Opportunities and Challenges of the Illinois Cannabis Market in 2025

Illinois has cemented its place as one of the leading cannabis markets in the U.S.

As of 2024, the state continues to showcase remarkable growth, with cannabis retail sales surpassing $1 billion by July 1—a milestone achieved nearly two weeks earlier than the previous year, reported Ganjapreneur. 

The Illinois Department of Financial and Professional Regulation (IDFPR) reported that total sales for Fiscal Year 2024 exceeded $2 billion. This figure reflects the sustained consumer demand and the maturity of the market. 

Illinois is an attractive destination for cannabis entrepreneurs because of its strategic geographic location, dense population, and well-defined consumer base. However, this market is not without its hurdles, which we outline below. 

High Prices: A Double-Edged Sword 

Illinois’ cannabis products are among the most expensive in the nation, with prices 89% above the national average. This pricing reflects a tightly regulated market dominated by a few large operators. About 68% of sales come from just 10 brands, highlighting the limited competition, according to a Headset report cited by Illinois Policy. 

While high prices help shield the market from oversupply and commoditization—a challenge in western markets like Oregon and California—they also hinder consumer accessibility.

Neighboring states, particularly Missouri, with significantly lower prices and taxes, attract Illinois consumers looking for better deals. 

The high costs are further exacerbated by Illinois’ tax rates, which are the second highest in the U.S. Illinois imposes a graduated tax rate on cannabis products, ranging from 10% on flower with less than 35% THC to as much as 25% on infused products.

While Illinois’ pricing structure has allowed businesses to maintain healthier margins to support long-term sustainability, these factors also limit in-state consumer spending and drive many to the unregulated market. 

Balancing Stability with Accessibility

Illinois has made efforts to improve accessibility in its cannabis market by expanding retail licenses and emphasizing its social equity program. This initiative aims to create opportunities for individuals disproportionately affected by communities by the War on Drugs to participate in the newly legal cannabis industry. 

However, the program has faced significant challenges, with many social equity license holders struggling to open their businesses.

For example, despite Illinois awarding 192 new dispensary licenses to social equity applicants, only 82 have become operational as of mid-2024. 

Many social equity businesses from retailers to infusers to transporters cite financial barriers, regulatory delays, and high operational costs as hurdles to launching. Critics argue that additional support, such as better access to capital and reduced regulatory burdens, is necessary to ensure the success of these businesses. 

Working With Illinois Cannabis Financial Experts

Partnering with an accounting firm that understands the nuances of the Illinois cannabis market is essential for navigating its unique financial and regulatory complexities. 

The cannabis industry is subject to strict state and federal regulations, including IRS Section 280E, which restricts tax deductions for businesses involved in controlled substances. With 280E, cannabis companies face higher effective tax rates compared to other industries. 

Additionally, the cannabis market often involves complex inventory management and cash flow challenges. Many financial institutions are still hesitant to work with cannabis businesses due to its federal status. 

An accounting firm with experience in cannabis–like CJBS–can help mitigate these risks by offering expertise in tax strategy, financial reporting, and cash management. 

Experienced CPAs in cannabis help businesses remain compliant while maximizing profitability and minimizing liabilities. 

Learn more about our Cannabis Practice leadership team here, and feel free to contact us for a consultation.