The economics of legal weed don't work

Ten years ago Colorado became the first state in the U.S. to fully legalize the recreational use of cannabis. Many other states followed, and several others already had sufficiently lax medical marijuana legislation, that now an estimated 40% of American adults can legally buy cannabis. Musicians, actors and sports stars have quickly jumped into the market with their own brands of weed, hoping to lure people who want to get high with a high-end product. Some of these—Willie Nelson, Snoop Dogg, Seth Rogen—are unsurprising. Others are less likely weedpreneurs, including Bella Thorne, Jaleel White—the actor who played Steve Urkel in Family Matters—and former NBA star Al Harrington. The newly legal industry was predicted to be a multibillion dollar business and a big tax revenue win for the states.

But it hasn’t been that simple, according to the authors of the new book Can Legal Weed Win?: The Blunt Realities of Cannabis Economics. The two economists from the University of California, Davis’s Department of Agricultural and Resource Economics found that the future of the legal cannabis business, hampered by regulation, competition and standard agricultural issues, is a bit hazy. TIME spoke to the authors, Daniel Sumner—who is also a former assistant secretary of economics at the U.S. Department of Agriculture—and Robin Goldstein, who is also the author of a controversial bestselling guide to wine, The Wine Trials.

This interview has been edited and condensed for clarity.

Not quite half of American adults can now buy weed legally. How’s business going?

Daniel Sumner: It’s been tough. There’s still a whole lot of illegal weed out there available to that same group of consumers, and most of them choose the illegal product because it’s half the price. Also, they have been consuming the product for the last 20 to 40 years; they’ve been dealing with this guy who knows a guy and they’re reasonably happy with the product.

Why is legal weed more expensive?

Sumner: To get a license to start with in most states you hire a consultant to help you through the regulation maze. And then you wait. In Vermont [which legalized recreational cannabis in 2018], for example, you’ve hired your consultants, you’ve gotten your venue for your retail store, you’ve purchased a greenhouse or rented one as your cannabis growing facility, and you’re still waiting. It’s been four years. Nobody has got an adult-use weed license in Vermont.

Robin Goldstein: In many states, the agencies are understaffed and the process is very lengthy, time-consuming and difficult for people to get through. So it can take years and years and in the meantime, they have investors, they’re burning cash and a lot of people have lost their money just by waiting.

Sumner: And at the farm level, the illegal producers really are, for the most part, off the grid. They’re not paying attention to labor regulations or pesticide regulations or other things that are the same for every farmer, not just for cannabis. That is a cost disadvantage for the legal guy. And that’s one where almost everybody would say, “We really ought to enforce that.” I wish we could figure out a way to enforce it on the illegal guys, but we haven’t figured that out yet.