How consumers transition between illicit and legal cannabis markets following the implementation of licensed recreational cannabis retail sales: evidence from a national panel with a recent policy shock

Abstract Introduction States across the US continue to legalize recreational cannabis to shift consumers from illicit to regulated markets. Yet evidence on whether the implementation of licensed recreational retail markets increases the share of cannabis obtained legally remains limited. This study examines how the implementation of recreational cannabis retail sales influences cannabis sourcing behavior using nationally representative panel data and recent policy variation. Methods We use three waves of panel survey data collected in June 2024 (pre-retail sales), January 2025, and August 2025. The analytic sample is a balanced panel of 578 adults (1,734 observations). We estimate difference-in-differences models of the proportion of cannabis obtained from legal sources, exploiting the implementation of recreational cannabis retail sales in Ohio in August 2024 within a multi-state context. Models controlled for baseline policy status, demographics, and survey wave fixed effects. Results Legal sourcing varies substantially across policy environments. Individuals residing in states with fully legal cannabis markets report significantly higher reliance on legal sources than those in fully illegal states (31.6 percentage points, p < 0.001). Exploiting the implementation of licensed recreational cannabis retail sales in Ohio, we find a 5.3 percentage-point increase in the share of cannabis obtained from legal sources (p < 0.01), although estimates are sensitive to sample restrictions. Legal sourcing is higher among more educated individuals and lower among Black non-Hispanic respondents. Discussion These findings suggest that the implementation of licensed recreational cannabis retail sales can shift cannabis purchasing from illicit to legal markets in the short term, although the estimated increase is modest, indicating that consumer transitions into regulated markets occur gradually. By directly measuring legal sourcing, this study provides new evidence on substitution between illicit and regulated markets. The results highlight the role of broader policy and market conditions in shaping consumer responses.