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In the first part of this three part series on cannabis, Andrew Little, research analyst at Global X, considers the legalisation of cannabis across the US.
Today is 20 April, a date of cultural significance in the long history of cannabis.
2020 was a landmark year for the state-level cannabis industry in the US and 2021 is shaping up to be one as well.
We believe that the US cannabis market is at an inflection point where continued state legalisation will further accelerate sales and help cannabis companies get their footing in advance of potential federal legalisation.
Thus far in 2021, 18 million Americans have gained access to adult-use cannabis through state-initiated legalisation in New York, Virginia, and New Mexico.
Our Take: New York’s adult-use cannabis industry will likely become a critical determinant of market dynamics in other adult-use states, and possibly at the national and global levels if supportive federal cannabis reform materialises.
And though federal law limits how financial services companies can work with the industry, a burgeoning New York cannabis market could push institutions to back the SAFE Banking Act legislation which could ease restrictions.
In our view, the state’s ten existing operators with medicinal licenses will see an outsized degree of success compared to MSOs and other operators who have yet to establish a presence in New York.
What happened? In April 2021, Virginia lawmakers voted to legalise adult-use cannabis by this July, making Virginia the first southern state to do so.
Additionally, those with sentences from marijuana convictions can petition to suspend or modify them.9 Retail adult-use sales are further out — the approved legislation is targeting the first day of 2024.
Our Take: Assuming implementation follows the path paved by April’s legislation, we think it is reasonable to expect that adult-use sales and respective state revenues align with mature-market projections by 2030.
Just last fall, Mississippi voted to legalise medicinal use cannabis, and as of April 2021 Alabama, North Carolina, Texas, Florida, and South Carolina have cannabis-related bills pending with their respective state legislatures.
The Act legalises the purchase and possession of up to two ounces of flower, 16 grams of concentrate, and 800mg of THC-infused edibles for adults aged 21 years and older.
Varying degrees of legalisation appeared on five state election ballots, with voters approving measures in each case.
Projections: Arizona adult-use sales could reach $300m by the end of 2021, on the back of a speedy rollout and existing infrastructure.
Measure 26 calls for the Department of Health to begin reviewing applications for medical marijuana cards as well as licenses for growers and sellers by January 2021.
Obstacles & Implications: Amendment A is imperilled by the fact that the measure passed with a tighter margin of approval than any of the other initiatives discussed in this piece.
We believe that recent legalisation efforts are indicative of more widespread state legalisation that could accelerate the timeline for potential federal legalisation.
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Given the uncertain nature of the regulation of the cannabis industry in the United States, the Fund’s investment in certain entities could, under unique circumstances, raise issues under one or more of those laws, and any investigation or prosecution related to those investments could result in expense and losses to the Fund.
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