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Cannabis Industry Scores Nearly $5 Billion in Legalization Wins in 2021

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2021 is on pace to be a record-breaking year for legislative recreational cannabis legalization, with the cannabis industry expected to earn $5 billion within four years, thanks to state legislators.

Since Vermont became the first state to legalize recreational cannabis through legislature in 2018, four other states have legalized recreational cannabis through the same process this year: Connecticut, Virginia, New York and New Mexico. Those four states are projected to generate more than $4.5 billion in annual sales by their fourth year of operation and another $500 million in medical cannabis sales after Alabama created a medical cannabis program.

The legislative wins show cannabis legalization is being controlled by lawmakers and governors as opposed to citizens alone. Cannabis was a big winner during the 2020 election with voters in five states voting to legalize cannabis, although South Dakota is facing a legal challenge to the results. In Mississippi, the state Supreme Court overturned the state’s voter-approved medical cannabis initiative. Lawmakers in Ohio recently introduced a bill that would legalize and regulate cannabis in the state, marking the first time such a proposal has been introduced in the legislature.

“This year has shown us that state legislatures are capable of rising to the challenge to end cannabis prohibition,” Karen O’Keefe, director of state policies at Washington, DC-based Marijuana Policy Project, recently said.

New York is expected to begin its cannabis market sometime in 2022 with the state projected to generate $1.1 billion in the market’s first year and $2.1 billion in cannabis sales by the fourth year. The state would allow existing medical cannabis businesses to participate in the recreational market by paying a one-time fee to become dual medical-recreational stores. Cannabis products will be taxed at 13 percent, with nine percent going to the state and four percent going to localities.

New York aims to award half of the licenses to social and economic equity applicants and will also offer fee reductions or waivers in addition to low- or no-interest loans to social equity applicants. Experts believe New York’s social equity program could become the new standard for other states looking to create similar programs.

Connecticut is expected to begin sales in May 2022 and is expected to reach $750 million in annual sales by the market’s fourth year. Sales will be subject to the state’s 6.35 percent sales tax, plus additional taxes based on potency. Municipalities that allow recreational sales would collect a sales tax of three percent.

New Mexico is expected to start sales in April 2022 with projected annual sales reaching $425 million in the market’s fourth year. An excise tax of 12 percent will be placed on retail sales in addition to the local and state taxes that range from five to nine percent. Native American communities will be able to participate in the recreational cannabis market through agreements with regulators.

Virginia is projected to begin cannabis sales in 2024 and is expected to reach $1.3 billion in annual sales by the market’s fourth year. Recreational cannabis will be taxed at 21 percent in addition to the state sales tax of six percent. Municipalities may choose to charge up to an additional three percent. Virginia will offer social equity licenses early on in the licensing process, and successful social equity applicants will have access to low-interest loans.

Senate Majority Leader Chuck Schumer recently introduced a measure to federally legalize cannabis in the U.S. The measure would remove all federal penalties on cannabis, expunge non-violent federal cannabis-related records and letting states decide if and how to legalize cannabis.

“The fact that every member will know once we introduce this legislation—not only that it has my support, but that it will come to the floor for a vote—is going to help move things forward in a very strong way,” Schumer said.