Within the cannabis industry, all eyes are on the East Coast.
In some ways, the East Coast is in a similar position with cannabis to where California stood a decade ago. It has a nascent market occupied by very few brands and home to even fewer legal dispensaries, but it has some of the best economies in the nation right now.
While the cost to open a dispensary averages about $1.5 million, opening one in Massachusetts brings in approximately $15 million in sales per year. Looking back at how California evolved, with more than 1,000 licensed dispensaries, there is a staggering amount of growth and abundant wealth creation just waiting on the sidelines for eastern states that legalize.
The Year of Legalizations
The year 2021 is looking bright for sweeping cannabis legalization with an especially glaring spotlight on the East Coast. Public support has reached an all-time high, states are in dire need of tax revenue to supplement depleted budgets and cannabis was the clear winner of the 2020 election. Just recently, the United Nations removed cannabis from Schedule IV of the 1961 Single Convention on Narcotic Drugs, and the U.S. House of Representatives passed a bill to decriminalize cannabis. Following these historic events, there is powerful momentum behind adult-use legislation that could bring about the biggest one-year jump ever in cannabis.
As a result of that enthusiasm, and assuming the federal government’s standing on cannabis remains unchanged, a majority of states will either have established recreational cannabis markets or be in the process of legalizing adult-use by the end of 2021. State budgets are in shambles because of the pandemic, and they are seeking ways to raise money that don’t involve increasing income or sales and property tax during a time when people continue to lose their jobs and businesses continue to close.
Cannabis is the only option that checks all the boxes. It has proven itself to be a recession-resistant revenue source and one that will keep on growing throughout the pandemic. The potential to establish an increasing tax revenue base for cities, towns and states will force the issue upon them since they don’t have any other fair, quick and proven way to raise that much money that rapidly.
However, legislation decisions are most likely remaining within states since, in my opinion, the possibility of federal legalization remains 50-50. Even in the event the Senate flips blue, southern governors will continue to do anything in their power to hold up federal legislation. Meanwhile, states will still legalize on their own regardless of what’s being discussed at the federal level and those along the Atlantic Ocean seem to be first in line.
Quick Growth = Quick Returns
Legalization across the East Coast will bring immense growth, but the degree and velocity of that growth depends on each state’s speed to market, which is determined by how quickly legislators can draft and approve cannabis regulations. Accomplishing a quick market roll-out is especially difficult and time-consuming in the cannabis space thanks to differing regulations between states, which lengthens the learning curve for regulators new to cannabis. Plus, the larger the learning curve, the later tax revenue is collected. States needed tax income months ago, so the last thing they want is a repeat of Maine’s four-year gap between recreational legalization and licensed dispensary sales.
To speed up the roll-out of East Coast cannabis markets, governors must collaborate to create a streamlined regulatory framework. The governors of Connecticut, New Jersey, New York and Pennsylvania had the right idea when they gathered at the multi-state Cannabis and Vaping Summit in 2019 to agree upon a coordinated regional approach to regulating marijuana. Their final core principles included limiting the number of sales licenses, implementing social equity initiatives and limiting the amount of cannabis that can be legally processed. Further, they agreed to establish similar tax rates for cannabis across all four states. This represents a sound structure for a streamlined regulatory process that will expedite each state’s speed to market, bringing cannabis tax revenue and jobs to the region without unnecessary delay.
No one needs to reinvent the wheel when the industry has an example of a fully workable regulatory framework in multiple states. Experienced operators assisting these new states would also help them get to market much faster. Otherwise, as they’re grappling with the many nuances of the cannabis industry and arguing over inconsequential decisions, tax money will continue going to neighboring adult-use states and the illicit market.
The primary concern for cannabis on the East Coast is a situation where states refuse to legalize adult-use ahead of the federal government. If New York fails to follow through a third time, the growth of the entire East Coast market will slow down tremendously.
By withholding cannabis legalization for yet another year, state officials throughout the East Coast would be putting politics ahead of pragmatism. Governors would not only be ignoring the practicality of what the cannabis industry is trying to accomplish, but also turning a blind eye to what is best for their state.
It all comes down to the state legislators and voters. The arguments for legalizing cannabis are much more compelling than those against it, and with a coordinated approach coupled with insight from adept industry experts, the East Coast is perfectly positioned to experience inordinate growth in 2021 and beyond.