cover of episode 608. Cannabis Is Booming, So Why Isn’t Anyone Getting Rich?

608. Cannabis Is Booming, So Why Isn’t Anyone Getting Rich?

2024/10/24

Freakonomics Radio

Key Insights

Why isn't anyone getting rich in the booming cannabis industry?

Heavy regulations, high taxes, and competition from illegal weed shops are major obstacles.

Why is the legal cannabis industry struggling despite high demand?

Federal illegality restricts access to traditional financing, banking, and cross-state sales, while state regulations and taxes are burdensome.

Why are legal cannabis businesses facing high taxes?

IRS Rule 280E prevents deductions for business expenses beyond the cost of the cannabis itself.

Why is the illegal cannabis market thriving?

Illegal operations avoid licensing fees, testing costs, and taxes, making their products cheaper and more competitive.

Why are social equity programs in cannabis facing challenges?

Politics and limited licenses often favor well-connected applicants over those with merit.

Why are hemp-derived THC products popular despite cannabis being illegal in some states?

The 2018 Farm Bill legalized hemp with less than 0.3% THC, creating a loophole for THC-infused products.

Why might cannabis replace alcohol in the future?

Cannabis beverages offer a social experience similar to alcohol without the negative effects like aggression or drunk driving.

Chapters

The cannabis industry has seen rapid growth but faces significant challenges, including regulatory complexities, high taxes, and competition from illegal markets.

Cannabis is fully legal in 24 states and medical use in 14 more.
The industry employs half a million people and generates $30 billion annually.
California's largest legal cannabis company, once valued at $3 billion, filed for bankruptcy.

Shownotes Transcript

There are a lot of reasons, including heavy regulations, high taxes, and competition from illegal weed shops. Most operators are losing money and waiting for Washington to get out of the way. In the meantime, it’s not that easy being green. (Part two of a four-part series).)

SOURCES:
Jon Caulkins), professor of operations research and public policy at Carnegie Mellon University.
Adam Goers), senior vice president of The Cannabist Company and chairperson of the Coalition for Cannabis Scheduling Reform.
Precious Osagie-Erese), founder and C.E.O. of Precious Canna Co.
Nikesh Patel), C.E.O. of Mammoth Distribution.
Nikesh Patel), director of the San Francisco Office of Cannabis.
Tom Standage), deputy editor of The Economist.
RESOURCES:
"Most Americans Favor Legalizing Marijuana for Medical, Recreational Use)," (Pew Research Center, 2024).
"Whitney Economics U.S. Legal Cannabis Forecast - 2024 - 2035)," by Beau Whitney (*Whitney Economics, *2024).
"Beer Sellers Use a Loophole to Break Into Weed Drinks Market)," by Redd Brown (*Bloomberg, *2024).
"Cannabis Producer Seeks Boston Beer Merger)," by Lauren Thomas (*The Wall Street Journal, *2024).
"California's 'Apple Store of Weed' Declares Bankruptcy With $410M in Debt)," by Lester Black (*SFGate, *2024).
"Is the State Democratic Chair Influencing Who Can Sell Legal Weed in this N.J. City?)" by Jelani Gibson (*NJ.com, *2023).
"When Prohibition Works: Comparing Fireworks and Cannabis Regulations, Markets, and Harms)," by Jonathan P. Caulkins and Kristina Vaia Reimer (*International Journal of Drug Policy, *2023).
"Did Minnesota Accidentally Legalize Weed?)" by Paul Demko (*Politico, *2022).
EXTRAS:
"Is America Switching From Booze to Weed?)" by *Freakonomics Radio *(2024).
"The Economics of Sports Gambling)," by *Freakonomics Radio *(2019).