Colorado’s Marijuana Sales, Tax Revenue Slump Amid Hemp Competition

Colorado’s cannabis industry is facing a steep decline in sales and tax revenue, falling to levels below 2018 figures. Tax collections from marijuana sales peaked at $424 million during the 2020-21 fiscal year but plummeted 41% to $248 million in 2023-24. 

Hemp THC Sales Bypass Cannabis Regulations

This downturn, detailed in a recent article in The Colorado Sun, is attributed to increased market competition, falling wholesale cannabis prices, and the rise of so-called intoxicating hemp products. These psychoactive hemp-derived products, such as delta-8 THC, mimic the effects of delta-9 THC but are less potent and have gained widespread popularity.

Since the legalization of hemp in 2018 under the federal Farm Bill, a $2.2 billion quasi-legal market for hemp-derived THC products has emerged. These products, including THC-infused seltzers, gummies, and brownies, often bypass the regulatory framework governing marijuana sales.

• Get Benzinga’s exclusive analysis and the top news about the cannabis industry and markets daily in your inbox for free. Subscribe to our newsletter here. If you’re serious about the business, you can’t afford to miss out.

As a result, they are sold in unlicensed venues such as gas stations and farmers markets, competing directly with Colorado’s heavily regulated marijuana market. 

“You’ve put a pretty robust regulatory structure in place around marijuana, and you have this product that is sort of laughing in the face of that structure,” said Craig Harper, Joint Budget Committee staff director, at a recent budget hearing, according to The Colorado Sun.

Lawmakers Push For Stricter Hemp Rules

State lawmakers have attempted to curb this competition. In 2023, Colorado restricted intoxicating hemp sales to licensed marijuana retailers. 

Meanwhile, state attorneys general, including Colorado’s Phil Weiser, are urging Congress to impose stricter federal limits on hemp-derived THC. However, enforcement challenges persist due to legal ambiguities.

Cannabis Tax Cuts Impact State Programs

The declining cannabis tax revenue has forced the state to cut programs funded by these taxes, including delaying a $20 million payment to a public school construction grant program. 

Moreover, the Colorado Sun notes Governor Jared Polis has proposed further reductions in marijuana-funded services for the 2025 legislative session.

Read Also: Denver’s Marijuana Revenue Drops 34%, But Cannabis Crime Rates Remain Low

Nationwide Trends Highlight Colorado’s Struggles

Colorado is not alone in experiencing declining cannabis sales. Washington and California, both early adopters of legalization, have reported drops in revenue. However, Colorado’s 8% year-over-year decline surpasses the national average, highlighting the unique pressures on its market.

As competition from hemp THC products grows and regulatory uncertainties persist, Colorado’s marijuana industry faces mounting pressure to adapt.

Read Next:

Image generated with AI tools.