Five years after legalization, legal cannabis captured 72% of the Canadian market while illegal cannabis dropped from 88% to 24%, but total cannabis spending grew 75%, raising questions about population-level consumption increases.
Policymakers designing legalization frameworks and economists studying cannabis markets.
Illegal market share dropped from 88% to 24% in 5 years
What the researchers found
Before legalization, illegal cannabis was 88.2% and medical 11.8% of the market. By 5 years post-implementation, legal recreational cannabis held 72.0%, illegal dropped to 24.3%, and medical to 3.7%. The overall market grew 75% in size. Illegal expenditures increased between passage and implementation but decreased significantly after legal sales began.
Why it matters
Displacing the illegal market is a primary goal of legalization. Canada has largely achieved this (illegal market down to 24%), but the 75% growth in total spending suggests legalization also expanded overall consumption, which could have public health implications.
The numbers in context
Pre-legalization: 88.2% illegal, 11.8% medical. 5 years post: 72.0% legal recreational, 24.3% illegal, 3.7% medical. Total market grew 75%. Illegal expenditures showed significant decreasing trend post-implementation. Medical had decreasing trend from passage.
How the study worked
Interrupted time series analysis of quarterly national household cannabis expenditure data from 2001 to 2023 in Canada. Examined medical, illegal, and total cannabis expenditures, adjusted for price fluctuations. Assessed changes at both legislative passage (October 2017) and implementation (October 2018).
What this study cannot tell us
Illegal cannabis expenditure data is inherently uncertain. National household survey methodology may not capture all spending. Price adjustments are approximate. The growing legal market may capture previously unrecorded spending rather than representing truly new consumption.
How to read the evidence
Interrupted time series analysis of national expenditure data over 22 years. Strong methodology, though illegal market estimates carry inherent uncertainty.
When this study was published
Published in 2025 with data through 2023.
The bigger picture
Canada is the most mature national legal cannabis market, making these data essential for other countries considering legalization. The trade-off between illegal market displacement (success) and overall market growth (concern) represents the central tension in cannabis legalization.
Questions still open
- How much of the market growth represents previously uncounted illegal spending versus genuinely new consumption? Will the illegal market share continue to decline?
Common questions
Has Canada eliminated its illegal cannabis market?
Is the 75% market growth a concern?
Read the original research
Association of recreational cannabis legalization with changes in medical, illegal, and total cannabis expenditures in Canada.
The International journal on drug policy, 139, 104793
Citation
McDonald, André J; Cooper, Alysha; Doggett, Amanda; Halladay, Jillian; Belisario, Kyla; MacKillop, James. (2025). Association of recreational cannabis legalization with changes in medical, illegal, and total cannabis expenditures in Canada.. The International journal on drug policy, 139, 104793. https://doi.org/10.1016/j.drugpo.2025.104793