I waited last week to talk about cannabis in 2021 until we knew the results of the Senate runoff elections in Georgia.
The results are in. Both Democrats, Jon Ossoff and Rev. Raphael Warnock, won the seats and granted Democrats the slimmest of majorities in the Senate.
This new political landscape is bound to affect the cannabis market in the new year.
Likelihood of Cannabis Legalization After Georgia Runoffs
The Democrat-controlled Congress will prioritize COVID-19 relief above national cannabis legalization. It will be up to individual states to introduce legislation to legalize adult-use marijuana.
During the 2020 election, Montana, Arizona, Mississippi, New Jersey and South Dakota voters approved measures to legalize either adult-use or medical cannabis in their states.
In the case of South Dakota, voters took the unprecedented step to approve both measures.
States such as New York, Pennsylvania and Virginia will likely discuss legalization this year.
Other states, including Connecticut, Delaware and Ohio, will need to navigate political headwinds, but I won’t be surprised if they get the ball rolling to legalize cannabis this year.
Last week, New York Governor Andrew Cuomo released his plan to legalize adult-use marijuana in the state to “generate much-needed revenue” and “directly support the individuals and communities that have been more harmed by decades of cannabis prohibition.”
Life in a Cannabis-Legal State
Today, more than 235 million Americans live in a state where cannabis is legal in some form.
States will continue to reap the tax benefits of cannabis legalization. States that have already legalized cannabis see taxes as high as 37% on marijuana sales in Washington state. The lowest is 7% in Illinois.
Cannabis spending increased by 25% during the COVID-19 pandemic lockdowns.
Colorado brought in $267 million in marijuana taxes in 2018, while Washington collected $439 million that year, according to the Urban Institute.
With five new markets, the cannabis industry is expected to grow from $13.2 billion in 2019 to $41.5 billion by 2025. That’s a 214.4% increase in five years.
But until cannabis is legalized on the federal level, cannabis companies will struggle to raise capital.
And regardless of legality by state, banks still can’t loan money to companies that partake in an activity that is illegal at the federal level.
The Issue of Illicit Sales
Another problem facing the cannabis market is illicit sales.
New Frontier Data recently reported $16 billion in illegal cannabis sales in eight states.
Illegal cannabis spending totaled around $66.6 billion in 2019.
With illegal sales, communities don’t see the tax money that would otherwise come from legal cannabis spending. With the progressive legalization of the cannabis industry, taxable products in the market will increase, and companies and states alike will see an influx of revenue.
This potential cash flow makes it the perfect time to buy high-quality cannabis stocks. Be sure to check out my Cannabis Watchlist, and tune in to our Marijuana Market Updates for all the details on the best stocks to put your hard-earned dollars in.
The Future of Cannabis After Georgia Runoffs
The U.S. economy is not even close to its pre-pandemic levels, and likely won’t be for some time.
States, counties and local government entities are scrambling to find new revenue so they don’t have to cut critical public services.
Taxing products, such as adult-use cannabis, on the federal level will allow the government to either reduce taxes in other avenues or invest revenue from cannabis sales into other projects.
If Congress and the Biden administration are paying attention, they will note that national support for cannabis legalization is on the rise.
Over two-thirds of Americans — 67%— support full legalization. That’s up from just 41% in 2010, according to The Pew Research Center. General Social Survey and Gallup also put national support for full legalization at more than 60%.
This growing support is sure to impact the stock market, and a growing market means a diversity of stock options. In my most recent video, I’ll walk you through some of the best and most promising cannabis stocks on the market right now.
Cannabis Watchlist Update
Now, let’s talk about the latest addition to my Cannabis Watchlist.
On Monday, I added Planet 13 Holdings Inc. (OTC: PLNHF) to our watchlist. It’s already outperforming the broader market — and even the cannabis market.
You can check out my Cannabis Watchlist here.
Where to Find Us
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Coming up this week, we’ll have more on The Bull & The Bear podcast and our Money & Markets Week Ahead, so stay tuned.
Until next time…
Safe trading,
Matt Clark
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.
