(This story has been updated to reflect Arcview Market Research’s role in the report.)

California’s marijuana market is poised for huge growth after a $500 million drop in legal sales in 2018, according to a wide-ranging report released Thursday.

Key takeaways from the report released by Arcview Market Research and BDS Analytics include:

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  • Legal marijuana sales slid to $2.5 billion in 2018 from roughly $3 billion in 2017 amid the transition to a fully regulated legal system and widespread retail contraction.
  • Sales will hit $3.1 billion in 2019 and $7.2 billion in 2024, which will be “40% larger than Canada and 253% larger than the next-largest state (cannabis market), Colorado.”
  • If such growth is realized by 2024, sales could represent as much as one in four of all dollars spent in the U.S. on legal cannabis.
  • There have been “billions (of dollars) in merger and acquisition activity between October 2018 and June 2019.”
  • The central drag on business and sales growth in California has been the “77% tax and regulatory load imposed by the state on the price of legal products.”
  • Lower-priced generic cannabis products are slowly being replaced by “branded product with better pricing power.”
  • Vaporizer cartridge sales are booming, jumping to $75.6 million in May 2019 from $26.8 million in January 2018.
  • Wholesale flower prices, by contrast, have not fared well since January 2018, mostly because of competition from illicit businesses and the inability of customers to distinguish legal flower from illegal.