans aged 18-34 say they use cannabis, compared to just 5% for cigarettes, according to a Gallup poll and reported in Marijuana Moment.

That’s more than double since Gallup started polling the question in 2013.

Beyond that, 17% of all Americans said they smoked cannabis in the past week, compared to 12% who smoked cigarettes. 

Still, the Olds — those 55 and over — still prefer good ol’ tobacco, with 13% smoking cigarettes over cannabis in the past week. Overall, half of Americans used cannabis in the past year. 

Back up: It’s the same trend for beer, too. So it’s no wonder that tobacco companies like Altria are lobbying for cannabis reform

And other big alcohol and tobacco conglomerates, including Corona beermaker Constellation Brands which owns a big chunk of Canadian cannabis company Canopy Growth, see the writing on the wall. 

In recent years, they’ve poured money into research, joint ventures, and investments into cannabis companies. But numerous regulatory challenges persist for publicly traded companies trying to get exposure to cannabis. 

It’ll be a while before the alcohol and tobacco barbarians, so to speak, storm the cannabis industry gates.  

🚀 Quick hits

Florida lawmakers introduced a bill to cap THC potency in cannabis flower to 30%, and 60% for vapes. 

Massachusetts cannabis sales exceeded $1.56 billion in 2023, a 5% boost over the year prior. 

A Virginia House Committee advanced legislation that would legalize cannabis sales. A separate, similar bill with some key differences, is working its way through the state’s Senate, Marijuana Moment reports.

Crimes around illegal grows persist. There’s a better way

What happened: A recent massacre at an illegal cannabis grow sheds light on how these operations have become crime magnets.

Six people were found shot to death (and worse) at a grow operation in a “desolate stretch” of Southern California desert, The Los Angeles Times reports

Police say the violence likely isn’t linked to Mexican cartels and is perhaps something more local, but they’re still working through details.

What they’re saying: “It doesn’t matter what the product is. If there’s sufficient demand and the thing is valuable enough, you’ll get a black market,” Peter Hanink, a professor of sociology and criminology at Cal Poly Pomona, said. 

Back up: Cannabis has been legal in California since 2018, but the illicit market still comprises a huge chunk of the state’s total cannabis sales, thanks to what many industry insiders and experts say are too-high taxes, onerous licensing requirements, and the difficulties of dealing with the fledgling legal market in general.

But California isn’t alone.

Cultivated readers will recall that Maine is dealing with a similar problem — an explosion of Chinese-linked illegal grow operations all over the state.

Those worries have been elevated all the way to Capitol Hill, as lawmakers have asked the Department of Justice to, do, well, something

Our take: The more we see regulated cannabis markets evolve, the more we’ve come to believe that speed, consumer access, and a right-sized tax structure that captures the most revenue while minimizing negative consequences is the way to go for cannabis policy.

While it’s a laudable goal to provide opportunities for those who’ve been imprisoned or otherwise impacted by the War on Drugs and racialized policing, at some point, the legal market needs quality cannabis cheaply and conveniently available for consumers.

Any other goal is really just window dressing without that.

Trying to use legalization as a vehicle to lift people out of poverty while they lose money competing with illicit sellers is an untenable situation, as we’ve seen in New York

Many states try to reinvent the wheel with their legalization framework. And, usually with the best of intentions, put far too many restrictions in place on who’s able to sell cannabis in the first place, and how they’re supposed to get the licenses. 

Regulators, mount up: These too-strict regulations are what allows the illicit market to thrive. Regulations add cost and complexity, while creating opportunity for those who want to risk prosecution.

Studies show that higher prices are the key driver of consumers substituting legal cannabis for the illegal stuff — even though most consumers do prefer to buy legal. 

Those higher prices are artificial constructs of too much red tape. The demand for legal cannabis, in other words, is elastic, given that consumers can easily switch to cheaper, illegal products. 

But we understand that these things take time, often years, before the market structure starts to resemble something logical. Cutting down that time, therefore, should be an important goal we hold policy-makers and regulators accountable for.

On the other hand: It’s also disingenuous for legalization opponents to point to these illicit markets as a failure of legalization, which, if you follow anti-legalization groups like Smarter Approaches to Marijuana, you’ll see is a frequent talking point. 

They’re wrong.

It’s not a failure of legalization in general, it’s a failure to learn from mistakes and update policy accordingly. Cannabis policy is alive and breathing, and luckily, we have dozens of self-contained cannabis markets in legal states where we can see what has and hasn’t worked. 

Good cannabis policy can erode illicit markets over time — just look at Canada, though it’s still far from perfect (or even very good, but that’s a different story). 

We’d call for cutting taxes to a more reasonable rate, reducing the barriers to entry on licensing and compliance, and getting more cannabis into legal markets by encouraging more market participation with less regulation. That’s good for all stakeholders. 

Dive further: Read “Can Legal Weed Win?” for how economists think about this stuff. It’s useful and explains much of what we’re seeing play out.  


👏 People moves

Marie Zhang is taking over as Chief Operating Officer of Trulieve.

Do you have an announcement about a new hire or important promotion? Let us know.

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