As the United States hovers on the cusp of welcoming a new administration to the White House, entrepreneurs and investors are eagerly awaiting the anticipated sea change in policy that might accompany the change. Among these parties are those that are active in the cannabis industry.
For these stakeholders first prize would be the countrywide legalization of cannabis – however, this is unlikely, even considering the fact that Canada did so in 2018 without any unforeseen negative effects – and considering that Joe Biden, the incoming President, has stated that he supports federal marijuana decriminalization. Realistically what is hoped is that the incoming administration will continue the policy of allowing states themselves to make the legalization decision and regulate the cannabis industry on a state-by-state basis.
Investors in cannabis stocks have been buoyed by the fact that marijuana-related stocks surged after New Jersey, Arizona, Montana and South Dakota voted to legalize recreational marijuana on the day of the election. Those stocks jumped once again when Biden’s official transition began.
To date, 15 states have legalized marijuana use – be that for medical purposes or recreational use. More are expected to follow during 2021. The reason is two-fold. Firstly the marijuana industry brings in much-needed tax revenue – and secondly because those states adjacent to those where cannabis has been legalized are rightly afraid that they will see a flight of tax revenue to the states where legalization has taken place.
The amount of tax revenue generated by legalizing cannabis consumption is not to be sniffed at. Colorado has made public its marijuana-related revenue – and it will make those states where cannabis has not yet been legalized sit up and take notice. Colorado collected in excess of $302 million in taxes and fees on medical and recreational marijuana during 2019. If (however unlikely in the short term) federal legislation legalized the industry it is anticipated that the government would enjoy a windfall of $105.6 billion in federal tax revenue by 2025.
There is also the matter of employment. The COVID-19 epidemic has caused mass unemployment – at percentages last seen during the Great Depression. Many of those who have lost their jobs will not be employed in the same industry even when the cloud of the Coronavirus lifts – too many businesses have closed their doors.
Research published by New Frontiers, which specializes in analyzing the cannabis business proposes that if nationwide legalization took place the result could be an extra 1 million jobs by 2025 – good news for those in search of work, and for the government, which is currently burdened by the costs of paying out unemployment benefits.
The above should serve as an indicator that widespread legalization simply makes sense. Stakeholders (including growers and retailers) are waiting with bated breath to see what 2021 will bring.