Recreational cannabis legalization has become an unprecedented trend in the United States, arousing heated debates on its implications for public health. Legalizing access to recreational cannabis may shrink the illicit market as it could be a substitute for illicit substances—the substitution effect. Alternatively, recreational cannabis may serve as a gateway drug to illicit drugs and raise the risk of using illicit substances—the gateway effect. Using novel darknet transactional data along with public health databases, we add evidence to the debate by empirically investigating the impact of recreational cannabis legalization on illicit drug use and mortality. Capitalizing on a quasi-experiment opportunity in which U.S. states legalized recreational cannabis at different times, we found a significant increase in the mortality of illicit drug overdose, along with the initiation and use of illicit drugs after the policy, i.e., the gateway effect. This effect is evident in a significant surge of Bitcoin transactions on darknets—a major source of illicit drugs—after the policy. It is also particularly salient in states allowing higher dosage possession and lower excise taxes on recreational cannabis. Our study contributes novel data to address the public health debate and provide policymakers with timely regulatory recommendations on recreational cannabis legalization.
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