Maryland Cannabis: Young Market Shows Promise, But 49% Capture Reveals Growing Pains

Maryland's cannabis market generated $1.16 billion in sales during FY2025 (July 1, 2024 - June 30, 2025)—its second full fiscal year—capturing 49% of the state's total cannabis demand. While this performance surpasses Illinois's catastrophic 30% capture, it falls well short of the 100% displacement achieved by mature markets like Massachusetts, Oregon, and Colorado.

The data reveals a market in transition: reasonable tax policy (12% excise as of July 2025) colliding with insufficient retail density (2.3 stores per 100K adults) and pricing that hasn't yet responded to competitive pressure ($8.28-9.27/gram). At only two years old, Maryland operators haven't had time to build the efficient supply chains that drive consumer-competitive pricing in mature markets.

More predictable: Maryland's medical patient base collapsed 38.5% since adult-use launch—from 140,891 patients (December 2023) to 86,704 (November 2025). Most casual consumers abandoned the $250 annual registration fee once adult-use retail became available, choosing to pay an extra $0.99/gram (12% tax vs 0% medical) rather than maintain medical cards.

The question isn't whether Maryland's market will mature. The question is which path it follows: Massachusetts's competitive pricing model that achieved complete black market displacement, or California's fragmented but underserved market that leaves 37% of consumers buying illegal cannabis despite eight years of legalization.

Market Overview: The Numbers

Maryland Cannabis Market (FY2025: July 1, 2024 - June 30, 2025):

Annual revenue: $1.16 billion ($874M adult-use, $289M medical)

Year-over-year growth: FY2024 (~$1.1B) → FY2025 ($1.16B) = +5.7% growth

FY2026 trajectory (July - December 2025): $596M through first half ($474M adult-use, $122M medical), annualizing to ~$1.2B+ indicating continued market expansion.

Market capture:

• Legal market: 49% ($1.16B of $2.37B total demand)
• Black market: 51% ($1.21M in untaxed sales)

Product breakdown (FY2025 sales):

• Flower: 59.3%
• Concentrates/Vapes: 28.4%
• Edibles: 12.3%

Pricing (FY2026 YTD through December 2025):

• Median price: $8.28/gram
• With 12% tax: $9.27/gram all-in
• Black market estimate: $5-7/gram
• Legal price disadvantage: 32-85%

Consumption data (FY2025, legal consumers only):

• Flower sold: 90.75 million grams
• Legal consumers: 383,779 (49% of 783,220 total)
• Flower consumption: 0.65 grams/day
• Total consumption (flower-equivalent): ~1.1 grams/day

Maryland's consumption validates the empirically proven 1.0 g/day baseline across North American markets—substantially lower than the 1.5 g/day industry assumptions that create phantom demand and drive cultivation oversupply.

Retail infrastructure:

• Active dispensaries: 108 stores
• Stores per 100K adults: 2.3
• Consumers per store: 3,562 (383,779 legal consumers ÷ 108)
• Revenue per store: $10.7M ($1.16B ÷ 108)

Tax structure:

• Adult-use excise: 12% (as of July 1, 2025)
• Medical sales: 0% - fully tax-exempt (no sales tax, no cannabis tax)
• Total burden: ~12% adult-use, 0% medical (among the lowest in legal cannabis)

Consumer behavior:

• Each legal consumer makes 38.1 purchases per year (~3 visits per month)
• Average purchase: 5.68 grams (~1/6 ounce)
• Transaction size indicates regular, moderate consumption patterns

Total Addressable Market: Legal + Illegal Combined

Using Maryland's actual consumption baseline:

• Adult population (21+): 4,746,788
• Participation rate: 16.5% = 783,220 total consumers (legal + illegal)
• Consumption: 1.0 g/day × 365 days = 365g annually per consumer
• Average flower price: $8.28/gram (FY2026 YTD actual)
• Total market demand: 286M grams annually

TAM = 783,220 consumers × 1.0 g/day × 365 × $8.28/gram = $2.37 billion

This represents the complete Maryland cannabis market—both legal dispensary sales and black market activity combined.

Important caveat: This $2.37B TAM is calculated using current Maryland pricing ($8.28/gram average flower price). As the market matures and retail prices compress—following the pattern seen in Massachusetts (71.5% decline), Colorado, and Oregon—the TAM will normalize to approximately $1.0-1.2B (45-50% of current figure). This doesn't represent declining consumption; it represents price normalization from early-market pricing ($8-9/gram) to mature-market competitive pricing ($3-5/gram). Legal capture percentage matters more than absolute TAM dollars—Maryland capturing 49% of $2.37B today means capturing fewer dollars but more consumers as prices drop and the market matures.

Legal Market Capture: The Math

Maryland captures 49% of its total cannabis market:

Calculation:

• TAM (total market): $2.37B
• Actual legal sales (FY2025): $1.16B
• Legal capture: 49%

What this means:

• 383,779 consumers (49%) buy from licensed dispensaries
• 399,441 consumers (51%) buy from black market dealers
• $1.21 billion annually in untaxed black market sales
• Black market remains economically viable despite two full years of legal sales

Cross-Market Consumption Comparison

Maryland's consumption aligns with validated North American baseline:

The pattern is clear: Consumption is consistent at ~1.0 g/day flower-equivalent across all markets regardless of tax rates or regulatory structure. What varies dramatically is legal market capture—determined by pricing competitiveness, retail density, and market maturity.

Maryland achieves 49% capture not through unique consumer behavior, but through policy choices that make black market cannabis the economically rational choice for 51% of consumers.

Pricing Analysis: Why Maryland Costs 2-3x Other Markets

Maryland's consumer pricing ($8.28-9.27/gram all-in) sits among the highest in North America despite the lowest tax burden.

Post-tax consumer pricing comparison:

Maryland's paradox:

• Lowest tax burden (12%) of any comparison market
• Second-highest final consumer price after Illinois
• Result: 49% capture—worse than successful markets (100%), approaching Illinois's failure (30%)

The problem is pre-tax retail pricing, not taxes.

Maryland operators charge $8.28/gram at retail before any taxes—more than double Colorado ($3.18), Oregon ($3.33), Massachusetts ($4.01), and California ($3.43). Even after adding Maryland's current 12% tax (as of July 2025), the final $9.27/gram price remains 2-3x higher than markets achieving complete black market displacement.

Why retail prices stay high:

1. Market immaturity (2 years old):
   • Launched July 2023, only one full calendar year complete
   • Most markets need 24-48 months to achieve price equilibrium
   • Massachusetts took 3+ years to compress from $14.09 → $4.69
   • Maryland down only 9.8% so far ($9.29 → $8.28)
2. Operator efficiency not yet scaled:
   • Medical operators converted to adult-use July 2023
   • Haven't built efficient supply chains for adult-use volumes
   • Still operating at medical-market cost structures
   • Vertical integration being optimized
   • Processing infrastructure still maturing
3. Insufficient retail competition (108 stores, 2.3 per 100K):
   • Not enough density to force true price discovery
   • Similar to California (2.6 per 100K, but CA has low prices from oversupply)
   • Compare to Massachusetts (7.2 per 100K, $4.69-4.81)
   • Limited competition keeps prices high despite low tax burden
4. Medical patient spending patterns:
   • Medical sales (29.3% of market) represent heavier consumption
   • Medical patients average $87.95 per transaction
   • Adult-use consumers average $66.34 per transaction
   • 33% higher medical ticket size reflects heavier usage by tax-exempt consumers

Black market comparison:

• Unlicensed cannabis: $5-7/gram (Mid-Atlantic prohibition premium shrinking as surrounding states legalize)
• Legal cannabis: $9.27/gram (32-85% more expensive)
• Black market price advantage is clear and persistent

When legal cannabis costs 32-85% more than illegal alternatives, 51% of consumers choose black market despite convenience and quality disadvantages. This isn't irrational behavior—it's economic decision-making based on price signals.

Retail Density Analysis: The California Problem

Maryland's retail infrastructure mirrors California and Illinois—the two markets with the worst legal capture rates in North America.

Stores per 100K adults comparison:

Maryland's positioning:

• 2.3 stores per 100K matches California (2.6, fragmented but underserved) and Illinois (2.1, oligopoly structure)—two of the worst performers
• 3,562 consumers per store indicates significant underserving
• $10.6M revenue per store suggests strong demand with insufficient access
• 3x the density gap compared to Massachusetts (2.3 vs 7.2 per 100K)

Geographic distribution reveals severe gaps:

Dispensaries by county (top 5):

• Montgomery County: 18 stores
• Baltimore County: 18 stores
• Baltimore City: 11 stores
• Prince George's County: 11 stores
• Anne Arundel County: 10 stores

Counties with ZERO dispensaries:

• Garrett County
• Somerset County
• Talbot County

What this means:

Maryland's 108 dispensaries cluster in urban/suburban Baltimore-Washington corridor, leaving rural and Eastern Shore areas severely underserved. This creates geographic monopolies where black market dealers maintain access advantages despite legal retail availability.

Compare to successful markets:

Massachusetts (100% capture) distributes 405 stores across urban, suburban, and rural areas—56% of stores operate outside Boston metro. Maine (100% capture) places 179 stores throughout the state, including remote counties. Both markets eliminate the access advantage that sustains black markets.

Maryland's density problem isn't theoretical—it's measurable in the 51% of consumers who buy illegal cannabis because legal retail isn't convenient or competitive enough to justify the premium.

Per-Store Economics: The Revenue Concentration Story

Maryland's $10.7 million per store revenue tells a story of limited licensing creating operator profits at consumer expense.

Revenue per store comparison:

Maryland's $10.7M per store represents the highest revenue concentration among major cannabis markets—even higher than Illinois's oligopoly-protected $7.42M. This isn't operator efficiency—it's limited licensing creating artificial scarcity.

The fundamental tradeoff:

Illinois concentrated $1.96B across 264 stores ($7.42M each) through oligopoly structure (limited licenses, vertical integration requirements), creating exceptional operator profitability through artificial scarcity while achieving only 30% legal capture. Massachusetts distributed $1.65B across 405 stores ($4.07M each), achieving 100% capture through competitive pricing but creating margin pressure on operators.

Maryland currently operates at $10.7M per store—even higher concentration than Illinois's oligopoly—suggesting the state has room to add 1.5-2x more dispensaries without threatening operator viability. California's fragmented market (1,450 stores, $3.04M per store) demonstrates that over-licensing without functional enforcement leads to 63% capture despite low per-store economics. The question is whether Maryland prioritizes operator returns (current path: 108 stores, 49% capture, persistent black market) or consumer access (balanced path: 160-215 stores, 95%+ capture, significant black market reduction).

Per-store revenue this high indicates:

• Insufficient retail competition to force price discovery
• Geographic monopolies protecting premium pricing
• Consumers willing to pay but lacking competitive alternatives
• Significant unmet demand (51% still buying black market)

The policy choice is explicit: Maryland can protect operator margins through scarcity (current path, 49% capture) or prioritize consumer access through competition. The state cannot achieve both simultaneously.

Why Maryland's Capture Is Low: Three Barriers

Maryland's 49% legal capture results from three interconnected problems—not tax policy, which Maryland got right at 12%:

1. High Pricing ($9.27/gram) - But Not From Taxes

Despite having one of the lowest tax rates nationally (12%), Maryland's final consumer pricing ranks among the highest:

• 2-3x successful markets: Oregon ($3.89-4.00), Colorado ($3.66-3.82), Massachusetts ($4.69-4.81)
• 32-85% above black market ($5-7/gram)

Tax burden isn't the problem—retail pricing before any tax ($8.28/gram) is already double competitive markets.

2. Insufficient Retail Density (2.3 per 100K)

Maryland's store count mirrors the worst performers while taxing far less:

• Maryland: 2.3 per 100K, 12% tax → 49% capture
• California: 2.6 per 100K, 23-40% tax → 63% capture
• Illinois: 2.1 per 100K, 25-35% tax → 30% capture

Versus successful markets:

• Massachusetts: 7.2 per 100K → 100% capture
• Maine: 12.8 per 100K → 100% capture

Geographic gaps: 3 counties with zero stores, 68% of dispensaries concentrated in top 5 urban counties.

3. Market Immaturity (2 years old)

Launched July 2023, Maryland operators haven't had time to build efficient supply chains:

• Price compression so far: 9.8% over 29 months ($9.29 → $8.28/gram)
• Massachusetts comparison: 50% compression by year 3, 71.5% total by year 7

Maryland resembles Massachusetts circa 2019—high prices, limited stores, operators scaling from medical to adult-use volumes. The question is which path Maryland follows: competitive expansion (MA model) or limited licensing with persistent black markets (status quo).

Maryland's unique position: Similar density to California/Illinois but vastly different tax policy. Maryland taxes like successful markets (12% vs MA 17-20%, ME 18.7%) but licenses like failed markets (2.3 per 100K vs MA 7.2, ME 12.8).

Understanding Market Capture: The Five Levers

Legal cannabis markets succeed or fail based on five key variables. Maryland's 49% capture results from a mixed performance across these levers:

Price Competitiveness: Legal Disadvantage

Maryland pricing reality:

• Legal retail: $8.28/gram pre-tax → $9.27/gram with 12% tax (as of July 2025)
• Black market: $5-7/gram
• Legal cannabis costs 32-85% more than illegal alternatives

Maryland's excellent tax policy (12%) can't overcome retail pricing that's double successful markets. The price disadvantage isn't caused by taxes—it's caused by insufficient retail competition and market immaturity preventing price discovery.

Retail Density: Insufficient Access

Maryland retail infrastructure:

• 108 active stores
• 2.3 stores per 100K adults (similar to California 2.6, Illinois 2.1—both poor performers)
• Compare to: Massachusetts 7.2, Maine 12.8

Geographic coverage:

• Baltimore-Washington corridor: Dense coverage
• Rural counties: Severe gaps
• 3 counties: Zero stores

This density provides neither comprehensive geographic access nor sufficient competition to force price discovery. Maryland sits alongside California and Illinois—the markets with the worst legal capture rates.

Product Quality: Strong

Maryland's quality controls work:

• Mandatory testing (potency, contaminants, pesticides, heavy metals)
• 6.5% batch failure rate (demonstrates real quality control, not rubber-stamping)
• 87% of licenses inspected annually
• Wide product variety: 59.3% flower, 28.4% concentrates, 12.3% edibles

Legal dispensaries offer tested, consistent products with professional retail environments—a clear advantage over black market alternatives.

Transaction Convenience: Good but Not Exceptional

Positive factors:

• Standard adult-use access (21+, no registration required)
• Professional retail environments
• Extended hours (typically 9am-9pm)
• Expanding payment options

Remaining friction:

• ID verification required every visit
• Purchase limits apply
• Some cash-preferred locations
• Limited delivery infrastructure

The convenience advantage over black markets is real but not overwhelming—legal retail is easier and safer, but requires travel to licensed locations and dealing with some regulatory friction.

Enforcement: Functional

Maryland enforcement strengths:

• Zero unlicensed storefronts (visible success)
• Seed-to-sale tracking operational
• Regular compliance inspections
• Real quality control (6.5% test failures)

Limitations:

• Limited resources for black market interdiction
• Home cultivation legal (6 plants per adult, minimal market impact)
• Black market dealers operate with low enforcement risk

Maryland's enforcement works for the legal market (no unlicensed stores) but can't eliminate black market alternatives when they're 32-85% cheaper and reasonably available.

The pattern is clear: Strong product quality, functional enforcement, and reasonable transaction convenience can't overcome pricing disadvantages and insufficient retail density. Maryland's 49% capture reflects exactly this reality—good fundamentals undermined by structural barriers (limited stores, immature pricing).

Policy Lessons: What Maryland Gets Right and Wrong

What Maryland Got Right

1. Reasonable tax structure (12%)

• Avoided Illinois's catastrophic high-tax trap (25-35%)
• Simple structure (no compounding California nightmare)
• Among lowest tax burdens in legal cannabis
• Demonstrates tax policy alone doesn't determine success

2. Functional enforcement

• Zero unlicensed storefronts (visible success)
• Regular compliance inspections (87% of licenses)
• Real quality control (6.5% batch failure rate)
• Seed-to-sale tracking operational

3. Medical program transition

• Allowed existing operators to convert to adult-use
• Preserved medical access (86,704 patients)
• Avoided Illinois's artificial scarcity
• Created operational continuity

4. Data transparency

• Comprehensive public reporting (sales, transactions, cultivation)
• Enables evidence-based policy refinement
• Rare among cannabis markets

What Maryland Got Wrong

1. Insufficient retail density (2.3 per 100K)

Maryland issued only 108 dispensary licenses for 4.7 million adults—matching California and Illinois, the two worst-performing markets in legal capture. This creates:

• Geographic monopolies protecting premium pricing
• Rural access gaps favoring black market dealers
• 3,562 consumers per store (vs Massachusetts's 2,494)
• $10.6M revenue per store (artificial scarcity, not efficiency)

The fix: Issue 50-110 additional licenses (reaching 3.5-4.5 per 100K, total 160-215 stores), prioritize geographic gaps, allow density increase over 3-5 years as market matures.

2. Pricing remains uncompetitive despite low taxes

Maryland's 12% tax burden (as of July 2025) should enable competitive final pricing. Instead, $9.27/gram all-in ranks among the highest in North America—32-85% above black market ($5-7/gram).

The problem: Limited retail competition (108 stores) allows operators to maintain medical-market pricing despite adult-use volumes. Market still maturing (2 years) means operators are scaling efficiency but haven't reached competitive equilibrium.

The fix: Retail density increase forces price discovery. As competition intensifies, operators must reduce costs (vertical integration, supply chain efficiency, automation) or exit market. Market maturation (24-48 months) typically drives 40-60% price compression.

3. Geographic distribution favors urban/suburban areas

68% of Maryland's 108 stores concentrate in top 5 urban/suburban counties (Montgomery, Baltimore County, Baltimore City, Prince George's, Anne Arundel). Rural counties and Eastern Shore remain severely underserved. Three counties have zero dispensaries.

The result: Urban consumers have reasonable access and price competition. Rural consumers face local monopolies or drive 30+ minutes to nearest dispensary—making black market dealers the convenient option.

The fix: Geographic density requirements (minimum stores per county based on population) or bonus licensing for underserved areas. Maine's rural coverage (56% of stores outside urban areas) provides the model.

The Fundamental Question Maryland Faces

Balanced Growth Model (Competition → Consumer Victory):

• Issue 50-110 additional licenses over 3-5 years (reaching 160-215 total, 3.5-4.5 per 100K)
• Force retail price discovery through measured competition
• Accept moderate margin compression (stores drop from $10.7M to $5-7M annually)
• Achieve 95%+ legal capture over 4-6 years

Limited Licensing Model (Status Quo → Persistent Black Market):

• Maintain 100-150 licenses (2-3 per 100K)
• Protect incumbent operator margins through scarcity
• Accept 55-65% legal capture indefinitely

Maryland cannot achieve both competitive consumer pricing AND protected operator margins. The state must choose whether cannabis policy prioritizes consumer access or incumbent profits.

Conclusion: A Market at the Crossroads

Maryland completed its second full fiscal year of adult-use sales (FY2025: July 1, 2024 - June 30, 2025), generating $1.16 billion in revenue while capturing 49% of total cannabis demand. This performance validates the state's reasonable tax policy (12% excise as of July 2025) and functional enforcement (zero unlicensed storefronts), while exposing the consequences of insufficient retail density (2.3 stores per 100K adults).

The consumer reality:

Maryland achieved partial success—49% of cannabis consumers buy from licensed dispensaries, gaining access to tested products, professional retail environments, and legal protection. But 51% of consumers (399,441 people spending $1.21 million annually) still buy from black market dealers because legal cannabis costs 32-85% more and isn't conveniently available throughout the state.

The operator reality:

Maryland's 108 dispensaries each generate $10.7 million annually—indicating limited licensing creating premium pricing. Operators remain profitable but at the cost of leaving 51% of the market to illegal competitors.

The choice Maryland faces:

Two years is still early to judge final outcomes. Most successful markets needed 24-48 months to achieve price equilibrium and 3-5 years to reach mature stability. Maryland's 49% capture represents early-stage performance, not final results.

But Maryland's current path—maintaining 108 stores while prices stay at $8-9/gram retail—risks replicating California's persistent black market. The state's 12% tax burden (effective July 2025) remains among the best in the country—the problem is insufficient retail density (2.3 per 100K) preventing competition and immature market operators (2 years old) who haven't scaled efficiency yet.

The path forward:

Maryland can follow a balanced competitive model—issue 50-110 additional licenses over 3-5 years (reaching 160-215 total, 3.5-4.5 per 100K), prioritize geographic gaps, force retail price discovery through competition, accept moderate operator margin compression, and achieve 95%+ legal capture. This improves tax revenue through volume while maintaining viable operator economics.

Or Maryland can maintain limited licensing—keep 100-150 licenses (2-3 per 100K), protect incumbent operator margins through scarcity, accept 55-65% legal capture indefinitely, and preside over a permanent black market serving 250,000-300,000+ consumers annually.

Two years in, the data shows a market at the crossroads—reasonable policy foundation meeting insufficient implementation. Whether Maryland pursues balanced growth (95%+ capture through measured competition) or maintains limited licensing with persistent black markets depends on decisions made over the next 24-36 months.

The market has spoken: 49% of consumers choose legal cannabis when it's available and reasonably convenient. The other 51% are waiting for it to become competitively priced and conveniently accessible. How long they wait depends on whether Maryland prioritizes consumer access over incumbent protection.