cannabis-regulation-analysis

Using Data to Quantify Good Cannabis Regulations for Retail

Here's how policymakers, industry-advocates, and pioneering cannabis-businesses should leverage historical data to understand regulations and proactively structure new markets to maximize positive impact and minimize negative externalities.

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As new states and countries continue to legalize medicinal and adult-use cannabis, there’s ample opportunity to learn from markets like Colorado and California that have paved the way.

Up until recently, the impact that cannabis legalization has had on communities and individuals has been somewhat of a black box. There simply wasn’t enough historical data that could be used to help steer policymakers as they build an industry from the ground up.

Associations like the National Cannabis Industry Association (NCIA) and Marijuana Policy Project (MPP) are doing tremendous work when it comes to measuring and documenting the societal impact of policies; these industry-leaders are increasingly leaning on the outcomes and lessons learned from states that have successfully implemented a regulated cannabis market.

In this article, we’re going to explore how policymakers, industry-advocates, and pioneering cannabis-businesses can leverage historical data to understand the effect of specific regulations and use that information to structure cannabis markets that maximize positive impact and minimize negative externalities.

The Significance of Data for Cannabis Legalization

Once we have consistent and reliable data that proves how cannabis legalization has positively impacted individuals, communities, and state economies, federal legislators will be hard-pressed to deny national legalization any longer.

Numbers don’t lie, and each day we are uncovering more insights and statistics indicating that states with legalized cannabis markets are seeing undeniable and often unexpected benefits. Among these are:

  • Reduced violence
  • Decreased dependency on addictive pharmaceuticals
  • Stronger community engagement
  • Decreased usage of cannabis and alcohol among minors

Armed with this data, it’s much easier to make a case to move forward with regulations in states that have yet to legalize cannabis.

With many states and organizations already tracking the impact of cannabis legalization, the question becomes how can we attribute specific outcomes to unique policy-decisions?

For example, Colorado regulates the proximity a cannabis dispensary can have to a school zone. How can we know what impact this has had on consumption amongst minors?


How to Measure the Impact of Cannabis Legalization

Since marijuana is typically taxed at a greater rate than alcohol, the impact of cannabis legalization on state revenue cannot be understated.

This is a clear and fairly accessible metric we can use to understand how state economies are benefiting from a legal, regulated cannabis industry. With clear historical data to prove that states (not only businesses) are benefiting from regulation, but can also advocate for further legalization.

It’s up to us now to continue to define and drill-down on the metrics which can be used to monitor business opportunities and general welfare effects on citizens.

Positive Impacts of Cannabis Legalization on State Revenue

If we first start with the state’s benefits, Colorado measured the impact of special marijuana taxes on the state’s economy.

Since the state, which paved the way both in terms of legislation and industry organization, imposes a 15% tax from cultivator to retailer with an additional 15% on the end consumer, they were able to earn as much as $270 million in taxes alone throughout the course of 2018.


Total marijuana sales were over $1 billion.

Other notable examples of states who profited from marijuana legalization are certainly California and Washington. California earned $345 million in marijuana taxes in 2018, with Washington pulling in as much as $376 million.

These are major sums for each state’s economy, especially considering that they previously had no way of earning it as marijuana sales weren’t regulated.

How Does Cannabis Regulation Impact Youth?

The most pressing problem for citizens and legislators have been the effects that cannabis legalization could have on minors. Without the data to prove positive effects and disprove rumors, advocates have been unable to move forward.

However, the methodology for quantifying good cannabis regulation has been problematic, as well.

Following Colorado in this aspect again, other states can use the following methods to monitor the impact of cannabis legalization on teens:

  • Surveys
  • Reported use by educational organizations (typically, connected to expulsions and suspensions)

If we take Colorado as an example, their officials have surveyed teens post-legalization. In 2017, Colorado’s marijuana consumption among the teenage population has fallen to an all-time low. Simultaneously, tobacco and alcohol consumption rates have decreased as well.

Previously, it was complicated to get accurate data as marijuana was de facto illegal. However, now that marijuana is legal, teenagers are more willing to be upfront about their marijuana consumption.

Their case can be viewed as a precedent for the positive impacts felt after cannabis legalization. Consequently, the data shows that minors can only benefit from close monitoring of cannabis sales.

Previously, marijuana sales were in no way regulated. Post-legalization, sales are more transparent. It’s become much simpler to regulate consumption and educate the youth on both positive and negative effects.

Additionally, Colorado’s high school graduation rates have increased since they legalized cannabis. Simultaneously, high school dropout rates decreased.

Measuring the Impact of Cannabis on Crime

Previous experience has proven that it’s particularly hard to measure how marijuana legalization affects crime rates.

With not enough data points that could correlate marijuana usage to an increase in violent crime rates, naysayers have been quick to conclude that legalization only increased crime rates across states.

However, when we compare crime rates in the states that have legalized cannabis to other states in the US, it’s clear that any increases can’t be attributed to marijuana legalization.

On the positive side, clearance rates for burglaries and theft have improved since legalization.


When measuring how cannabis affects crime, policymakers and organizations should use correlation metrics (e.g. THC DUI charges, measuring THC levels in perpetrators’ blood samples).

States can understand how marijuana legalization affects violent behavior only if they measure the relationship between crime and marijuana consumption.

Shifting Demographics and Diverse Industries

In addition to measuring the societal impact of cannabis legalization, organizations should also monitor shifting consumer sentiments.

According to BDS Analytics’ report, we could be seeing more and more people visiting dispensaries. More people today are willing to use cannabis, as opposed to the number of “rejecters” in the previous years.

With the rising number of potential consumers, we’re also seeing the need for dispensaries and CBD businesses in smaller towns and suburbs.

This could be a significant advantage for businesses looking to expand their market.


The most useful metrics for cannabis market research (with regard to market growth) are consumer locations, sentiment, and cannabis availability in their area.

It’s not enough to conduct surveys annually. Companies like BDS analytics are now conducting half-year surveys to capture rapidly-changing consumer preferences in cannabis retail.

Finally, analyzing marijuana consumers’ lifestyle habits is an important way of fighting the stigma and proving to policymakers that cannabis isn’t just healthy, but beneficial for sustaining health; cannabis consumption is linked to positive behavior: 43% of consumers participate in physical activities at least once a week.

Conclusion

As the cannabis industry continues to mature, policy-makers and industry analysts will have more data-points to inform how they should craft and revise industry regulations.

However, organizations have to be careful when selecting metrics they’ll use to understand how the industry is changing and impacting citizens.

The most accurate metrics are proving themselves to be the ones that can create a strict correlation between cannabis legalization and certain behaviors.

Other metrics which exist in a bubble simply lack the context and strict-controls we need to get the full picture.

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