How Expensive Will Legal Marijuana Be In Massachusetts When Retail Stores Open

Photo Credit: Ethan Miller

For states that have legalized recreational marijuana, the new authorized markets have carried the promise of increasingly cheap weed. In Colorado, wholesale cannabis prices have dropped roughly 35 percent since their 2015 peak. In Oregon, some pot shops reportedly sell grams of weed for less than a glass of craft beer.

Massachusetts residents will likely have to wait awhile before they see anything similar.

State regulators say the initial market will be “sparse” when the first licensed retail pot shops open in July, due to both the cautious rollout process and widespread municipal bans on marijuana businesses. As a result, experts expect initial prices to be expensive — and stay that way for a while.

I would expect that we would see really high prices to begin with,” Kris Krane, the co-founder of 4Front, a cannabis industry consultancy firm, told “There’s going to be a shortage.”

For an eighth of an ounce of weed, Krane said before-tax prices could start out around $60 to $70 — compared to an average of around $50 on the black market — and remain at that level for up to six months to a year. Of course, sales will also be subject to a combined tax by the state and local governments of up to 20 percent.

“It’s really simple supply and demand,” Krane said. “There’s not going to be enough supply.”

A similar dynamic has played out to some degree in every state that has gone through the process of implementing a legal retail or medical marijuana market. Because cannabis is (controversially) still an illegal Schedule 1 drug at the federal level, companies and individuals are prohibited from shipping it across state lines. That makes it difficult for each new state market — working in isolation from each other — to grow enough product to meet demand in its early days. And weeks. And months.

Nine states and Washington, D.C. have voted to legalize and regulate recreational marijuana. And the states that have already implemented their markets have experienced initial price surges, followed by broad declines in price. In Colorado, an ounce of marijuana (the legal limit for public possession in Massachusetts) can regularly be found for $150, according to Krane.

Massachusetts might not ever make it to that point, but Krane expects prices to eventually stabilize in the $40 range for an eighth of an ounce.

“That may be a little higher than you see some places out west, but I think $40 to $45 eighths will become the norm,” he said, adding that once large-scale greenhouses and facilities get up and running several years down the road, the state could even see eighths as low as $25.

It’s not a question of if prices go down, but when. That said, the decline will likely be gradual due to Massachusetts’ growing capacity, which — for reasons ranging from space to weather to the delayed implementation of its medical marijuana industry — doesn’t stack up against the likes of California, Colorado, Oregon, or Washington.

Jim Borghesani, a former spokesman for the Massachusetts legalization campaign and now a consultant in the industry, says that Nevada, which also voted to legalize recreational marijuana in 2016, provides “a compelling predictive example” for what the Bay State might expect in the next 12 to 18 months.

Even though it passed its legalization ballot measure the same day as Massachusetts, the Silver State decided to implement its adult-use recreational market last July. However, the industry wasn’t ready for the surge in demand.

“Nevada’s supply chain was hampered by cultivation shortages and a flawed distribution licensing process,” Borghesani said.

Nine months later, prices in the state are still relatively high. The Bay State should expect a similar future, according to Borghesani.

“Massachusetts will likely see supply constraints due mainly to a relatively immature medical cannabis industry and a time lag in getting adult-use cultivation operations licensed and running,” he said. “The results will likely be the same as Nevada—higher prices until supply catches up with demand.”

Massachusetts’ top pot regulating agency, the Cannabis Control Commission, says it is unable to make a meaningful prediction on the early stage pricing. But officials noted that the commission has instituted a number of safeguards aimed at preventing potentially high price levels from perpetuating the illicit market.

Krane says substantially higher prices created problems in Oregon, which had abundant black market cannabis — even compared to other states. The price disparity was so great that consumers opted for the black market over the legal stores. The state then responded by licensing “basically…anyone who qualified” and now struggles with oversupply, which can also facilitate illicit markets.

Krane says it was an overreaction to a predictable early stage problem and the CCC has looked to preempt a similar situation with regulations ranging from “seed-to-sale” tracking to strict licensing and verification standards. Krane’s advice to Massachusetts — officials and consumers like — is to keep the early high prices in perspective.

“By and large, this is very normal,” he said. “The business is responding to market conditions. It will change, but it will take some time.”