ACT Resources News Update – November 2020
Election season has now come and gone and, whatever your political persuasions, it is clear that cannabis is the big winner of Election Day. In this news update, we’ll take a look at the states that voted to legalize cannabis programs and what the future might hold for these markets. We’ll also examine states with developments to their existing legal cannabis programs. Finally, we’ll review how the industry as a whole fared during the COVID-19 pandemic, and what we can expect in 2021. Here’s a celebratory look at the state of legal cannabis as 2020 comes to a close – based on the results of legalization ballot referendums, the industry has nowhere to go but up!
Cannabis wins big in election season
Voters in all five states with cannabis legalization initiatives on the ballot in 2020 approved the measures, signaling a big win for the national cannabis legalization movement. Arizona, Montana, and New Jersey approved adult use cannabis programs, while Mississippi approved the legalization of medicinal cannabis. South Dakota made history as the first state to legalize both medical and adult use cannabis programs at the same time.
Altogether, the estimated market value of legal cannabis markets in these states totals more than $2.5 billion in just a few years’ time. New Jersey joins Massachusetts and Maine as it legalizes adult use cannabis sales in the northeast, prompting expectations that a “domino effect” will soon cause nearby states – such as Connecticut, New York, and Pennsylvania – to follow suit.
The expansion of the legal cannabis industry into these new markets will compound the growth of the fastest expanding industry in the country. The legal cannabis industry already employs more than 250,000 people (expected to near 300,000 by the end of the year) and pays higher than average wages, surpassing industries like computer programming. Current projections estimate the cannabis industry will employ more than half a million people by 2024.
Maine’s first weekend of legal cannabis sales nets $250,000 in sales
Last month, Maine kicked off its first legal cannabis sales to a roaring start. In the first two days of retail sales, Maine residents spent $250,000 on cannabis products across 6,400 transactions. These sales generated $25,000 in state tax revenue.
Maine was previously projected to represent a $300 million market for the legal cannabis businesses, offering entrepreneurs an opportunity to reap the rewards of a state with a rich tourism economy despite a modest population of 1.34 million people.
Vermont legalizes sales for adult use cannabis
Vermont was a unique state in the cannabis industry. It had legalized adult use cannabis but continued a prohibition on retail sales. That changed last month when Gov. Phil Scott said he would allow a measure in the Senate to become law without his signature.
The bill, S. 54, would make retail sales of cannabis legal and impose a 14% excise tax on all cannabis products. This addendum creates a true commercial cannabis market in Vermont, where residents 21 years of age and older have already been permitted to possess up to one ounce of cannabis without facing a fine.
Tax revenue generated by S. 54 would be earmarked for after-school and summer education programs. A portion of the funds would also be allocated to substance abuse prevention and recovery programs. The bill also includes social justice measures that prioritize licenses for small operations and minority business owners.
Cannabis industry remains strong through COVID-19 pandemic
After suffering an initial hit, there were a lot of positive signs for the cannabis industry at large despite the economic challenges of the COVID-19 pandemic. Not only were many cannabis businesses deemed essential services during the COVID-19 lockdowns, many were able to implement curbside pickup and delivery to continue serving their customers, many of whom found themselves working from home or on unemployment, resulting in a lot of free time to consume cannabis products.
Challenges remain for the cannabis industry however, including limited access to banking and financial services due to the ongoing federal prohibition of THC products. The result has largely been the accumulation of legacy cash among cannabis businesses, especially plant-touching operations like dispensaries and cultivators. Additionally, the fragmented nature of the industry, in which rules and regulations vary significantly from state to state, can make it complicated to operate multistate businesses.
As Congress has shown fresh interest in reforming the legal cannabis industry from the federal level, it is possible that in 2021 legislation like the SAFE Banking Act or the MORE Act are brought to a vote. These laws would help provide access to banking and would deschedule cannabis from the U.S. Controlled Substances Act (CSA), effectively legalizing THC products federally. These measures could go a long way to addressing the lingering challenges to the cannabis industry. Yet, despite those challenges, the industry has continued its meteoric rise.
ACT now, not later
As if the cannabis industry weren’t already exciting enough, major victories at the ballot box on election day have advanced the legalization movement even further. As new states come online with sales, the industry is poised for continued explosive growth, especially after emerging from the COVID-19 pandemic and subsequent economic impacts virtually unscathed. If you are looking to get involved in the cannabis industry or to grow your existing cannabis business, you need experienced and knowledgeable accounting partners. For sound financial advice and tax planning, don’t wait – ACT today!