Analysis Finds Legal Canadian Cannabis Has Largely Displaced Unregulated Market

A major goal of every jurisdiction that has modernized its cannabis policies to permit adult-use cannabis activity is to help combat the unregulated market, including in Canada, where lawmakers adopted a national recreational cannabis legalization measure in 2018.

Since 2018, Canada has served as the largest legal national adult-use cannabis market and remains the only country on earth where anyone of legal age can make purchases of recreational cannabis products, regardless of their residential status. Uruguay, which adopted national legalization in 2013, still restricts legal adult-use cannabis sales to residents only.

A team of investigators affiliated with academic and research institutions based in Canada, the United States, and the United Kingdom recently analyzed data from Canada’s legal cannabis market and determined that Canadian legalization has resulted in the legal industry largely displacing the nation’s unregulated market.

The researchers’ findings were published in the academic publication International Journal of Drug Policy.

“The current analysis used ‘demand-side’ methods to estimate the size of the Canadian cannabis market using data from two sources.” the researchers stated about their study’s methodology. “First, data from the Canadian Community Health Survey were used to estimate the number of Canadians who use cannabis.”

“Second, data on cannabis expenditures from legal versus illegal sources were analyzed from 5656 past 12-month consumers aged 16–100 who completed national surveys conducted in 2022 as part of the International Cannabis Policy Study.” the researchers also stated.

In a regulated cannabis commerce system, cannabis producers, product manufacturers, and retailers must adhere to certain standards, including stringent testing, which ensures that consumables are fit for human use. The same is not true of the unregulated cannabis market, which creates potential public health outcome issues when patients and consumers make their purchases through unregulated sources.

Additionally, unregulated cannabis sales do not generate revenue for public coffers, and profits from such sales often support organized criminal enterprises, which further adds to the potential for public issues that can affect all members of society. With that in mind, the more market share that a legal, regulated cannabis commerce system can gain, the more it benefits all members of the jurisdiction’s society.

“In the 12-month period ending in September 2022, total cannabis expenditures in Canada were estimated at $6.72 billion dollars, including $5.23 billion from legal sources and $1.49 billion from illegal sources for an estimated legal market capture of 78 %.” the researchers stated about the legal Canadian market’s share of the nation’s cannabis purchases.

“In 2022, dried flower accounted for 55 % of total legal expenditures and an additional 2 % was spent on plants and seeds. Concentrates accounted for 12 % of legal expenditures, followed by oral liquids (11 %), vaping liquids (10 %), and edibles (8 %, excluding drinks).” the researchers also stated.

“The findings provide evidence of substantial transition in expenditures from the illegal to the legal market in the five years since legalization of non-medical cannabis in Canada.” the researchers concluded.

Findings from this data analysis provide valuable insight for lawmakers and regulators in other jurisdictions who desire to effectively combat the unregulated market in their areas, including in European jurisdictions where national adult-use commerce models like Canada’s remain prohibited due to current European Union agreements.