A new Nevada report confirms that the home of Sin City is in the midst of a multiyear downturn in cannabis trade, as are many other states that have seen marijuana sales slump since the end of the COVID-19 pandemic and quarantine-era government stimulus packages, but it also predicts a brighter future that could mean a shrinking illegal market and growth in legal cannabis businesses in the long term.
The report, issued by the Nevada Cannabis Compliance Commission and written by consulting firm TPMA, said legal marijuana sales in the state have seen a “notable decline since the industry's 2021 peak.”
“Following the overall market trend, monthly sales peaked in April 2021 before declining slowly and plateauing recently,” TPMA reported. “While sales appear to be plateauing in the short term, forecasts indicate the trend is expected to reverse and growth will continue through 2030, with consumer numbers also expected to increase.”
Shrinking market
Monthly sales were about $95 million in April three years ago, but have since plummeted to about $68 million as of September 2023, according to the report.
Medical marijuana sales typically account for less than 1% of the total cannabis market, but the number of registered medical patients also fell 14% to 12,169.
Taxable cannabis sales also haven't grown significantly since then, according to data from the Nevada Department of Taxation. Combined adult-use and medical marijuana sales in June were $69.3 million, with the monthly average in the $70 million range. After the market hit a sales low of $54.9 million in December 2023, sales jumped to $82.9 million in February.
One of the main challenges, according to the report, is that Nevada still has a large illegal cannabis market, estimated to be worth about $242 million to $370 million, while legal cannabis sales in the state are expected to reach $862 million in 2022.
According to the TPMA report, the number of licensed marijuana businesses across Nevada will decline 12% from 2021 to 2023, falling to 665 from a high of 754 in 2022. Declines were reported in all license categories except retail dispensaries, which saw an increase from 84 licensed retail businesses in 2021 to 100 in 2023.
Despite the decline in cultivators, production continues to grow. The remaining cultivators are ramping up production, and the state is producing more cannabis product than ever before, despite a shrinking market, according to the TPMA report. Average monthly harvest volumes in 2022 and 2023 are “nearly double” those in 2020 and 2021, reaching more than 4 million pounds last year.
The estimated total cannabis demand in Nevada is between 3.2 million and 4.4 million pounds per year, according to the report.
National unrest?
The report also made several policy recommendations to Nevada regulators, before veering off into the inaccurate topic of federal marijuana reform and the Drug Enforcement Administration's ongoing reclassification process, which could move cannabis from Schedule I to Schedule III.
The TPMA report authors appear to confuse “deregulation,” the complete removal of marijuana from the controlled substances list, with “federal legalization,” which several cannabis lawyers have noted is inaccurate, with the process of reclassifying controlled substances.
Specifically, the report suggests that rescheduling would create a new “national cannabis market,” lead to the “elimination of state lines” for marijuana businesses and cause an “explosion of interstate commerce,” which lawyers say is not true.
“The Compliance Board appears to be equating the current proposed changes to cannabis regulations with a complete lifting of restrictions, which are not the same thing at all,” said Jason Holst, a California-based cannabis lawyer and past president of the International Cannabis Lawyers Association.
“There is currently no serious movement toward deregulating marijuana, which would decriminalize marijuana at the federal level,” Holst said. “Most of the committee's analysis is unrelated to how the legal landscape of the national marijuana market is actually going to change. Ironically, the committee doesn't even mention the one substantial impact most people agree deregulation would have on the current state market: the elimination of the federal tax burden imposed by IRS Code 280E.”
In an emailed statement, the Nevada CCB noted that it was TPMA, not the commission, that wrote the report, but that commission staff had “communicated with TPMA to clarify that the section on legalization reflects a point in time, not an ongoing national discussion.”
The agency spokesperson also said, “We conducted our own independent study earlier this year, which has been the primary source of information on rescheduling/de-scheduling federal budgets for CCB.”
TPMA did not immediately respond to a request for comment Tuesday.
TPMA_5550 – NV Cannabis Market Analysis
