The Colorado Department of Revenue (DOR) released a monthly cannabis sales report for August, the latest month available, showing that adult-use and medical cannabis sales surpassed $15 billion.

While the overall picture looks good, sales are actually down during the past few years since peaking during the pandemic, and the downward trend worries some analysts.

The data shows Colorado adult-use and medical cannabis sales reached a total of $15,028,995,376. Since 2016, the state has sold $1-2 billion in cannabis each year. But because of oversupply issues ultimately leading to lower prices, Colorado sales are expected to be lower in 2023 than prior years.

The DOR’s Marijuana Sales Reports summarize total sales made by medical and retail cannabis stores monthly by county. The Marijuana Sales Report has monthly total sales for the state, and the Marijuana Sales by County Report shows monthly sales by medical and adult-use cannabis stores by county.

Adult-use cannabis sales launched in Colorado in January 2014. 

Sales are still up compared to when the market launched in 2014, but has fallen precipitously since its peak during the pandemic.

The Colorado cannabis market sold almost $2.2 billion in 2020 and more than $2.2 billion in 2021, as many residents  were forced to quarantine at home, and government stimulus checks provided people with some extra cash.

That’s because the state’s dispensaries are struggling amid an economic downturn.

Sales of both medical and adult-use cannabis in Colorado plummeted in June 2022—marking a downward trend that extends to today.

Unless cannabis sales pick up in Q3 of 2023, full-year cannabis sales could be down from 2022, when Colorado cannabis companies sold $1.7 billion in cannabis, matching sales in 2019. As of the end of August, year-to-date sales tallied in at just over $1 billion.

Cannabis Sales in Denver, the State’s Largest Market

In Colorado’s largest city and capital, and the corresponding county, the drop in sales is acute. A July report from the City and County of Denver shows a 22% decline in annual cannabis sales revenue from 2021 to 2022, the largest annual drop since legalization launched.

Consumers who are strapped for cash are buying fewer expensive products, Truman Bradley with the Marijuana Industry Group told 9 News.

“The ripple effect to employees and customers can’t be overstated either,” he said. “As cannabis sales drop, so do the tax revenues.” 

Denver makes up about a third of the state’s entire cannabis sales.

“In 2021, 31% of Colorado’s total marijuana sales occurred in the City and County of Denver,” a Municipal Marijuana Management report from 2022 reads. “From 2014 to 2021, the proportion of marijuana sales in Denver out of all Colorado marijuana sales has fallen by 17%, going from 48% to 31%. This downward trend, which has been consistent since the implementation of retail marijuana sales in 2014, indicates marijuana sales growth outside of the City and County of Denver has been increasing faster than within the city.”

A recent report from The Denver Post analyzes the fallout of the post-pandemic cannabis industry in Colorado.  “The market’s just bad. It’s bad right now,” cannabis salesperson Val Tonazzi told The Denver Post. “There’s businesses closing, left and right.”

Federal Law Impacts Sales in Colorado

Colorado Gov. Jared Polis recently sent a letter to President Joe Biden on Sept. 5 regarding the U.S. Department of Health and Human Services’ (HHS) recommendation for the Drug Enforcement Administration (DEA) to reschedule cannabis from a Schedule I substance to a Schedule III substance.

 “We are pleased to hear that you have recently received Health and Human Services’s (HHS) recommendation to move cannabis to Schedule III,” Polis began in his letter. “It’s about time.”

“This is an historic moment and we owe you and your administration a debt of gratitude for your leadership on catching up with where the science is,” Polis continued.

 “Cannabis’ current classification under federal law as a Schedule I drug is contradicted by the scientific evidence. The notion, as previously considered, that cannabis has no accepted medical use, a high potential for abuse, and no accepted safety standards even under medical supervision has been widely disproven, HHS’s recommendation is evidence-based and a move in the right direction.”

Polis also addresses the issues that still need to be resolved, such as banking. He wrote that if cannabis becomes a Schedule III substance, banks would be free to serve cannabis businesses and that tax code 280E would no longer be necessary.

Oversupply, lack of demand, competition with neighboring legal states, and black market sales, puts Colorado cannabis businesses in a bind. 

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Colorado Gov. Jared Polis recently sent a letter to President Joe Biden on Sept. 5 regarding the U.S. Department of Health and Human Services’ (HHS) recommendation for the Drug Enforcement Administration (DEA) to reschedule cannabis from a Schedule I substance to a Schedule III substance.

According to The Gazette, Polis’ letter addressed this recommendation, and applauded Biden on leading an administration toward progress. “We are pleased to hear that you have recently received Health and Human Services’s (HHS) recommendation to move cannabis to Schedule III,” Polis began in his letter. “It’s about time.”

“This is an historic moment and we owe you and your administration a debt of gratitude for your leadership on catching up with where the science is,” Polis continued. “Cannabis’ current classification under federal law as a Schedule I drug is contradicted by the scientific evidence. The notion, as previously considered, that cannabis has no accepted medical use, a high potential for abuse, and no accepted safety standards even under medical supervision has been widely disproven, HHS’s recommendation is evidence-based and a move in the right direction.”

He continues that he offers his “enthusiastic support” while the country waits for the DEA to respond, but in the meantime, urges the president to begin thinking about what else needs to be done to make moving cannabis to Schedule III ideal for cannabis businesses. “I ask you to simultaneously consider a few next steps in the near future by showing your support for access to banking for the state-regulated marketplace, reduced criminal penalties for possession and distribution of cannabis, addressing immigration-related consequences and enforcement discretion from FDA,” Polis wrote.

Polis also addresses the issues that still need to be resolved, such as banking. He wrote that if cannabis becomes a Schedule III substance, banks would be free to serve cannabis businesses and that tax code 280E would no longer be necessary. “The most efficient way to address these public health risks is to displace the illicit marketplace and replace it with a legal, safe, regulated, and age-verified system,” Polis continued. “But we can only do that by promoting federal policies that allow for profitability in these well-established state-regulated marketplaces. That equates to [Internal Revenue Code] Section 280E reform and access to traditional banking services.”

Polis noted that rescheduling cannabis will become a hallmark accomplishment of Biden’s term as president. “Your administration will soon be credited with saving hundreds of thousands of jobs and significant tax revenue for the states when DEA solidifies FDA’s recommendation,” Polis writes. “While federal prohibition continues, more than three-fourths of the states have legalized medicinal marijuana, and more than 20 have legalized marijuana for adult use.”

“Let’s celebrate this progress and work together to finish the job,” his letter to Biden concluded. “We greatly appreciate your leadership, and please come visit Colorado again soon.”

Nearly a year ago on Oct. 6, 2022, Biden made a historic announcement to pardon of thousands of federal cannabis prisoners. He also called for the HHS secretary and the attorney general to “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law,” Biden said. “Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act, the classification meant for the most dangerous substances. This is the same schedule as for heroin and LSD, and even higher than the classification of fentanyl and methamphetamine—the drugs that are driving our overdose epidemic.”

In response to Biden’s request last year, HHS Assistant Secretary for Health, Rachel Levine, sent a letter to DEA Administrator Ann Milgram on Aug. 29 regarding recommendations for moving cannabis into the Schedule III category. “Following the data and science, HHS has expeditiously responded to President Biden’s directive to HHS Secretary [Xavier Becerra] and provided its scheduling recommendation for marijuana to the DEA on August 29, 2023,” an HHS spokesperson said.

According to a statement provided to The Hill by a DEA spokesperson, it’s the DEA’s turn to review the recommendations. “As part of this process, HHS conducted a scientific and medical evaluation for consideration by DEA. DEA has the final authority to schedule or reschedule a drug under the Controlled Substances Act. DEA will now initiate its review,” the spokesperson said. It is unclear how long it will take for the DEA to review the recommendations, or how the department will respond.

The Controlled Substances Act of 1970 labeled cannabis as a Schedule I substance over 50 years ago. Schedule I substances currently include cannabis, heroin, LSD, ecstasy, and peyote, among others, which are described as having no medical benefits and a high potential for abuse. Schedule II substances also have high potential for abuse, but potentially lead to “severe psychological or physical dependence,” such as Vicodin, cocaine, meth, oxycodone, fentanyl, Adderall, and more. Schedule III substances however, are simply drugs with “moderate to low potential for physical and psychological dependence,” like ketamine and testosterone.

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