New York became the newest state to legalize recreational marijuana this week, putting it on track to become one of the country’s biggest markets.
Another multibillion-dollar market opportunity will be lucrative for cannabis firms, but industry experts and representatives are taking a wider view of New York. They agree that legalization in a big state like New York would have a national effect on cannabis’ future trajectory, eventually enabling it to lose its federally illegal status.
“New York is certainly a spark for more states to legalize and open up, as well as federal legalization,” said Ross Lipson, CEO and co-founder of Dutchie, a cannabis e-commerce platform that recently secured a $200 million investment from influential tech VC firms.
“This industry deserves to be normalized like other industries,” he added.
According to Marijuana Business Daily, sales of medicinal and adult-use cannabis will total between $16.9 billion and $20 billion in 2020. And, despite the fact that it is already a huge industry, revenues will continue to expand as existing state markets develop and new state initiatives get underway.
“Once you get the big financial players involved and interested — with their clout, their weight, their role as a key cog in the American economy, and their influence with lawmakers — I do think that could be a game-changer,” he said.
According to Chris Walsh, chief executive officer and president of trade publication Marijuana Industry Daily, “if cannabis is in the backyard of the world’s largest companies and financial institutions, they’re expected to take note.”
The timing of New York’s legalization could not be better for the cannabis industry.
Cannabis was one of the few industries to emerge stronger from the pandemic-plagued year of 2020. The new administration and a slim Democratic majority in Congress fueled optimism about federal law changes, as sales soared in areas where cannabis operations were considered vital businesses; state legalization initiatives won a clean sweep at the ballot box in November, and the new administration and slim Democratic majority in Congress fueled optimism about federal law changes.
And the year 2021 has already begun with a flurry of investment activity and legalization efforts, confirming previous bullish predictions about the sector.
Now that New York has legalized adult-use cannabis, there are at least 15 states that have done so, with a few more on the way, including Virginia, New Mexico, and Pennsylvania.
New York’s cannabis tax and regulation legislation contain a range of measures aimed at creating a diverse industry mix of large and small operators, funnelling 40% of tax revenue into underserved areas, expanding medical marijuana access, and enabling delivery services and cannabis cafes.
New York’s annual leisure revenues are projected to hit $1.2 billion by 2023, rising to $4.2 billion by 2027, according to early estimates from consultancy company MPG Consulting.
According to MPG, recreational sales tax revenue in New York could rise from $360 million in 2022 to $1.3 billion in 2027. According to MPG’s market research for the New York Medical Cannabis Industry Association, a controlled adult-use market will generate 76,000 jobs by 2027.
In a research note released Wednesday, Viridian Capital Advisors wrote that the legislation tends to be beneficial to New York’s current operators.
According to Viridian, “As the law stands today, existing operators will be grandfathered long-term advantages, creating an unequal playing field for new entrants,” The ten operators in the New York medical cannabis industry, which include Acreage Holdings, Etain Wellness, Columbia Treatment, Cresco, and Green Thumb, can now have up to four stores. They’d be allowed to open four more stores under the new legislation, with three of the eight being designated for adult recreational use and the others for medical use. Newcomers are permitted to open up to three recreational stores.
In New York, Curaleaf, one of the largest cannabis firms in the country, runs four medical marijuana dispensaries and a production facility. CEO Joe Bayern told CNN Business that the company plans to double its retail footprint and invest millions of dollars in expanding its development and increasing capabilities.
Curaleaf, which has placed itself as an omnichannel consumer goods company that operates its dispensaries and sells branded products to others, sees nothing but positives in expanding the market’s number of operators.
“For us, we want to get our products in as many dispensaries as possible,” he said.