On Jan. 1, 2014, Iraq War veteran Sean Azzariti made headlines worldwide as the first person in the U.S. to buy legal weed. More than 10 years later, 3D Cannabis, the dispensary where the historic purchase was made, displays a makeshift sign announcing it is “temporarily closed.” The dismal state of the historic site is a fitting symbol of the plight of Colorado’s cannabis market, reports Politico. What once was a success story has left a trail of failed businesses and cash-strapped entrepreneurs in its wake. Regulatory burdens, an oversaturated market and increasing competition from nearby states have all landed major blows, leaving other states with newer marijuana markets scrambling to avoid the same mistakes. In 2020, Colorado’s marijuana market soared to $2.2 billion. Just three years later, sales had plummeted to $1.5 billion, leading to layoffs, closures and downsizing. The market downturn has spelled trouble for state finances too: Colorado took in just $282 million in cannabis tax revenues in the last fisc al year, down more than 30% from two years earlier.
An assortment of factors has led to the pioneering industry’s struggles. A supply glut caused weed prices to plummet after the pandemic. The spread of cheap, largely unregulated intoxicating hemp-derived products further heightened competitive pressures. And marijuana remains federally illegal, subjecting operators to sky-high taxes and costly regulations. More than any other factor, Colorado’s market has been sapped by the rapid spread of legalization across the country. Neighbors New Mexico and Arizona are among the 24 states with their own adult-use legal marijuana markets, wreaking havoc on the business plans of dispensaries on Colorado’s southern border. Tourists who once flooded the state for the opportunity to legally experience Rocky Mountain highs have largely disappeared as the novelty has worn off. “We’re a victim of our own success,” said Jordan Wellington, a partner at Denver-based cannabis policy and public affairs firm Strategies 64. “New markets drawing investment away, new markets drawing purchasing away — all of these different things combined into the soup of the challenges [facing] Colorado.”