The Green Rush Is Over: How Legal Weed Went from Billion-Dollar Dream to Commodity
The Billion-Dollar Promise That Fell Apart
In the early 2010s, cannabis was supposed to be the next big American industry. Colorado and Washington legalized recreational weed in 2012. The federal government soft-pedaled enforcement. Presidents from both parties discussed decriminalization and pardons. Investors rushed in, convinced that weed would become the next beer, cigarette, or big-box pharmacy category.
By 2023, cannabis was legal for medical use in 39 states and recreationally in 24. Yet, at the federal level, it remained a Schedule I drug—barred from banking, restricted for research, and fenced off from interstate commerce. According to the NYSSCPA, that legal limbo turned out to be the poison pill in the “Green Rush” business model.
On paper, this looked like a goldmine. In reality, it created an industry built on hype, financial engineering, and regulatory friction.
How the Corporate Green Rush Went Off the Rails
The first generation of cannabis giants had one playbook: Grow fast, tell a big story, worry about profits later.
Tilray As highlighted in recent analysis by Modern MBA Tilray was the first cannabis company listed on a major U.S. exchange. Its market cap shot to around $17 billion at its peak, trading at hundreds of times its revenue. It stacked partnerships with pharma, drinks, and lifestyle brands—but its U.S. hands were tied by federal law, leaving Canada as its main playground. Years later, even after merging and scaling, the Cannabis Business Times reports it still struggles to turn a profit and earns more money from beer than weed.
(Caption: The disconnect between valuation and revenue. Source: Google Finance / The Crumbling Business of Marijuana via YouTube)
MedMen Branded as the “Apple Store of Weed,” MedMen built high-end stores in prime real estate. They burned through cash, assuming cannabis retail would magically escape normal retail economics. While other retailers boomed off stimulus checks during COVID, MedMen’s sales declined. Eventually, it slid from unicorn status into bankruptcy.
Cronos, Curaleaf, & Trulieve
Cronos tried to build a luxury, R&D-heavy brand portfolio with big tobacco money but still racks up losses.
Curaleaf built the largest footprint in the U.S. on the back of heavy debt—great for expansion, but brutal when growth slows and interest payments come due.
Trulieve went all-in on vertical scale and SKU volume but cannot move inventory across state lines, trapping products in siloed markets and pressuring margins.
The pattern: Scale + hype + regulation + debt = fragility. As more states legalized and competition exploded, the only lever left was price. Once weed turned into a commodity race to the bottom, the early mega-operators discovered they didn’t have true moats—just head starts.
Commoditization Was Inevitable—Collapse Wasn’t
On one level, the collapse of cannabis margins is simple economics:
Too much supply.
Not enough profitable demand caught inside the regulated system.
A massive illegal market still thriving just outside the legal frame.
Even in California—still one of the biggest legal cannabis markets on earth—licensed retailers reported $5.1 billion in taxable sales in 2023, a significant drop from prior years. Estimates put the illegal market at around $8 billion annuallyin the state—bigger than the legal side.
That isn’t just competition; that is an alternative system with structural advantages: no compliance costs, no lab testing, no payroll tax, and, most importantly, no cannabis taxes. Legal weed isn’t just competing with other legal brands. It’s competing with an entire untaxed parallel economy.
The Tax Trap: When the Government Becomes the Biggest Competitor
Taxes are where the business story turns into a policy story.
In California, the retail excise tax jumped to 19% of gross receipts in mid-2025 before being reduced back to 15% later in the year. That excise tax is layered on top of state sales tax and local taxes. In cities like Los Angeles, the combined burden can push the total tax load on legal cannabis purchases to around 35–39%—versus 0% on the illicit market.
At the same time, MJBizDaily reports that taxable cannabis sales in California dropped to about $4.6 billion in 2024, continuing a downward trend. High taxes don’t just skim profits from companies—they push consumers away. The more expensive legal weed becomes, the more attractive your old “guy” looks.
Why Alcohol and Tobacco Can Handle Taxes—and Weed Can’t (Yet)
Supporters of the status quo sometimes argue: “Alcohol and cigarettes are heavily taxed too, and those industries survive just fine.” That is true—but incomplete.
Key differences:
Alcohol and tobacco are federally legal, bankable, and fully integrated into national distribution networks. Big beer and tobacco companies have had decades to build real brands and premium segments.
In cannabis, federal illegality blocks interstate commerce, traditional financing, and full-scale logistics. State-by-state fragmentation kills economies of scale.
The illegal market is not a fringe element—it is an equal or larger force in many places. In California, sources like SFGATE estimate only 38% of cannabis consumption comes from the legal market.
(Caption: California’s high tax rates have driven many consumers back to the illicit market. Source: The Crumbling Business of Marijuana via YouTube)
How This Story Connects to NYC
New York is the next major test case for whether regulators can avoid repeating the California story—or just copy-paste the same mistakes with an East Coast accent.
Some numbers:
New York has now passed 500 legal adult-use dispensaries, with regulators projecting the state could sustain up to 2,000.
Since adult-use sales launched, New York has seen roughly $2.3 billion in total adult-use revenue.
Tax-wise, New York actually learned from California—eventually. Originally, New York had a THC potency tax layered on top of retail taxes, a structure industry groups called unworkable. In 2024, the state scrapped the potency tax and replaced it with a 9% excise tax at the distributor level and a 13% retail tax (state + local).
Is a 22% total tax load still high? Yes. Is it better than California’s “stack and suffocate” approach? Also yes. New York is already seeing its own regulatory drama—court fights over buffer zones, slow licensing, and enforcement headaches—but the sales and store count show demand is there if the system doesn’t strangle itself.
NYC Weed News View
From our NYC lens, the story of the Green Rush collapse is a warning label: Hype doesn’t build an industry. Policy and math do.
If New York wants to avoid California’s fate, it can’t treat cannabis as an infinite tax ATM or a press-release generator for politicians. The future belongs to operators who are lean, local, policy-literate, and honest about the numbers.
For consumers in NYC, the takeaway is just as simple: If legal weed wants your dollar, it has to compete on price, quality, and trust—not just vibes and buzzwords.