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Nearly six months since New Mexico opened the doors of the adult-use cannabis market, sales are still booming and consumers are still excited about cannabis. Neighboring states are also feeling the effects from legalization in the land of enchantment. Colorado’s cannabis market is suffering a severe sales slump this year, and Texans with a taste for legal cannabis are now pressing for their own reforms. While New Mexico is currently celebrating record-breaking marijuana sales, this high will definitely not lost forever.
Tourism Only Lasts So Long
In many ways, New Mexico showed up somewhat late to the party when it comes to the legalization and regulation of adult-use cannabis. In 1978, New Mexico was the first state in the nation to officially recognize cannabis’ medical applications. In 2007, the state legalized medical marijuana, making it one of the earliest adopters.
But while states like Colorado, California, Washington and Oregon jumped onto the recreational marijuana legalization train early enough to reap the rewards of a cannabis tourist economy, New Mexico waited a full decade to free up its adult-use market. The reason for this stalling out is unclear, since many state law enforcement groups considered cannabis crimes to be low-priority anyway, and the state’s Medical Cannabis Program was an instant success. But over the last decade, New Mexicans have been driving out of state to spend their tourist dollars on expensive cannabis that was easily obtainable in the state.
The closest and most common cannabis vacation destination was Colorado, and it was able to enrich itself in that time thanks to interest from consumers in states on all sides that were banned from using the drug at home.
But all that ended in recent years. According to The Colorado Sun, the Colorado cannabis market is seeing its first downturn since it opened its doors in 2014. Dispensaries are closing and employees are being laid off.
From January through July, Colorado collected $198.3 million in taxes and fees from retail cannabis sales—down 21 percent compared to the previous year. That reportedly included a 44 percent drop in medical cannabis sales. In 2021, flower was selling for around $1,300 a pound. This year, it’s selling for $700 a pound. August marked the 13th straight month of significant losses for Colorado dispensaries.
Altogether, Colorado collected $423.5 million in taxes and fees in 2021. If the same trend continues, the state will make less than $350 million in 2022.
While much of the blame for this downturn can be leveled at the current economic recession and the reality of consumers with lighter wallets, it’s also notable that Colorado made record cannabis sales during the pandemic years.
But perhaps most detrimental has been the legalization of adult-use cannabis in Arizona and New Mexico, two neighboring states that supplied tourists to Colorado’s cannabis market.
Mayor Phil Rico of Trinidad, Colorado—a small town on the border of New Mexico that draws much of its taxes from a thriving strip of cannabis dispensaries—told reporters that the city’s leaders had been preparing for the inevitable downturn that they are now facing. “We knew this would happen at some point,” Rico told The Maverick Observer. “We know there is going to be some effect. We might see a loss temporarily.” City leaders are now planning to turn their focus to offering recreational activities for tourists to offset losses in cannabis revenue.
Texas Wants Weed
Meanwhile, New Mexico border towns like Sunland Park and Anthony are already filling their pockets with revenue from Texans who are literally able to walk from their front door into New Mexico to purchase legal marijuana. Cannabis operations are exploding in some of these towns, and they are set to paint themselves into the same corner that Trinidad is in right now.
It doesn’t look like New Mexico will be able to enjoy the benefits of selling cannabis to Texans for as long as Colorado sold it to New Mexicans. A popular federal legalization bill is currently working its way through Congress, and even though it seems unlikely to pass this year, its positive reception bodes well for pot legalization in the next five years. And although Texas lawmakers have historically been vehemently opposed to the use of cannabis inside their state’s borders, voters and community leaders have become much more outspoken about their desire to see the drug legalized.
Texas Agriculture Commissioner Sid Miller, a Republican, has been making waves over the last month, vocally supporting the expansion of medical cannabis in his state. “It is my goal next year to expand access to the compassionate use of cannabis products in Texas so that every Texan with a medical need has access to these medicines,” wrote Miller in an essay posted on the agriculture department’s website. His Democratic opponent, Susan Hays, already supports medical cannabis reform. “I’d like to see a thoughtful, comprehensive reform of our medical cannabis program,” she told reporters, “so that we do not have legislators telling doctors how to practice medicine.”
In a recent poll from The Dallas Morning News, 72 percent of registered voters in Texas (including 67 percent of Republicans) support medical cannabis legalization. It seems like it’s only a matter of time before cannabis reform in Texas starts affecting New Mexico’s market.
The significant amount of cash flowing from Texas tourists into New Mexico’s cannabis market will dry right up if cannabis is ever legalized in Texas or federally. Market stakeholders would do well to refrain from celebrating the latest sales figures too soon. They should be making weed while the sun is shining instead, and prepare for the inevitable plateau and eventual dip that are coming.