The Economic Benefits of Legalizing Marijuana (2023)

Although the Presidential election drew most of the attention in November of 2020, there were several other important decisions made at the polls as well: notably, several states held votes to determine the future of the legal cannabis industry in one form or another. Taking a leaf out of Colorado or Washington’s book, four states—New Jersey, South Dakota, Montana, and Arizona—passed measures to make marijuana consumption for recreational purposes legal. Mississippi also voted to allow medical marijuana.

State legislation remains heavily divided on the topic. Since the 2020 election, South Dakota Circuit Judge Christina Klinger ruled that the measure was unconstitutional. In November 2021, the South Dakota Supreme Court agreed and ruled against pot legalization. On the other hand, Arizona has collected more than $284 million of tax revenue since the legalization of marijuana in the state.

All told, more and more states are moving to legalize marijuana (whether for medicinal or recreational use, or both). The legal changes have spawned a burgeoning industry of legal cannabis companies, including those which aim to research and develop cannabis-based medical products, those which are working to distribute and grow marijuana, and many others.

As of May 2022, 37 states allow the use of medical cannabis products, while 18 states allow the use of non-medical cannabis products for personal consumption. States are continuing to propose new legislation to encourage legal activity. Delaware is circulating HB 305, a bill that would make marijuana legal for adults. Meanwhile, 62% of Marylanders now support non-recreational legalization.

The economic benefits of legalizing weed have already been apparent as the first states have moved to change their legal positions. Overall, legal marijuana couldmean a big push for state economies and big bucks for both the state and the federal governments. Though state law and federal law remain divided on the issue. let's explore some of the key economic benefits of legal marijuana.

Key Takeaways

  • There has been a growing popular movement in the United States to legalize marijuana for medicinal and recreational uses, with several states adopting such measures already.
  • One motivation for legalization is the economic benefits that can come from the regulated commercial availability of marijuana.
  • Increased tax revenues, job growth, and investment opportunities all are powerful incentives to push for legalization.
  • As of May 2022, 18 states allow for personal consumption of marijuana, while 37 states allow medical usage.
  • Although the collection of tax revenue has yet to start in many of these states, a total of $3.7 billion of proceeds were collected in 2021, more than double tax revenue generated in 2019.
(Video) Marijuana Matters: Do the economic benefits of legalizing weed outweigh the potential risks?

Impact on Tax Revenue

Better than expected sales of marijuana in Colorado and Washington over the past several years have resulted in buoyant tax revenues. In 2021, Washington collected $559.5 million of legal marijuana revenue, over $85 million more revenue than 2020. Meanwhile, Colorado collected $423 million of marijuana tax revenue in 2021, up almost 10% from the year prior.

In 2019, total tax revenue collected by all states topped $1.7 billion. two years later, the total dollar revenue had more than doubled. Aggregate revenue for all states hit $3.7 billion for legal, adult-use cannabis sales, and this does not include revenue generated for statewide budgets, cities, and towns. In addition, six states that have approved marijuana use had not started collecting marijuana tax revenue in 2021.

Should marijuana become legal on a federal level, the benefits to the economy could be exceptional: A report from cannabis analytics company New Frontier suggests that federally legal pot could generate an additional $105.6 billion in aggregate federal tax revenue by 2025.

Colorado began collecting marijuana tax revenue in 2014. In 2021, it's total life-to-date collections surpassed $2 billion.

(Video) The Benefits of Legalization - An Animated Video

Income and Jobs

Setting up marijuana nurseries and dispensaries would be the first step for the states that voted in favor of medical marijuana. These would not only create jobs but also set the ball rolling for economic activity in the pot industry in these areas. In the case of states like California and Nevada where such infrastructure already exists, the economic impact has become more quantifiable as the sector has matured.

An RCG Economics and Marijuana Policy Group study on Nevada says that legalizing recreational marijuana in the state could support over 41,000 jobs till 2024 and generate over $1.7 billion in labor income. The ICF study estimates at least 81,000 additional direct, indirect, and induced jobs in California as a result of legalized marijuana sales. It also projects an increase in total labor income by at least $3.5 billion.

New Frontier's report predicting the impact of federally legal marijuana suggests that nationwide legalization could generate 1 million jobs by 2025. These jobs would likely come from the quickly growing industry which would spring up across the nation. Workers would be needed to farm, process, distribute, and sell marijuana-based products. Further, there would be ample opportunities for secondary industries that are related to legal cannabis although not directly involved in its production and distribution. These might include software developers, financing services, construction companies, and many others.

Investment Opportunities

Legal marijuana presents the possibility of tremendous benefits to economies on a local and a national scale. It also could help to secure the investment portfolios of investors across the country and further afield as well. While marijuana remains illegal on the federal level, it is difficult for investors to capitalize on the growth of the industry. The number of marijuana-related companies trading on public stock exchanges is minuscule, and while investors do have the option of working with over-the-counter exchanges, many of the most successful businesses in the early legal cannabis space have been based in Canada or other countries.

(Video) Cannabis Series: Economic Benefits of Legalizing Marijuana

Should marijuana become legal on the national level, marijuana companies would be free to list their stocks on all U.S. exchanges, thereby enhancing liquidity and opening up access to many more investors. Should the growth rates for the cannabis space continue as they have in recent years, it's likely that investors would express a keen interest in the industry.

As of March 2022, the largest marijuana ETF was AdvisorShares Pure US Cannabis ETF with over $1 billion of assets under management.

Saved Money

When considering the economic benefits of legal marijuana, it's important to think of the money that might be saved as well as revenue that could be generated through such a process. Currently, federal marijuana enforcement costs several billion dollars per year. A 2013 report by the American Civil Liberties Union found that the costs at that time were approximately $3.6 billion per year.

The more states that legalize cannabis, the lower the cost of enforcement would likely be; if marijuana were to be legalized on a national level, these costs would likely drop considerably. If marijuana were removed from the list of controlled substances, far fewer court cases involving the substance would go to trial, resulting in fewer incarcerations, and, in turn, more money saved.

(Video) Economics of Legalising Cannabis

Legalized marijuana also stands to benefit medical consumers of cannabis-based products. As marijuana becomes legal in more and more parts of the country, it's likely that the price will drop overall as a result of commoditization. This may not immediately seem like good news for overall tax revenue or for marijuana companies looking to maximize profits. However, individuals utilizing marijuana-based products for medical treatment would stand to benefit considerably from lower prices for these items.

How Many States Have Legalized Marijuana?

As of May 2022, 18 states have legalized the personal use of marijuana. In addition, 37 states have legalized the medical use of marijuana.

How Much Money Are States Collecting in Marijuana Tax Revenue?

In 2021, the states that legalized marijuana for personal consumption generated $3.7 billion. This revenue does not include city revenue or proceeds distributed to smaller municipalities.

What Is the Economic Impact of Legalizing Marijuana?

States that legalize marijuana have recognized various economic benefits. There are direct tax proceeds generated for the state. States employ thousands of employees of oversee the production, distribution, and management of the sector. There are also potential savings to the legal enforcement of the industry if certain criteria are no longer considered illegal.

(Video) Marijuana Has Economic Benefits

The Bottom Line

There is ample pushback against the idea of legalizing marijuana across the country. Critics cite the potential for confusion among law enforcement officers aiming to keep up with shifting regulations, a concern about increased homelessness or youth use of the substance, the potential for decreased property values, and much more. Some are opposed to changing the regulatory status of marijuana simply because it means a change to the status quo.

All of these reasons combine to decrease the likelihood that marijuana will become legal at a national level any time soon. However, as more and more states move to individually decriminalize pot use in various ways, and as the economic benefits of a legal marijuana industry take effect, there are also many compelling reasons to consider nationwide legalization.


What health benefits does marijuana? ›

The most well-studied benefits of cannabis are:
  • Pain relief.
  • Improved sleep.
  • Reduced nausea and vomiting.
  • Improved appetite.
  • Improved quality of life.
28 Sept 2021

What are the benefits of legalizing drugs? ›

Drug legalization would benefit the United States in several ways: save Federal, State, and local governments billions of dollars a year; lead to reduced crime and safer neighborhoods; and enhance public health.

What are the PROs and CONs of legalizing drugs? ›

  • PROs: Decreases accessibility to the drug.
  • CONs: Increases criminality, incarceration, & black markets.
  • PROs: Decreases criminality, incarceration, & black markets.
  • CONs: Does not eliminate the cartels and criminal activity associated with the drug's manufacture, distribution, and sales.

How does drugs affect the economy? ›

Economic Costs

This value includes: $120 billion in lost productivity, mainly due to labor participation costs, participation in drugabuse treatment, incarceration, and premature death; $11 billion in healthcare costs – for drug treatment and drug‐related medical consequences; and.

How does legalizing drugs affect the economy? ›

Drug legalization may increase the number of drug addicts by 25 percent, but the current dollar volume of the drug trade is estimated at approximately $100 billion a year and reducing the economic profit of drug dealing is necessary. Arguments against drug legalization are noted and countered.

Why Marijuanas should not be legalized? ›

Here's why:

Contrary to what many people think, it can be addictive. Inhaling the smoke can cause lung problems. New research shows that marijuana use during adolescence and young adulthood, when the brain is going through many important changes, can lead to permanent problems with memory, learning and thinking.

Does legalizing drugs reduce crime? ›

The solution to the drug problem, however, is not legalization since legalizing drugs will almost certainly increase their use. Drug-related crimes may decrease with legalization but other crimes, especially violent crimes, may increase.

Why should drugs be legalized debate? ›

Advocates of legalization argue that the Nation's war on drugs has failed and that making drugs legal would erase the enormous profit motive for trafficking and thus diminish crime and violence. The Nation's resources would then be free for drug education, treatment, and rehabilitation.

Why we should not legalize drugs? ›

These arguments against drug legalization emphasize addiction, dependency, and treatment issues. If drugs such as heroin are legalized, their price will be reduced significantly, hypodermic needles will be readily available at the neighborhood drug store, and drugs can be purchased anywhere.

Why should drugs be legalized debate? ›

Advocates of legalization argue that the Nation's war on drugs has failed and that making drugs legal would erase the enormous profit motive for trafficking and thus diminish crime and violence. The Nation's resources would then be free for drug education, treatment, and rehabilitation.

Does legalizing drugs reduce crime? ›

The solution to the drug problem, however, is not legalization since legalizing drugs will almost certainly increase their use. Drug-related crimes may decrease with legalization but other crimes, especially violent crimes, may increase.

What does it mean to legalize drugs? ›

Legalization means that a once-banned drug is made legal, under federal or state law. Decriminalization means that a once-banned drug is still prohibited by law, but the legal system will no longer prosecute or criminalize a person for carrying under a certain amount.

What are the arguments against legalizing drugs? ›

Opponents argue that legalization would result in an increase in the number of drug users, destroy families, increase crime, and adverse physical effects among drug users. According to drug experts, marijuana is the most popular illegal drug.


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