Any way you slice the recent election results, it’s been a big win for our industry — and the predictions for 2021 are rolling in. Topping them all is the forecast from cannabis researcher New Frontier Data that the U.S. market will grow to $38.3 billion by 2025, an increase of more than 9 percent from their previous prediction.
This is spurred by the expectation that the five states just passing cannabis legalization will begin distribution sooner rather than later. Two-thirds of the country now lives in a state where cannabis is available in the medical marketplace — including states traditionally deemed highly conservative.
In addition, the likelihood of the federal government decriminalizing and/or legalizing cannabis moves closer under the new administration’s stated goals. The MORE Act — Marijuana Opportunity, Reinvestment and Expungement — is still expected to come up for a vote before year’s end. And many leading politicos are taking pro-cannabis stands of late; Senate Minority Leader Chuck Schumer of New York recently tweeted that “it’s past time to end the federal prohibition on marijuana.”
How can businesses best take advantage of the new state marketplaces opening up? First of all, know the law: states are still codifying regulations and there’s going to be a learning period. And be prepared to wait; Arizona, for example, will have an early application period beginning in January for new recreational dispensaries, but with a few exceptions only existing licensed medical providers can apply during this stage.
The new states are also reserving licenses for social equity applicants: minority participants from communities that have been disproportionately affected by strict cannabis law enforcement. Past experience in other states, however, shows this does not always produce the intended results: better-capitalized firms can often submit multiple applications to better their chances in lotteries, or hire employees who have been previously impacted in order to qualify for social equity status. So all eyes will be on how the new states handle the situation.
Speaking of capital, none of the new legislation makes obtaining funds any easier. Without federal action, traditional bank loans continue to be difficult, leaving venture capital, private equity and other alternative sources as the places to turn.
The other issue for businesses to consider is corporate status. Arizona had required its medical cannabis providers to be not-for-profit, but now new recreational licensees can be for-profit entities owned by public companies. Other new states have similarly opened their doors wider, which means greater options for interested businesses.