Canada’s Cannabis Market: Legal vs. Illicit Sales

When Canada legalized recreational cannabis in October 2018, one of the federal government’s most pressing goals was clear: eliminate the illicit market. The reasoning was straightforward. If people shifted their purchases to licensed retailers, consumers would gain safer access, governments would collect tax revenue, and unregulated criminal networks would lose their grip on the cannabis trade. But the big question remains: have Canadians actually embraced the legal market?

A new paper¹ published in Drug and Alcohol Review sheds light on exactly that. Drawing on national survey data from 2022 and 2023, the research team asked Canadians not only where they bought their cannabis but also how much they paid and what forms they purchased. The results provide one of the clearest pictures yet of how legalization has reshaped consumer habits and what’s still driving some people underground.

How Much Cannabis Canadians Buy Legally vs Illegally

The headline figure is striking; Canadians reported that 78% of their cannabis purchases in the past year came from legal sources. That means the majority of consumers are now choosing licensed dispensaries or government-run shops over street dealers. Compared to the early years of legalization, when only a fraction of purchases flowed through legal channels, this marks an undeniable success.

But the 22% that still comes from illegal sources shouldn’t be ignored. It reflects ongoing challenges in affordability, accessibility, and consumer trust. If legalization was meant to eliminate the illicit market entirely, there’s still work to do.

Price Still Matters, But the Gap Is Shrinking

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One of the strongest predictors of whether people buy legal or illegal cannabis is price. Early after legalization, licensed products were significantly more expensive, driving many Canadians to stick with their old suppliers. This new study shows that the gap has narrowed considerably, though it hasn’t disappeared.

For dried flower, the most popular form of cannabis, legal purchases were, on average, 23.8% more expensive than illegal ones. Vapes were about 18.7% higher, while hash was a steep 38.4% higher. But in other categories, like cannabis capsules, the legal market actually offered a better deal, averaging 28.4% lower prices. For edibles, drinks, concentrates, and tinctures, differences were minimal.

What’s important is that the price trajectory has been downward in the legal market. As more producers entered the system and supply increased, prices dropped significantly compared to the early rollout years. Legal retailers have also introduced bulk and value offerings, which helped close the gap with illicit sellers who traditionally relied on discounts for larger purchases.

Quality and Safety: The Legal Edge

Price is not the only factor at play. Many Canadians are willing to pay slightly more for the assurance of quality and safety. Legal cannabis in Canada is subject to strict testing for contaminants like mold, pesticides, and heavy metals, something the illicit market doesn’t guarantee.

Consumers also appreciate the consistency of legal products. Whether it’s a standardized edible dosage or a clearly labeled strain, the regulated system offers a level of transparency that was missing before. That reliability has been key to winning over hesitant buyers, especially those who use cannabis for wellness purposes rather than just recreation.

Why Affordability Matters in Beating the Illicit Market

Still, the lesson is clear: affordability and quality together are what truly erode the illicit market. If legal products are priced too far above street options, consumers, especially frequent users, will continue to seek out cheaper alternatives. But when regulated cannabis approaches price parity while also offering safety and consistency, the balance tips in favor of legal stores.

This dynamic is crucial for other countries watching Canada’s evolving cannabis landscape. If governments want to reduce unregulated supply, they can’t rely on enforcement alone. Market design, particularly around pricing, taxation, and competition, matters just as much. Canada has shown that lowering legal prices and maintaining strict quality standards is a powerful combination for shifting consumer behavior.

Why Some Canadians Still Buy Illicit Cannabis

Even with progress, about one in five Canadians still reported buying from illegal sources. The reasons are not just about cost. In some regions, especially rural areas, legal stores are still sparse, making illicit dealers more convenient. Others may prefer certain products or higher-potency items that remain more easily available outside the regulated system. And cultural habits play a role too as longtime consumers may simply stick with familiar suppliers.

This highlights that eliminating the illegal market is not a single-step process but an ongoing challenge. Accessibility, product diversity, and affordability must continue to evolve if the legal system is to fully replace its underground counterpart.

The Future of Canada’s Cannabis Market

The study by Hammond and colleagues offers encouraging news: Canada’s legal market is working, and most consumers have embraced it. But it also underscores that legalization is a living policy experiment, one that requires constant adjustment.

For policymakers, the message is simple. Lowering prices through fair taxation and competitive regulation, ensuring wide access to licensed stores, and maintaining strict quality controls are all necessary to keep the legal market attractive. Affordability and quality together, not just legalization on paper, are what truly reduce reliance on the illicit market.

For consumers, the data is a reminder that every purchase is also a choice about the kind of cannabis market Canada will have. Opting for legal products not only provides safer and more reliable cannabis but also helps build a sustainable industry that moves further away from unregulated supply.

The numbers show Canadians are voting with their wallets, and the legal market is winning. The next test will be whether Canada can push that 78% even higher, eventually making the illicit market more of a relic than a competitor.

References:

^{1. Rundle, S., Hong, D. D., Iraniparast, M., Rynard, V., Wadsworth, E., Pacula, R. L., Kilmer, B., & Hammond, D. (2025, August 4). Self-Reported Cannabis Prices and Expenditures From Legal and Illegal Sources Five Years After Legalisation of Non-Medical Cannabis in Canada. Drug and Alcohol Review. Advance online publication. https://doi.org/10.1111/dar.70009}