In recent weeks, I’ve covered cannabis legalization measures across the country and in Washington, D.C.
Today, I examine the future of markets in states where adult-use cannabis is either legal or nearly legal.
I looked at a few select states where cannabis use is legal and markets are established. I found an interesting growth pattern in most of those states.
Legal Cannabis Market Size: California, Michigan, Massachusetts, Illinois, New York
Take a look at the chart below:
All told, the cannabis market size in the U.S. is around $20 billion, according to data firm New Frontier Data.
By 2025, the same firm projects that the total legal cannabis market could double, reaching $41.5 billion. This is thanks in large part to states’ legalization initiatives.
The biggest growth over the next year will be in large-market states such as California, Washington and Michigan.
- California could see its market nearly double from $4.4 billion in 2020 to more than $7 billion in 2022.
- Michigan could more than double its market size from $500 million in 2020 to $1.4 billion in 2022.
- Massachusetts could experience similar growth.
- I think Illinois’ projections are soft and that the market will expand faster than analysts realize. It could be in the neighborhood of $2 billion by 2022.
However, we need to consider the size of these states.
California, Illinois and Michigan are populous. It makes sense to think their market size will increase by larger percentages than those of smaller states, such as Oregon or Vermont.
In terms of states that have legalized but haven’t yet made sales, all eyes on are New York.
The state recently passed a measure to legalize adult-use cannabis, but sales won’t actually begin until next year.
I talked about the legalization in New York in a recent episode of the Marijuana Market Update.
Legalization in New York is massive for the broader market.
Forbes recently reported that New York expects to bring in $1.2 billion in sales by 2023, increasing to $4.2 billion by 2027.
Data firm Grand View Research suggested the New York market’s sales could be higher than $7 billion by 2025 — rivaling sales in California.
So, no matter which data point you believe, the point is that sales in New York will be huge — perhaps more than Illinois’ first year of sales.
But we can’t justify this kind of market expansion just based on population.
Legal Cannabis May Boost Usage Trends
So, I dug deeper to see if there was a trend in the market. Something that could point to why expectations for large market growth are so high, even without federal legalization.
I found something extraordinary. You can see it in the chart below:
In 2012, New Frontier Data found that only about 7.1% of Americans used cannabis on a monthly basis, while 11.6% used it at least once a year.
This year, that will balloon to 11.7% of Americans using at least once per month and nearly 17% using at least once per year.
This suggests that more Americans used cannabis recreationally in the past decade.
As we know, more states have legalized. Plus, more Americans have reached the legal age.
One thing is certain: The market is growing. It makes this a perfect opportunity to invest in cannabis-related stocks.
Now, there are hurdles. For one, the licensing process in some states is complex. Others haven’t yet worked it out.
However, experienced cannabis companies that are already licensed in other states have the know-how to navigate those waters.
Cannabis Watchlist Update
Now, let’s look at our Money & Markets Cannabis Watchlist.
The average gains of our seven positions stands at about 48%:
Model gains pulled on April 13, 2021.
A Note on PotNetwork
We have a correction to make as well.
In a recent Marijuana Market Update about the company PotNetwork Holdings Inc. (OTC: POTN), I reported that the company had partnerships with both Tommy Chong and former NFL linebacker Lawrence Taylor.
Well, it turns out that one of those partnerships is not accurate.
According to his management, Tommy Chong is no longer in partnership with PotNetwork and hasn’t been for some time now. Apologies for the oversight.
Where to Find Us
To watch the Marijuana Market Update before anyone else, just subscribe to our YouTube channel and get an alert when we release a new update.
Coming up this week, we’ll have more on The Bull & The Bear podcast and our Money & Markets Week Ahead, so stay tuned.
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.
