New Jersey’s Cannabis Market Falls Short of Its Immense Potential

Legalization With Promise: High Hopes in 2020

When New Jersey voters approved adult-use marijuana legalization by a decisive 67%-33% margin in November 2020, the decision was heralded as a landmark moment in the national cannabis movement. With a densely populated landscape, high median income, and proximity to major East Coast cities, New Jersey seemed poised to become a powerhouse in regulated marijuana commerce.

Yet, nearly five years later, that promise remains largely unfulfilled.

Sluggish Growth: Why New Jersey Lags Behind Smaller States

Despite its ideal conditions, New Jersey’s cannabis industry is underperforming. In 2025, it’s projected to bring in $1.3 billion in cannabis sales. That may sound substantial—until you compare it to Missouri. With a smaller population and lower income levels, Missouri’s cannabis sales are expected to exceed $1.6 billion in the same year.

The 25% higher revenue in Missouri underscores how market structure and state policy—not just population or affluence—determine success. New Jersey’s restrictive policies have hindered legal operators while allowing the illicit market to flourish.

High Prices Driven by Limited Cultivation Supply

One major factor affecting New Jersey’s cannabis industry is the cost of production. The average wholesale marijuana price in the state is $2,600 per pound—more than double the national average of $1,050.

Retail prices reflect this supply crunch. The average cost of flower is $10 per gram in New Jersey—two to three times higher than in more mature markets.

What’s driving these high prices? A lack of cultivators. With only about 50 licensed cannabis cultivators in operation, New Jersey falls far behind other states with more established markets. The state’s complex and lengthy municipal approval process has deterred many would-be growers.

While premium pricing has attracted high-end West Coast brands like Clade 9, Garden Society, and Lowell Farms, it’s also pushed many consumers to stay with unlicensed sources. For many residents, a legal purchase costing over $60 for an eighth (after taxes) simply isn’t competitive.

Local Control Has Fragmented Retail Access Across the State

Another obstacle to New Jersey’s cannabis growth is its fractured retail presence. Although the state has approved about 250 marijuana retailers, only 160 of its 564 cities (just 28%) allow cannabis businesses to operate.

This has resulted in severe clustering, with dispensaries packed into a small number of cities such as Newark, Atlantic City, and Jersey City. Meanwhile, large swaths of the state remain “cannabis deserts.”

Other states like Michigan have implemented financial incentives for municipalities to welcome cannabis businesses. New Jersey, however, offers no such benefits—nor does it impose penalties on towns that opt out. The lack of coordinated policy has led to oversaturation in some areas and glaring gaps in others, reinforcing the illicit market’s presence.

A Controversial Tax Proposal Could Undermine Legal Operators

In 2024, the Cannabis Regulatory Commission (CRC) raised the cultivation tax from $20 to $40 per pound. While this increase took effect in January 2025, Governor Phil Murphy’s proposal to increase that tax to $240 per pound has sent shockwaves through the industry.

A 500% hike would further widen the gap between legal and illegal marijuana pricing. It would also reduce already thin margins for cultivators and retailers who are struggling to stay afloat under heavy regulation and high operational costs.

Rather than curbing the illicit market, such a tax would likely empower it—driving more consumers away from licensed sellers and encouraging unregulated trade.

Proposed Legislation Seeks to Curb the Illicit Market

One recent legislative attempt to rein in the illegal market comes in the form of Bill S4154. This proposal would criminalize both the unlicensed sale and knowing purchase of cannabis products.

While this could offer regulators new tools to combat black market activity, it’s drawn criticism from some cannabis advocates who see it as a step backward into criminalization—a reversal of the voter intent behind the 2020 legalization mandate.

A Smarter Path Forward: Solutions to Unlock the Industry’s Potential

New Jersey’s market still holds enormous potential. To harness it, the state must take proactive measures that empower legal businesses rather than stifle them. These include:

• Expanding Cultivation Access: Simplify municipal processes to license more cultivators and expand supply.
• Incentivizing Retail Expansion: Offer grants or revenue-sharing models to municipalities that allow cannabis businesses.
• Lowering Taxes: Reevaluate cultivation and sales tax policies to promote competitive pricing against the illicit market.
• Supporting Consumer Education: Launch public awareness campaigns on the benefits of legal cannabis and the risks of unregulated products.

Conclusion: The Time for Bold Cannabis Reform in New Jersey Is Now

New Jersey entered the cannabis industry with high expectations—and the fundamentals to support long-term success. But policy missteps, restrictive local controls, and looming tax hikes have slowed progress and empowered illicit operators.

The state still has the ingredients for a thriving cannabis ecosystem. With smart reforms that increase access, lower costs, and support licensed operators, New Jersey can reverse course and live up to the promise that 67% of its voters believed in back in 2020.