Study: Illinois Marijuana Industry Will Have to Expand to Meet Legalization Demand Market Could Produce $440 Million or More in Revenue When Mature Marijuana

Daily Herald (Arlington Heights, IL), March 6, 2019 | Go to article overview

Study: Illinois Marijuana Industry Will Have to Expand to Meet Legalization Demand Market Could Produce $440 Million or More in Revenue When Mature Marijuana


Byline: Jerry nowicki capitol news illinois

A fully-matured adult-use marijuana program in Illinois could produce between $440 million and $676 million in annual revenue, and the expected demand would be far greater than the state's current supply, according to a demand study released Friday.

The study was conducted by Freedman and Koski, a Colorado consulting firm which advises local governments on the implementation of marijuana legalization. It was commissioned by state Rep. Kelly Cassidy and state Sen. Heather Steans, both Chicago Democrats who have been working on legalization efforts for the past two years.

Illinois would have to produce 350,000 to 550,000 pounds in dried cannabis plants each year to meet the expected demand, the study said. The state's existing industry could supply between only 35 percent and 54 percent of that number. The bill's sponsors said the expansion of the industry will help increase minority-owned business inclusion.

"We're contemplating additional license categories such as craft cultivation, transportation and processing to ensure that everyone is at the table," Cassidy said. "These will create space for more innovation and entrepreneurship in the industry, but more importantly, provide opportunity for more diversity in an industry with a pressing need for it."

The revenue and usage estimates were determined by using other states with legalized marijuana as a baseline, while factoring in Illinois' usage and tourism rates among other demographic factors. Illinois would become the second-largest of the 11 states to legalize adult-use cannabis and the third-largest jurisdiction in the world after Canada and California.

The tax revenue estimates were based on a total mature-market marijuana industry revenue number of $1.69 billion to $2.58 billion, which was determined by medicinal prices and the usage estimates. These revenues, taxed at an assumed rate of 26.5 percent, would produce between $443,690,100 and $676,481,400 annually.

The study's authors warned that revenue estimates are an inexact science, and it was not clear in the report how much of the assumed tax revenue would be offset by increased costs of state regulation.

"Choices made by Illinois regulators will have significant effects on price and revenue, and until such choices are made, revenue estimates will be challenging to estimate," it said.

The estimates could shrink if users grow their own marijuana or purchase it illegally, the study said. This could happen, because illegal marijuana is likely to remain cheaper than what is legally purchased, at least until initial regulatory costs decrease and economies of scale push prices down. …

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