Introduction

The US cannabis industry continues to face significant wholesale price volatility, with national prices fluctuating by 21% between May and September 2024—a reflection of fragmented, state-specific regulations. The US Cannabis Spot Index fell to $944 per pound in early May. Regional pricing varied sharply: Oregon’s market dropped 23% in a month, while New Jersey’s climbed nearly 5% to $2,298 per pound. This volatility highlights the instability still inherent in the cannabis marketplace. These price disparities stem from oversupply in mature markets, limited retail access in emerging states, and policy frameworks that restrict interstate commerce and complicate investment. Michigan’s wholesale prices, for example, have declined from $300–350 per ounce to approximately $225, reflecting the compression trend seen across legacy markets. As a result, the US cannabis economy functions as a patchwork of disconnected regional markets.

Operators now face pressure to adapt in response to shrinking margins and increased competition, including from illicit operators. Many businesses are adopting cost-cutting technologies, expanding into edibles and extracts, and securing long-term supply agreements. Navigating this pricing environment will require strategic foresight and policy reform to ensure long-term viability. This creates both opportunities and challenges for businesses dealing with the current pricing crisis. Despite short-term pressures, the global cannabis market still shows long-term promise, with projections estimating it will reach $82.3 billion by 2027, growing at an annual rate of 24.3%. Understanding these evolving dynamics is essential for companies aiming to adapt, compete, and thrive as the industry approaches a future shaped by potential federal reform.

Average Spot Price Movement: January to May 2025

The US Cannabis Spot Index began 2025 at $888 per pound, raising concerns among producers (1). Prices rebounded through winter and early spring, climbing to $991 per pound by late March, marking an 11.6% increase. April brought more ups and downs. The index dropped to $939 per pound (2) before recovering to $974 by April 25, marking a 9.7% increase from January’s opening value. Forward market indicators supported this stabilization. The Implied Forward for April 2025 reached $975 per pound, while May’s forward price settled at $970 (3). However, both figures remained below 2024 benchmarks, when March and April averaged $1025 and $1017 per pound, respectively (3).

Cultivation Method Price Gaps: Indoor vs. Outdoor Markets

As of early 2025, a noticeable pricing gap has emerged between cannabis grown indoors and that cultivated in greenhouses or outdoor environments. Across most markets, indoor-grown flower continues to command a premium, driven by both consumer perception of quality and the higher production costs associated with controlled-environment cultivation. In California, the divergence became especially apparent. Indoor flower prices initially declined by approximately 7.6% at the start of the year (1), but rebounded by 9.0% during the final week of April (3). Meanwhile, greenhouse-grown cannabis saw only a modest 1.8% price increase, and outdoor flower rose by just 3.7% in that same period (3). These figures illustrate the growing market preference—and pricing power—of indoor products, even as other cultivation tiers experience more modest gains.

Other states have similar dynamics. In Montana, indoor cannabis prices surged by 8.1% in late April, while greenhouse-grown flower rose 9.0% (3). However, in New Mexico, the pattern shifted: indoor and greenhouse prices gained 1.4% and 3.0% respectively, but outdoor-grown flower prices experienced a 1.8% price drop, suggesting regional demand fluctuations or shifting consumer expectations (3). This price gap between growing methods reflected buyers’ preference for indoor products often associated with higher potency, but also the influence of market maturity and production infrastructure on wholesale pricing.

Regional Disparities: Comparing Mature and Emerging Markets

One of the most defining features of the cannabis industry in early 2025 is the stark pricing contrast between well-established and newly regulated markets. These disparities illustrate how regional policy, market structure, and supply conditions can dramatically influence wholesale and retail values. For example, New Jersey, as a newer market, has maintained some of the highest wholesale prices in the nation, with rates reaching as high as $2,598 per pound in May. In contrast, California’s mature market reported significantly lower prices, with top-shelf flower averaging $259 per ounce ($4,142 per pound) at the whole sale level. Retail pricing tells a similar story: California products averaged just $19.21 per unit reflecting intense competition and market saturation. Other markets showed big differences too. Michigan’s retail prices fell to $83.71 per ounce (3), while Illinois’s prices maintain significantly higher rates, averaging $257.22 per ounce, a 207% difference between neighboring states. These regional differences stemmed from several factors:

• Market maturity and saturation (California’s established market vs New Jersey’s newer one)
• Licensing rules and regulations
• Supply chain development
• Number of competitors in each market
• Taxation and regulatory compliance costs

These price gaps created opportunities for companies operating in multiple states while challenging single-state businesses.

Oversupply in Mature Markets

Cannabis prices continue to decline—even as inflation rises in other sectors—due to a convergence of oversupply, regulatory constraints, and structural inefficiencies. States with established cannabis programs are experiencing a supply glut. In markets like California, Oregon, and Colorado, overproduction has pushed wholesale prices downward. For example, outdoor flower in California now sells for around $300 per pound, a steep decline from previous highs. In Oregon, an estimated 3 million pounds of unsold cannabis and 75,000 pounds of concentrates remain in storage, with prices falling from $3,000 to as low as $100 per pound. This surplus stems from aggressive production increases during the COVID-19 sales boom, combined with restrictive laws that prevent interstate commerce and early licensing policies that allowed cultivation to outpace demand.

Licensing Challenges and Market Entry Barriers

Each state’s licensing rules shape how companies compete and set prices. The rules vary widely across the country. States with easy entry like Oklahoma and Oregon see lower prices but struggle with black market sales (4). States like Illinois, New York, and Pennsylvania make it tough to get in, requiring the completion of complex applications hundreds of pages long (4). License prices show these differences clearly. Illinois retail licenses ask for $100,000, while Colorado’s licenses cost around $8,500 (5). California’s market is especially tough. Companies need deep pockets to handle licensing fees and complex rules about land use, environmental standards, and product labels (6). Big companies have an edge over smaller ones.

The Push Toward Vertical Integration

Companies that control growing, processing, and selling can better manage their costs in states that allow it (7). Falling wholesale prices push more businesses toward this model. As Sean Rhatigan, Co-Founder of Integrated Extraction noted in an article, “Falling wholesale marijuana prices coupled with surging demand for new marijuana-based products, such as extracts and concentrates, should stimulate business owners within the marijuana industry to reevaluate their existing business models.” (8).

Vertical integration helps with pricing in several ways:

• No markup between production steps (9)
• Control over internal material and manufacturing costs (9)
• Better efficiency in operations (9)

However, this approach has downsides. Small operators often can’t afford to start vertically integrated businesses due to the initial capital expenditures (9). Florida shows this clearly—a single license to grow, make, and sell products costs approximately $1.5-2.0 million (10).

State-Level Taxation and Compliance Costs

The way states tax cannabis shows a complex mix of approaches that shape pricing. Twenty-one states now charge cannabis excise taxes using three different methods: percentage-of-price, weight-based, and potency-based (11). Tax rates vary widely from state to state—Missouri charges a modest 6% while Washington takes a hefty 37% (11). Local governments in 12 states can add their own excise taxes, which usually range between 2-5% (11). These tax models have made a huge financial impression. Cannabis tax revenues jumped from $68.5 million to more than $4 billion between 2014 and 2023 (11). Studies show that consumers end up paying 44-73% of these taxes through higher retail prices (11). Compliance costs are the biggest operational headache for cannabis businesses, with 12.1% of operators naming it their main concern (12). This worry ranks higher than federal legal issues (11.5%) and general tax problems (10.7%) (12).

Delayed Licensing Rollouts in Emerging States

New cannabis markets often hit snags with licensing delays. Delaware’s recreational market hit a wall when the Federal Bureau of Investigation (FBI) turned down the state’s fingerprinting system application in December 2024 (13). This red tape left 125 businesses chosen through the state lottery stuck in limbo (13). New York’s cannabis rollout didn’t fare much better, prompting Governor Hochul to call it a “disaster” (14). The state has only about 50 licensed stores running nearly three years after making cannabis legal (14). Such delays create uncertainty in the market, derail business plans, and shake up pricing stability.

Federal Legalization Uncertainty and Investor Hesitation

Questions about federal policy still loom over the cannabis industry. State-level progress since 1996 for both medical and recreational policies relies only on federal nonenforcement (15). Moving cannabis from Schedule I to Schedule III might help somewhat, but recreational cannabis businesses would still operate in a legal gray zone (15). This uncertainty changes how investors behave. Jason Paredes, director and architect at Hearst said at the Benzinga Cannabis Capital Conferences that investors “have divested from the industry altogether as they don’t see it feasible compared to other markets”(16). The industry’s ongoing battle with the 280E tax code and limited banking access makes investors even more nervous (16). Federal rules block interstate commerce, so each state must build its own supply chain (17). States with too much product can’t legally send it to states that need more, which leads to price swings across the country.

Black Market Influence on Legal Cannabis Pricing

Legal cannabis faces tough competition from black market sales, even as more states push for legalization. Licensed operators struggle to stay profitable while competing with unregulated sellers. This ongoing battle between legal and illegal markets creates unique challenges. Black market cannabis sellers beat legal market prices by avoiding regulatory costs. Legal products in California cost 30-50% more than their unlicensed counterparts (18). Taxes, licensing fees, and compliance costs drive up legal cannabis prices by up to 40% (18). These price differences pushed California’s illegal market to revenues of $8 billion in 2021—double the legal sales (18). The price gap changes with quantity but remains notable everywhere. Recent data shows illegal cannabis costs $6.24 per gram while legal stores charge $7.96 (19). Bulk purchases of 28-gram packages show closer prices (illegal: $4.24, legal: $4.32) (19).

Consumer Behavior in Dual-Market States

People buying cannabis in states with both markets look at several factors besides price. Studies show quality and easy access top the list for legal cannabis buyers, while price drives illegal purchase decisions (20). Market analysis suggests better quality, safety measures, delivery options, and more stores could reduce illegal market share (20). Economic pressures continue to shape buying habits, with 66% of cannabis users spending less due to inflation (21).

Enforcement Gaps and Their Economic Impact

Even established legal states struggle with black market control. California is a good example of this challenge, with legal cannabis sales only happening in 40% of local areas, leaving most of the market open to illegal sellers (18). Shuttered unlicensed businesses often reopen quickly under new names or locations (18). These weak spots in enforcement twist market economics. Research shows illegal cannabis prices dropped 9.2% after states legalized recreational use (22). States with more licensed stores and lower business application fees saw bigger drops in illegal cannabis prices (22). This data suggests well-planned markets with enough legal stores naturally reduce illegal operations without heavy enforcement.

How Businesses Are Adapting to the Pricing Crisis

Cannabis producers face shrinking prices and must adapt their strategies to stay viable in tough market conditions. These businesses now focus on streamlining processes, expanding their product lines, and building mutually beneficial alliances to keep their profits healthy.

Cost-Cutting Strategies in Cultivation and Distribution

Cannabis cultivators must find ways to work smarter as wholesale prices continue to drop. Many growers have streamlined their operations through lean practices that cut waste and boost productivity (23). Automating smart irrigation systems, energy-efficient lighting, and precise nutrient management help minimize labor expenses (23).

Labor costs remain the biggest expense for cultivation facilities (24). Staff members now learn multiple tasks to handle changing workloads without extra hiring during busy times (24). Some companies bring in contractors for seasonal work instead of keeping year-round employees (24). New technology helps reduce costs substantially. Automated irrigation and fertigation systems cut labor expenses and lead to better harvests (24). Companies that switch from HPS to LED lighting usually save 30-40% on their power bills (30). Modern grow room systems like GROWHub help save money through automated
climate control and power usage monitoring (24).

Diversification into Edibles and Extracts

Product expansion serves as a key survival strategy, particularly in cannabis extracts and edibles. Companies that sell products in multiple categories show much better profits—about 50% report making money compared to 27% of those selling in just one category (25). Extracts offer concentrated cannabinoids in oils, tinctures, and vape products with exact dosage measurements (25). The 2019 Canadian Cannabis Survey showed these products gaining popularity. The numbers revealed 23% of users consumed hash or kief, 26% used oil cartridges/vape pens, and 17% chose solid concentrates (26).

Contract Pricing and Long-Term Supply Agreements

Long-term supply deals help protect against price swings. These contracts usually include yearly purchase commitments that grow over time (27). HEXO’s three-year agreement with Entourage Health stands out as an example, with set prices that only change based on production costs and market rates (27). Mutually beneficial alliances go beyond basic supply deals to secure valuable retail shelf space (28). Some agreements last for many years, like Glass House’s 10-year biomass deal worth almost half-a-million pounds of cannabis (28).

Conclusion

The cannabis industry faces a turning point as 2025 unfolds. Price volatility continues to alter the market dynamics in states across America. Regional differences create both challenges and opportunities for stakeholders. National wholesale prices saw a 21% fluctuation between May and mid-September. Each market tells its own unique story—from New Jersey’s premium $2,598 per pound to Oregon’s steep 23% price drop. Market age plays a key role in pricing patterns. Mature markets don’t deal very well with constant oversupply issues. This forces businesses to streamline processes, diversify products, and form strategic collaborations. The widening price gap between growing methods makes this situation more complex. Indoor-grown cannabis now commands higher premiums over greenhouse and outdoor products. Regulatory frameworks increase these market pressures. State tax systems create big cost differences. Federal uncertainty restricts interstate commerce and reduces investor confidence. Black market competition makes things even more challenging by undercutting legal prices 30-50% through avoiding compliance costs. Companies that survive this pricing crisis share similar traits: lean operations, diverse product lines, and strategic supply deals. The global cannabis market’s projected growth to $82.3 billion by 2027 offers hope. This growth depends on fixing fundamental market issues.

This pricing crisis shows how new markets behave—rapid growth without proper regulations leads to price swings. Companies that adapt to these market forces instead of fighting them will have a better chance to secure long-term success as the industry grows.

References

1. U.S. Cannabis Spot Index, Cannabis Benchmarks, January 3, 2025. https://www.cannabisbenchmarks.com/reports/u-s-cannabis-spot-index-january-3-2025/
2. U.S. Cannabis Spot Index, Cannabis Benchmarks, April 11, 2025. https://www.cannabisbenchmarks.com/reports/u-s-cannabis-spot-index-april-11-2025/
3. U.S. Cannabis Spot Index, Cannabis Benchmarks, April 25, 2025. https://www.cannabisbenchmarks.com/reports/u-s-cannabis-spot-index-april-25-2025/
4. Howard, T. E. Barriers to Entry across State Cannabis Markets. American Bar Association, Feb 11, 2020. https://www.americanbar.org/groups/young_lawyers/resources/tyl/practice-areas/barriers-to-entry-across-state-cannabis-markets/
5. Jackson, M. Value of a cannabis license varies with type, market age. MJBizDaily, Aug 27, 2024, updated Jun 11, 2025. https://mjbizdaily.com/value-of-a-cannabis-license-varies-with-type-market-age/
6. Lange, T. New Report: High Entry Barriers to California’s Cannabis Market Impede Oversight, Market Viability. Cannabis Business Times, Feb 16, 2024. https://www.cannabisbusinesstimes.com/us-states/california/news/15686923/new-report-high-entry-barriers-to-californias-cannabis-market-impede-oversight-market-viability
7. Hoffman, P. Consolidation and Vertical Integration Within the Cannabis Industry. Channelchek, Jun 6, 2022. https://www.channelchek.com/news-channel/consolidation_and_vertical_integration_within_the_cannabis_industry
8. Rhatigan, S. Vertical Integration. LinkedIn, Apr 6, 2018. https://www.linkedin.com/pulse/vertical-integration-sean-rhatigan?trk=public_profile_article_view
9. Hernandez, F. Horizontal and Vertical Integration Affect the Cannabis Industry. Leafbuyer, October 17, 2018. https://www.leafbuyer.com/blog/horizontal-vertical-integration/
10. Garcia, R. Don’t Get Stuck With A Worthless Piece Of Paper: Risk, Reward And Other Factors That Make A Cannabis License Valuable. Benzinga, Aug 29, 2024. https://www.benzinga.com/markets/cannabis/24/08/40619119/dont-get-stuck-with-a-worthless-piece-of-paper-risk-reward-and-other-factors-that-make-a-cannabi
11. How do state and local cannabis (marijuana) taxes work? Tax Policy Center, Aug 2024. https://taxpolicycenter.org/briefing-book/how-do-state-and-local-cannabis-marijuana-taxes-work
12. CEN Staff. Compliance Costs Are the Most Significant Challenge Cannabis Operators Face. Cannabis Equipment News, May 21, 2024. https://www.cannabisequipmentnews.com/news/news/22910507/compliance-costs-are-the-most-significant-challenge-cannabis-operators-face
13. Delaware’s Recreational Marijuana Market Delayed Over FBI Fingerprinting Dispute. Delaware State Cannabis, March 19, 2025. https://delawarestatecannabis.org/news-19mar2025
14. Adams, R. Calling Cannabis Rollout a ‘Disaster,’ Hochul Blames Law for Rampant Illegal Sales. The City, Jan 31, 2024. https://www.thecity.nyc/2024/01/31/hochul-calls-weed-rollout-disaster-hochul-blames-law/
15. Mallinson, D. J.; Hannah, L. Marijuana Rescheduling: Federal Uncertainty in the U.S. Politics Rights, Mar 6, 2025. https://politicsrights.com/marijuana-rescheduling-federal-uncertainty-u-s/
16. Higginbotham, A. Why Are Investors Shifting Away From Cannabis? Expert Says ‘They Don’t See It Feasible Compared To Other Markets’. Benzinga, Oct 7, 2024. https://www.benzinga.com/markets/cannabis/24/10/41206371/why-are-investors-shifting-away-from-cannabis-expert-says-they-dont-see-it-feasible-compared-to-
17. Schultz, L. The Economic Impact of Developing the Adult-Use Cannabis Industry in New York. Rockefeller Institute of Government, Apr 25, 2019. https://rockinst.org/issue-area/the-economic-impact-of-developing-the-adult-use-cannabis-industry-in-new-york/
18. Tangirala, S. Illegal Dispensaries in California: The Threat to the Legal Market. Kayapush, December 5, 2024. https://www.kayapush.com/blog/illegal-dispensaries-in-california-the-hidden-threat-to-the-legal-cannabis-market
19. Clark, S. Report: Price of legal cannabis almost on par with black market. StratCann, January 29, 2024. https://stratcann.com/news/survey-price-of-legal-cannabis-almost-on-par-with-black-market/
20. Xing, J.; Shi, Y. Cannabis consumers’ preferences for legal and illegal cannabis: evidence from a discrete choice experiment. BMC Public Health. 2024, 24, September 4. DOI: 10.1186/s12889-024-19640-1
21. Reveles, M. Weedflation: How Inflation Alters Cannabis Consumer Behavior. GreenPharms, March 12, 2025. https://greenpharms.com/inflation-reshaping-cannabis-consumer-behavior/
22. Meinhofer, A.; Rubli, A. Illegal drug market responses to state recreational cannabis laws. Addiction. 2021, 116 (12), 3433-3443. DOI: 10.1111/add.15517
23. Suchoff, S. Cultivating Efficiency: Cost Control Strategies for Cannabis Cultivators. The CannaCPAs, Nov 13, 2023. https://thecannacpas.com/cultivating-efficiency-cost-control-strategies-for-cannabis-cultivators/
24. TSRgrow Growing Solutions. 10 Strategies for Reducing Cannabis Cultivation Expenses. TSRgrow Blog, Aug 4, 2023. https://blog.tsrgrow.com/smart-savings-10-strategies-for-reducing-cannabis-cultivation-expenses
25. Cowee, M. Chart: Diversification enhances profitability of marijuana product manufacturers – to an extent. MJBizDaily, July 19, 2019. https://mjbizdaily.com/chart-diversification-enhances-profitability-marijuana-product-manufacturers-to-an-extent/
26. Gabrys, R. Clearing the Smoke on Cannabis. CCSA, 2020. https://www.ccsa.ca/sites/default/files/2020-05/CCSA-Edible-Cannabis-Extracts-and-Topicals-Report-2020-en.pdf
27. HEXO Corp. HEXO and Entourage Health Sign Long-Term Supply Agreement. GlobeNewswire, Nov 15, 2022. https://www.globenewswire.com/fr/news-release/2022/11/15/2556001/0/en/HEXO-and-Entourage-Health-Sign-Long-Term-Supply-Agreement.html
28. TPCO Holding Corp. The Parent Company Enters into Agreements to Expand Supply of High-Quality, California Grown Cannabis. Business Wire, May 17, 2021. https://www.businesswire.com/news/home/20210517005563/en/The-Parent-Company-Enters-into-Agreements-to-Expand-Supply-of-High-Quality-California-Grown-Cannabis

About the Columnist

Dr. Zacariah Hildenbrand is a research Professor at the University of Texas at El Paso, the principal founder of Inform Environmental, a partner of Medusa Analytical, and is a director of the Curtis Mathes Corporation (OTC:CMCZ). Direct correspondence to: zlhildenbrand@utep.edu.

About the guest Co-Author

Hannia Mendoza -Dickey has a MS degree in Chemistry and is the founder of Green Matter Consulting. hemendoza0816@gmail.com.

About the guest Co-Author

Robert Manes is the CEO and CTO of the publicly-traded Curtis Mathes Corporation, where he specializes in the creation and manufacture of frequency-specific lighting for horticulture and phototherapy purposes.

How to Cite this Article

Hildenbrand, Z., Mendoza-Dickey, H., Manes, R., Cannabis Pricing Crisis: Market Forces Shaping 2025 Trends, Cannabis Science and Technology, 2025, 8(3), 10-15.