Recreational Cannabis Sales Surge Nationwide While Arizona’s Medical Market Fades Away

Arizona’s medical marijuana program has plunged below 100,000 qualifying patients for the first time in over a decade, highlighting a significant downturn in the state’s medical cannabis market as adult-use recreational sales surge. According to data from the Arizona Department of Health Services, the number of registered medical cannabis patients fell from 100,753 in May to 97,610 in June, and further to 94,754 in July.

The state’s recreational cannabis market, however, continues to thrive. Arizona ranked eighth in the nation in cannabis sales for the first six months of 2024, despite experiencing a two-year low in recreational sales during June. This continuing trend follows the launch of adult-use sales in January 2021, when nearly 300,000 patients were registered in the medical system, which first began in 2012 after Proposition 203 was passed.

Sales volumes reflect this shift. The Arizona Department of Revenue reported that medical cannabis sales dipped below $20 million in June, falling to $18.2 million from $20.7 million in May. The peak for medical cannabis occurred in April 2021 with sales reaching $73.4 million, showcasing a stark decline in the years since.

In June, medical cannabis purchases totaled just 4,390 pounds, a decline from 4,764 pounds in May. This trend continued into July with consumers buying only 4,285 pounds, pushing the year-to-date total to 32,972 pounds.

Conversely, the recreational market also saw a downturn, with sales dropping from $85.8 million in May to $73.8 million in June. This marks the first time recreational sales dipped below the $80 million mark since June 2022. March 2023 remains the high point with adult-use sales peaking at $103.5 million.

Arizona’s overall cannabis market continues to demonstrate impressive annual sales, consistently reaching around $1.4 billion, predominantly driven by adult-use transactions. Data from Green Market Report places Arizona’s adult-use sales eighth nationally, trailing behind states like California and Colorado.

For the first half of 2024, recreational cannabis sales in Arizona totaled $586 million, as states like California topped the chart with $2.08 billion. Cannabis data firm Headset noted a 14.5% decline in Arizona’s combined market over the last two years, which parallels trends observed in Colorado, where sales also decreased by around 17.6% year-over-year.

Taxes generated from cannabis sales play a vital role in funding community services. Under Proposition 207, approved by voters in 2000, Arizona imposes a 16% excise tax on recreational cannabis transactions, in addition to the regular state sales tax. Medical patients are subject to approximately a 6% sales tax, with local governments often adding around 2% more.

In May, the recreational market contributed about $13.7 million in tax revenue, which fell to $11.8 million in June. The combined tax for both medical and recreational sales totaled $22.2 million in May and $19.25 million in June. The excise tax funds are allocated across multiple sectors: one-third goes to community college initiatives, 31% to public safety, 25% to the Arizona Highway User Revenue Fund, and 10% to supportive services for communities affected by past marijuana criminalization.