Economic Impacts of Cannabis: Benefits of Legalizing Weed

By WeedWeek Sep 18, 2020

Marijuana is a lucrative business – or at least, it could be if allowed to flourish within a favorable legal climate. If legalized at all state and federal levels, cannabis has the potential to generate billions in revenue, provide millions of jobs, and save billions of dollars on law enforcement. Given the surging demand for marijuana and its ever-expanding diversity of products, this is one drug that holds many benefits should it finally be legally accepted. A few of the economic impacts of cannabis are explored below. 

Economic Impacts of Cannabis

Marijuana is classified as Schedule 1 drug, meaning it is illegal at the federal level. However, certain states have taken steps towards legalizing medical marijuana or entirely legalizing the plant, including for recreational purposes. The resulting conflicting nature of laws within states such as California, where weed is entirely legalized, causes a good deal of uncertainty when it comes to financing a business, or being employed by one. Financial institutions such as banks can be wary of taking on clients associated with the marijuana business, and the jobs of certified public accountants are made difficult due to their inability to provide guidance that complies by all laws. 

The uncertainty caused by conflicting laws has negative impacts on marijuana businesses, hampering their ability to take out loans or acquire financing at low prices. The number of professionals, investors and entrepreneurs who decide to avoid the sector altogether collectively represent a financial loss for the country that at the current time prevents jobs and revenue from being generated. 

5 Economic Impacts of Cannabis Legalization

There are many incredible economic benefits of legalizing weed – in fact, weed has such great potential to increase revenue, generate jobs and increase investment opportunities that it is surprising that local and federal governments have stalled on legalization for so many years. Below are a few key economic benefits associated with legalizing cannabis. 

1. Revenue gains

Demand for legal medical and recreational marijuana tends to be quite strong in states that have legalized the drug, and strong sales have proven this out. Total sales in the U.S. were over $12 billion in 2019 alone, a figure that is projected to climb in coming years. One report predicts that the economic impacts of cannabis legalized at the federal level could generate a whopping $105 billion in federal tax revenue by the year 2025. 

2. Budgetary savings

Currently, the cost of enforcing marijuana laws runs into the billions of dollars annually throughout the United States. Not only is this enforcement racially-motivated, unfairly targeting black people and communities of color, it has done nothing to diminish the use of marijuana on a national scale. Instead, this costly enforcement has forever altered lives, sending otherwise innocent people to serve long prison sentences often for non-violent, minor marijuana-related offences. Removing people from their communities for years or even decades at a time, and forcing them into costly legal battles, winds up creating negative economic impacts on people, families and communities that can last for generations. 

3. More Income and Jobs

One of the more prominent goals of any presidency is to create more jobs. A federally-legal cannabis industry would likely increase jobs by hundreds of thousands, and perhaps even millions, with one study estimating an increase of 1 million jobs nationwide by 2025. Cannabis jobs can come from sectors including growing, distributing, manufacturing, selling and marketing. 

4. Investment Opportunities

Federally legalizing marijuana would enable U.S. companies to appear on stock exchanges for the first time in history, in turn helping improve liquidity and strengthen reporting standards throughout the industry. Investors already recognize the enormous potential of marijuana, given historical and predicted sales and market caps. Federal legalization would significantly expand investment opportunities. 

Medical Benefits of Cannabis

The medical benefits of cannabis come from the naturally-occurring chemical compounds known as cannabinoids and terpenes in the cannabis sativa plant. While research is still emerging, some of the medical benefits of certain compounds are listed below. 


  • Cannabidiol (CBD): appears to possess anti-inflammatory, analgesic, and anticonvulsant effects, and may  have positive effects on certain types of cancer. 
  • Tetrahydrocannabivarin (THCV): may assist with regulating type 2 diabetes and weight loss by acting as an appetite suppressant and improving metabolism. 
  • Cannabidivarin (CBDV): may prove effective in treating seizures, nausea and gastrointestinal inflammation. 


  • Limonene: known for anti-inflammatory, antioxidant and relaxation properties. It may also prove useful in combating tumors. 
  • Humulene: found to possess analgesic, anti-inflammatory, and appetite-suppressant properties. 
  • Ocimene: demonstrates antifungal, anti-viral, anti-inflammatory and anti-oxidative properties. 

Social Impacts of Cannabis Legalization

There are social impacts to both decriminalizing and legalizing cannabis. The MORE Act of 2019 attempted to decriminalize weed at the federal level. It was a notable bill in its explicit restorative and social justice aims, painting a vision for the many positive social impacts that come with legalization. The Act would have taken steps to repair the decades of unfair policing and sentencing related to minor, nonviolent weed offences – the enforcement of which targeted communities of color. The Act would expunge minor prison sentences for offenders still doing time, as well as roll out social equity programs such as an investment fund and small loans for marijuana businesses located in unfairly targeted communities. The Act would also abolish marijuana-related offences from triggering an immigrant from being deported. 

Although the MORE Act did not become law, there is still hope that such progressive legislation will become enacted in the coming years. 

Would Crime Rates Drop After Legalization of Marijuana?

Opponents of marijuana legalization often suggest that loosening restrictions will result in higher rates of crime. In fact, the exact opposite has been observed in some states that have legalized medical and/or recreational weed, serving as case-studies for what the effect of national legalization might be. 

When marijuana is illegal at a state and federal level, many – if not all – aspects of its production, distribution, and possession remain illegal, so people who are caught by law enforcement officials will face penalties and be convicted of crimes. Predictably, when weed is legalized, the rate of weed-related crimes have been seen to drop – and in many cases, plummet. A report by the Reason Foundation looked at crime rates in Washington state, where the number of low-level court filings related to marijuana fell by 98 percent in the year following legalization. Similar findings were observed in Colorado, Oregon, Alaska and Washington D.C.

Marijuana legalization also has impacts on crimes unrelated to marijuana itself. The Reason Foundation report aggregated results from different studies showing that legalized medical marijuana is associated with reductions in opioid use and overdoses, as well as significant decreases in property crime within neighborhoods containing a legal dispensary after recreational marijuana was legalized. Other studies also suggest that legalization is associated with lower rates of violent crimes.


As cannabis becomes more understood for its economic, medical and social benefits, it is likely that the road towards legalization will become all the more easy to travel. When the economic impacts of cannabis legalization are better known, it could be only a matter of time before marijuana is finally accepted by many more detractors.