top of page

Ten Years After Legalization, Colorado's Boom Times Are Over

The once robust and lucrative marijuana market has hit hard times in the first state to legalize adult-use cannabis.


According to a new report, the high economic times for the recreational marijuana industry in the pioneering state of Colorado may be over. In 2012, the Mile High State became the first to legalize adult-use cannabis in the country. Controversial and trailblazing, it was an exciting and uncertain time for the place known for its sunshine and picturesque mountain vistas.


Dave Malone, Co-Founder and Chief Creative Officer for Denver-based Green Dot Labs, compared those early days to that of bushwhacking through the wilderness at night. As Malone says, "We've been in the dark with a torch in our left hand and a machete in the right."


However, the market is now maturing. Some of the early companies succeeded and flourished throughout the decade. At the same time, others failed or were bought out by the more prominent players in the industry.


During the shutdowns brought on by the COVID-19 pandemic, many Colorado marijuana businesses flourished, recording some of their best sales months ever. Nevertheless, that was just a brief respite from the inevitable.


Much like many sectors in the current U.S. economy, the cannabis industry is experiencing something no one thought possible this early into its young existence - a substantial regression. Furthermore, much like it led the fight to begin the legalization revolution, Colorado is also on the frontlines of this not-so-fun economic downturn.


Many Colorado marijuana companies have seen a steady decline in month-over-month sales figures, primarily due to significantly lower wholesale flower prices, since those early days following legalization and the financial windfall brought on by the pandemic boost.


Simply put, there are too many growers cultivating plants, and the market is saturated. It has gotten to the point where industry insiders and experts have called for an unprecedented halt to issuing new cultivation licenses in the state.


Additionally, Colorado is no longer the only saloon in town, so to speak. For the longest time, there was no competition, as it was the only legal adult-use market in the region. However, now with more than 25 states legalizing recreational cannabis, including the border states of Arizona and New Mexico, consumers have many more options at their disposal regarding where and from whom they buy their marijuana.


Malone goes on to share, "It's been a very tough time in the industry this year. The market is down from its highs. It's a real meat grinder right now."


"It's been a very tough time in the industry this year. The market is down from its highs. It's a real meat grinder right now."

- Dave Malone, Co-Founder and Chief Creative Officer, Green Dot Labs


As the first state to end prohibition and attempt to create America's first regulated adult-use cannabis market, Colorado was given no roadmap on how to responsibly and successfully create an entirely new industry. However, for the most part, lawmakers and business leaders did a remarkable job.


Dan Pabon, an original sponsor of the first bill that ultimately led to legalization in Colorado, served as a state representative for eight years beginning in 2011. He now serves as general counsel for Denver-based Schwazze, a vertically integrated cannabis company.


He measures the overall success of the Colorado experience with marijuana by how many other newly legalized state markets have succeeded using a similar model to Colorado's.


"Colorado's model has been wildly successful. And I say that because most of the states that have adopted recreational cannabis into their system have used, if not in whole, in part Colorado's rules and regulations," he says.


"Colorado's model has been wildly successful. And I say that because most of the states that have adopted recreational cannabis into their system have used, if not in whole, in part Colorado's rules and regulations."

- Dan Pabon, General Counsel, Schwazze


However, he and other industry vets admit there have been mistakes along the way. Another key individual who was there from the beginning is Joe Hodas, Chief Marketing Officer at Boulder-based Wana Brands. His early lobbying efforts assisted in helping shape regulations for the burgeoning market, and he has been helping marijuana companies navigate the Colorado marketplace from its inception.


He believes two critical failures from the outset have produced some of the current economic woes. First, if he had a time machine and could go back to 2012, he would have made the tax rules final. Currently, regulators and politicians can add layer upon layer of additional taxes on the industry.


This action is short-sighted and potentially catastrophic for long-term viability. Hodas shares, "People don't seem to understand that if we continue to add taxes and make legal cannabis more expensive, consumers will continue to (seek out) the black market."


"People don't seem to understand that if we continue to add taxes and make legal cannabis more expensive, consumers will continue to (seek out) the black market."

- Joe Hodas, Chief Marketing Officer, Wana Brands


The second misstep, in his estimation, was a lack of focus on including crucial social equity elements in the core structure of the business license aspect. As a result, he adds, "We didn't give an opportunity to people of color or those who have suffered at the hands of the war on drugs to appropriately get involved in the industry."


Additionally, Pabon thinks the state missed an opportunity for sustained success by not creating a fund for would-be entrepreneurs interested in getting into the industry. Instead, many fell prey to high-interest predatory lenders and unsuccessful business deals.


"A lot of that could have been avoided if the state would have invested more in an entrepreneurial fund," Pabon explains.


Regardless of what caused the current state of affairs, it is apparent to those in Colorado and beyond that to fix the situation and help avoid future instability in the state and the potential national marketplace, if and when federal prohibition ends, fundamental changes must take place.


Cannabis is a plant and can be grown just about anywhere, given current technological capabilities. So, there must be a limit placed on the industry's supply side to avoid the boom-bust cycles prevalent early on in the development of state markets. Likewise, responsible and common sense tax legislation must prevail to keep the black market element from rearing its ugly head every time prices fluctuate.


Finally, to provide social and economic equity for a wide range of eager and hardworking potential entrepreneurs, lawmakers and the financial sector need to create a lending structure that is both economically fair and sound for all involved. Much like the plant itself, a new industry can be a very fragile thing. Those in charge of shepherding its growth and development must take mindful and responsible care to cultivate it for sustained staying power and longevity.


233 views0 comments

Comments


bottom of page