If you have read recent headlines about the legal cannabis industry in the United States, then you are likely aware that the overall U.S. cannabis industry is experiencing a bit of a contraction lately. For the first time since the start of the spread of adult-use legalization, total jobs and sales both declined year-over-year, albeit only slightly.

At first glance, that information may be a bit perplexing, if not concerning, to casual industry observers. However, that macro data needs to be put into proper context. It should be seen more as the industry experiencing a temporary adjustment phase rather than being indicative of the industry hitting its ceiling. The fact remains that the legal cannabis industry is still largely untapped in the United States, and there is still plenty of room for growth.

For starters, over half of the states in the U.S. have yet to adopt adult-use cannabis legalization. Currently, 24 states have adopted adult-use legalization, along with Washington D.C., with the rest still prohibiting adult-use activity. Even in states that have adopted recreational legalization, the domestic adult-use industry is still in its infancy in some of those markets. In the case of Virginia, adult-use sales have yet to launch, and recreational sales remain prohibited in Washington D.C., despite legalization.

Consider that Texas, Florida, Pennsylvania, Georgia, and North Carolina are all ranked in the top ten for the most populous states in the U.S. and have yet to legalize cannabis for adult use. Those five states have a combined population of roughly 91 million people. That is more than the entire population of Germany and more than double the population of Canada.

Obviously, those five states hold significant untapped adult-use sales potential, and when you add to that 21 more non-legalized states, the State of Virginia, D.C., and the continued growth in newer legalized adult-use state markets, it becomes readily apparent that the legal U.S. cannabis industry is nowhere near hitting its ceiling.

Furthermore, the U.S. medical cannabis industry may be established in a lot of states, but certainly not all states. Some state-level markets provide patients with significant purchasing options, and a wide variety of conditions can qualify a patient to enroll in the state’s medical cannabis program. Yet, other states where medical cannabis is legal still limit patients to “non-smokable preparations,” and the list of qualifying conditions is very limited. Ten states have yet to adopt medical cannabis legalization.

Cannabis laws and regulations are a patchwork in the United States, and interstate commerce remains prohibited outside of limited exceptions for a very short list of cannabis-derived pharmaceutical drugs. 280E, marketing limitations, and hindered access to banking still stunt the industry’s overall growth, and the United States remains on the sidelines when it comes to legal cannabis imports and exports, despite the continued rise of the international cannabis industry, with many other nations now participating in it.

It is important to keep all of this in mind when evaluating the current state of the United States cannabis industry. The industry has come a long way, but it still has a long way to go before it reaches its full potential. In the meantime, there will continue to be ups and downs, winners and losers, and examples of successes and setbacks. Entrepreneurs and investors have to be strategic, methodical, and perform proper due diligence at all times.