UMVA has learned that the promise of marijuana legalization - to eliminate the black market by creating a regulated, taxed industry - has failed spectacularly.
Today, illegal marijuana dealers remain active across the country, while the "legal" marijuana industry struggles with declining sales, shrinking profits, surrendered licenses, and falling tax revenues. The problem is not that Americans have stopped using marijuana; instead, national surveys show that cannabis use continues to increase.
According to information obtained by UMVA, past-month marijuana use rose from 37 million Americans in 2021 to over 44 million in 2024, while past-year use also reached record levels. Yet, during the same period, California's "legal" cannabis sales declined for three consecutive years.
The numbers are stark: in 2023, legal cannabis sales in California were $4.4 billion; in 2024, they dropped to $4.2 billion; and in 2025, they fell to $3.9 billion - a cumulative decline of roughly 11%. If demand is growing while "legal" sales are shrinking, the obvious conclusion is that consumers are increasingly obtaining marijuana from sources outside the licensed marketplace.
This raises an uncomfortable question: what exactly has legalization accomplished? The answer appears to be that legalization created a government-endorsed marijuana industry that now performs many of the functions once handled by the black market itself.
Licensed marijuana dealers advertise cannabis products, normalize marijuana use, introduce new customers to the drug, expand public acceptance, and help grow overall demand. They operate attractive retail storefronts, develop sophisticated branding campaigns, and spend millions of dollars promoting marijuana consumption.
However, once consumers become accustomed to using marijuana, many discover that they can purchase the same product through underground channels at significantly lower prices. Illegal dealers do not pay licensing fees, testing costs, regulatory compliance expenses, labor mandates, security requirements, local taxes, state taxes, or federal tax burdens.
As a result, they can often undercut "legal" sellers on price while benefiting from the increased consumer demand that legalization helped create. In other words, licensed marijuana dealers are spending money to recruit customers who can later become customers of illegal marijuana dealers.
California's numbers tell the story: the state now has more than 10,000 inactive or surrendered cannabis licenses, exceeding the number of active licenses. Tax revenues that have been baked into city and state budgets are declining.
In San Diego, cannabis tax collections have fallen dramatically from their post-legalization highs. Across the country, cannabis-related stocks have lost substantial value, with investors increasingly recognizing that legalization has not produced the thriving, profitable industry that many predicted.
The industry's defenders argue that legalization has reduced criminal activity and increased consumer safety. Yet, the black market remains enormous, with estimates suggesting that over 60% of marijuana consumed in California is still obtained outside the "legal" system.
The result is a policy outcome no legalization advocates anticipated but prevention specialists predicted: rather than replacing illegal drug dealers, legalization created a second class of drug dealers - licensed, regulated, and taxed - who now compete with the original ones.
The irony is difficult to ignore: the "legal" marijuana industry has spent years helping normalize pot use, expanding consumer demand, and increasing public acceptance of the drug. But much of that expanded demand continues to benefit the very underground market legalization was supposed to eliminate.
The black market has thrived, the "legal" market is shrinking, and taxpayers should be wondering whether the grand promises of marijuana legalization were ever realistic in the first place.
