Illinois’ legal weed business reached an all-time high in 2024, with the state reaping more than $2 billion in sales and nearly a half-billion dollars in sales tax.
But the state’s legal pot business continues to operate in the shadow of an unregulated hemp and Delta-9 market that is siphoning an untold amount of taxes from state coffers.
Despite that, the signs are mostly bright for the state’s legal pot business, which has been growing since the drug was legalized in Illinois in 2020.
The average price of bud has fallen gradually. Recreational sales grew 2.5% last year, with dispensaries logging $1.722 billion in sales. And although the medical marijuana market shrunk for a third year in a row, with $285.1 million in sales in 2024, the state logged more than $490 million in sales tax from medical and recreational cannabis sales.
Gov. JB Pritzker touted the record sales as showing the “economic impact of a thriving cannabis industry.” In a news release, he called out the “unchecked market” of Delta-9 and hemp for undercutting legal operators and “flooding the industry with untested, potentially unsafe products.”
A loophole in federal law legalized hemp-derived variations of the drug that mimic the effects of marijuana. Pritzker tried to introduce a bill to regulate the industry but it was killed before ever receiving a vote in Springfield.
Saying she hopes lawmakers take up the bill again, Erin A. Johnson, the state’s cannabis regulation oversight officer, told the Sun-Times that hemp is hurting the cannabis market.
There’s no estimate for the size of the state’s unregulated hemp market, she said.
But the Illinois weed market continues to grow steadily, between 2% and 6% a year, which Johnson calls a sign of strength.
Critics say larger weed businesses have reaped most of the new pot revenue. Smaller businesses, mostly owned by Black and Brown entrepreneurs who received licenses under the state’s social equity applicant program, have been left in the dust due to unfair regulations, they say.
“The strength of the market is only the strength of the multi-state operators,” said Peter Contos, deputy director of the Cannabis Equity Illinois Coalition.
When Illinois legalized recreational pot in 2020, the state issued special licenses to people of color and others disproportionately affected by the War on Drugs. The idea was to level the playing field and share the billions in pot revenue with the communities most hurt by previous policies that outlawed marijuana.
Social equity applicants accounted for 65% of the licenses granted in 2023 but only 11.9% of all pot sales, according to state commissioned disparity study from 2024.
One reason social equity applicants are struggling is because they are not allowed to sell medical marijuana, Contos said. The Cannabis Equity Illinois Coalition has pressed lawmakers in Springfield to allow this, and to introduce anti-monopoly rules and prohibit other unfair business practices.
“The numbers show it’s brutal for the social equity folks to stay in business the past few years,” Contos said. “They continue to have a difficult time.”
Everyone does not agree.
Johnson said the rift between social equity license holders and multi-state operators has shrunk since the report was issued. Because of the delays caused by the COVID-19 pandemic, and the bill’s requirement that the report be completed in a certain time frame, the study only accounted for when there were six social equity businesses, she said.
Now there are 135 social equity license holders out of 245 total business licenses, she said.
“We know the gap is closing, for sure, as more people come online,” Johnson said.
Prices falling but taxes still an issue
More than 56 million cannabis products were sold in 2024, shattering the previous record in 2023 by 13%, according to the state.
Prices are also falling, on average, in Illinois, but the state still has some of the highest legal pot prices in the nation. Johnson said weed prices are now comparable to other state programs as young as Illinois’.
Contos argues prices remain high because of a state-imposed limited cultivation capacity. He ties the problem to the the size restrictions placed on craft growers compared to the larger multi-state operators. Craft growers can operate up to 5,000 sq-feet, while the multi-state operators can expand up to 200,000 sq-feet, he said.
Taxes are also an issue. Illinois has double digit taxes on legal weed, and it’s pushing many consumers to Michigan and Missouri, which have a lower tax levy, says Tiffany Chappell Ingram, executive director of the Cannabis Business Association of Illinois.
“Taxation is a big headwind for us,” Ingram said.
She says the unregulated hemp market is removing the incentive of legal cannabis business owners to stay in business.
“There’s no incentive for folks to adhere to a regulated market if you can open up a [Delta-9] store with no oversight,” Ingram said. “What’s the incentive to stay in the other market? You’re starting to see cannabis operators going into the hemp space because frankly it’s easier.”