Cannabis advocates are cautiously optimistic that 2020 will be the year that New York state finally legalizes marijuana for adult recreational use, marking a milestone for the legal business.
Gov. Andrew Cuomo has included legalization in his budget proposal for the new fiscal year, projecting it could generate $20 million in revenue in fiscal 2021, growing to $63 million by fiscal 2022 and $188 million by fiscal 2025.
Passage of such legislation is not a sure thing, however.
A similar effort last year fell apart when lawmakers were unable to agree on the details, specifically the correct measures to ensure that the communities that were disproportionately punished during the 40 year long U.S. war on drugs would benefit from a new legal industry.
Crystal Peoples-Stokes, a Democrat from Buffalo who is New York state Assembly Majority Leader and pro-legalization, welcomed Cuomos proposal.
However, the only legislation that I can support will include a statutory commitment of significant resources directed to communities harmed by mass incarceration resulting from the so called war on drugs, and a robust economic and social equity plan for access to the new industry, she told MarketWatch in emailed comments.
Read also: Marijuana companies are bad at forecasting, analyst says
Cuomo is taking a different approach this year with plans to create a new Office of Cannabis Management to specialize in cannabis regulation and create the framework for medical, adult-use and hemp programs.
Central to the plan are provisions to ensure social equity licensing opportunities. Sales will be restricted to adults of 21 years of age and older and quality controls will be used to ensure the safety and potency of products, including labeling, packaging, advertising and testing.
See: Shorting cannabis stocks was a billion-dollar idea in 2019
These efforts will be done in coordination with neighboring states Connecticut, New Jersey and Pennsylvania, Cuomo said in a statement. Further plans include the creation of a Global Cannabis and Hemp Center for Science, Research and Education with SUNY and other partners.
Experts agree that the time is ripe for New York to fully legalize the drug with public support at an all-time high. A Siena College poll released on Monday found voters in favor of legalization by a 58% to 38% margin, the highest level yet recorded by Siena.
Rob DiPisa, co-chair of the Cannabis Law Group at law firm Cole Schotz, said hes hopeful but also a bit skeptical about a deal being done. Its the same lawmakers and the same issues, he said.
Still, the states $6 billion budget deficit may persuade some skeptics of the need to create a new revenue source and taking a unified approach with other legislatures may also act as a catalyst, he said.
Read: Cannabis stocks rocked as FDA warning undermines case for CBD investments
Cannabis alone cant plug all the deficits, but it can be part of a cocktail of revenue generation, he said. And working with neighboring states makes sense to ensure the tax structures are similar and discourage cross-border buying that would sees states compete for revenue.
Coming a little late to the cannabis party 11 states and the District of Columbia have already passed laws legalizing recreational cannabis use gives New York the advantage of learning from others, said DiPisa.
They are taking some social equity measures from Illinois. So far, no state has got everything right, he said. Illinois started legal sales of cannabis on Jan. 2.
See: Drakes attempt to trademark Canadas weed warning label hits a stop sign
Then there is the thorny issue of taxation.
Cuomo is proposing three levels of taxes, starting with a 20% tax on the sale of product to a retailer. Cultivators would be taxed at the rate of $1 per dry weight gram for flower, at 25 cents per dry weight gram of cannabis trim, and at 14 cents per gram of wet cannabis. Local counties or cities with a population of 1 million or more would be entitled to another 2% sales tax.
As California companies know all too well, high taxes can have the effect of truly crippling the nascent sector as it makes it all but impossible for companies to compete with the black market, which continues to dominate in the Golden State.
A recent report by Boulder, Colorado-based BDS Analytics and San Francisco-based ArcView Market Research found that about 80% of cannabis transactions in California are black-market deals, eating into the revenue available to legal players.
A slow and complex licensing process in California has also meant fewer store openings than expected, further exacerbating the problem. Companies unable to access the market are now running out of money, and many are laying off staff, cutting costs and getting creative with fundraising.
Read now: U.S. pot retailer MedMen says its trying to use stock to pay its bills amid cannabis industrys cash crunch
Related: Cannabis companies are having a horrible summer as scandals mount and stocks slide
The situation is almost as dire in Canada, the first G-7 country to legalize weed for adult use in October of 2018. Canadian companies have also suffered from a slower-than-expected rollout of retail stores that has allowed the black market to thrive. MKM analyst Bill Kirk said the stubborn price gap between legal and illicit weed is encouraging Canadians to use the black market. The average legal price in the fourth quarter was C$10.30 ($7.83) a gram in the legal market versus C$5.74 a gram in the illicit market.
Cristina Buccola, founder of Cristina Buccola Counsel PLLC and a former general counsel at publication High Times, said taxation is key. If its too high, it shuts down the industry before it begins.
But its also important how tax revenue is spent and Buccola would prefer to see a plan to reinvest some of the money raised in services for the very communities that were devastated during the years of prohibition.
Plenty of people who have been negatively affected by prohibition might not want a license, for example, she said. But they might want to work on mental health issues, or job training. Thats the kind of community reinvestment we need to see.
Buccola agreed that addressing New Yorks enormous illicit market is a challenge, but a key factor in creating a viable industry. Its about bringing the actors from the legacy market over to the legal market and that will take time. We need to ask what services those people need to make that change.
See: Aphria stock slides on weaker-than-expected earnings, but other cannabis shares shine
Whatever happens in 2020, experts agree that New York is a major market for the industry and bringing in New Jersey, Connecticut and Pennsylvania at the same time would be a big move forward.
Those are monster markets and we already have Massachusetts, said Korey Bauer, portfolio manager at the Cannabis Growth Fund from Foothill Capital Management. It would be a big step forward to descheduling at the federal level.
The ETFMG Alternative Harvest ETF MJ, -4.65% has fallen 40% in the last 12 months. The S&P 500 SPX, -0.90% has gained 26% in the same time frame, while the Dow Jones Industrial DJIA, -0.58% has gained 19%.
Cannabis Watch: For all of MarketWatchs coverage of cannabis companies: Click here
- A Bill to End the War on Drugs - Psychiatric Times - June 18th, 2021
- Vision for Justice Campaign Demands an End to the War on Drugs - Civilrights.org - June 18th, 2021
- Poll: Abandon The War On Drugs And Decriminalize - The Appeal - June 18th, 2021
- On anniversary of the war on drugs, CT sends recreational cannabis bill to Gov's desk - FOX 61 - June 18th, 2021
- 50 years later, end the war on drugs | Columns | stardem.com - The Star Democrat - June 18th, 2021
- Why Mexico Needs to Demilitarize the "War on Drugs" - The National Interest - June 18th, 2021
- Oregon's Pioneering Drug Decriminalization Experiment Is Now Facing The Hard Test - NPR - June 18th, 2021
- Congressman Cohen Questions Expert Witnesses at a Hearing on Sentencing Reform - Congressman Steve Cohen - June 18th, 2021
- 50 years in, the war on drugs is an unmitigated disaster - Politics.co.uk - June 4th, 2021
- Bidens proposed budget keeps a block on recreational weed sales in Washington, DC - The Verge - June 4th, 2021
- Industry VoicesVaccines are pivotal in the war on COVID-19, but better treatments for acute COVID patients are critical - FierceHealthcare - June 4th, 2021
- Missouri Feels the Pain of Drug Dependency and Overdose More than Most States - Flatland - June 4th, 2021
- Human Rights Watch Urges Congress to Support the MORE Act - Human Rights Watch - June 4th, 2021
- 'Crack: Cocaine, Corruption & Conspiracy' Exposes The Truth About The War On Drugs - KALW - May 22nd, 2021
- When the Black Panthers and Young Lords Teamed Up to Fight Addiction with Acupuncture - Hyperallergic - May 22nd, 2021
- Bill to Decriminalize Possession and Personal Use of Psychedelics Headed for Full Senate Vote - EastCountyToday - May 22nd, 2021
- Cookies and WebberWild Join Forces to Launch Cookies U - PRNewswire - May 22nd, 2021
- Herbarium Hosts The CBX Takeover for The Last Prisoner Project - PRNewswire - May 22nd, 2021
- Judge rejects plan to ban people with drug arrests from the Tenderloin | 48 hills - 48 Hills - May 20th, 2021
- Cannabis may be legalized, but criminal justice reform is still needed - The Commonwealth Times - May 9th, 2021
- How Washington Lost the Ultimate Drug War - LA Progressive - May 9th, 2021
- "Belly of the Beast" Excerpt: The War on Drugs and the War on Obesity - Wear Your Voice - May 4th, 2021
- In final case the court will hear this term, profound issues of race, incarceration and the war on drugs - SCOTUSblog - May 4th, 2021
- We Need To Recognize That The War In Afghanistan Is Not Our Longest War - The Fresh Toast - May 4th, 2021
- COVID has kept some struggling with drug addiction from getting help - WQAD.com - May 4th, 2021
- Weed Limit: Pot prohibitionists regurgitate tired tropes from the bygone days of the War on Drugs - Tucson Weekly - May 4th, 2021
- CHRONICLE: How the pandemic changed the war on drugs - KETV Omaha - April 25th, 2021
- Six Things Feminists Should Know About the War on Drugs - Ms. Magazine - April 25th, 2021
- War on drugs, and peace - The Riverdale Press - April 25th, 2021
- In Opinions: Yes, the War on Drugs disproportionately targets minorities - The Signal - The Signal - April 25th, 2021
- 10 Famous Entrepreneurs Who Are Against The War On Drugs - Benzinga - April 25th, 2021
- Washington AG urges legislators to 'move away from a war on drugs' - KUOW News and Information - April 25th, 2021
- These Beauty Brands Are Trying to Fix the Damage Caused by the War on Drugs - Allure - April 25th, 2021
- When Crack Kills: Media, Misinformation and the Truth About the War on Drugs - The Root - April 25th, 2021
- Drug Take Back Day providing a safe way to dispose of unused or expired medications in Toledo - WTOL - April 11th, 2021
- Opinion | After Blake, will Washington state repay victims of the war on drugs? - Crosscut - April 9th, 2021
- Baltimore ends war on drugs with plot line straight from The Wire - The Independent - April 9th, 2021
- Tusinski: Weed is winning the war on drugs. Good. The Rocky Mountain Collegian - Rocky Mountain Collegian - April 9th, 2021
- President Biden isn't 'too busy' to carry out the cruelties of the Drug War - Leafly - April 9th, 2021
- Drug war logs 186 killings in first quarter of the year amid surge in COVID-19 cases - Vera Files - Vera Files - April 9th, 2021
- States Keep Repeating the Same Mistake With Marijuana Legalization - Slate - April 9th, 2021
- A Murderous Plague in the Philippines - The Bullet - Socialist Project - April 9th, 2021
- Name Ministers, cops involved with drug dealers: Manipur Congress - The Hindu - April 9th, 2021
- 'Has Marijuana Changed or Have We?' - Syracuse University News - April 9th, 2021
- The US War on Drugs is Driving the Displacement Crisis - FPIF - Foreign Policy In Focus - April 4th, 2021
- Baltimore: How one of America's deadliest cities ended the war on drugs - with help from The Wire - Telegraph.co.uk - April 4th, 2021
- Greens pledge to end 'failed' war on drugs and tackle crisis with health policy - HeraldScotland - April 4th, 2021
- Disastrous US Drug War Is Key Driver of Displacement in Central America - Common Dreams - April 4th, 2021
- Senate Democrats pledge to reform marijuana laws and repair the damage done by the war on drugs - The Independent - April 4th, 2021
- Indiecast: Looking Back To 2011 With The War On Drugs, And More - UPROXX - April 4th, 2021
- Manipur: Drug peddler arrested with 84 kg of opium worth over Rs 4 crore - The Indian Express - April 4th, 2021
- Opinion: Treat Drug Use Like the Public Health Risk That It Is Maryland Matters - Josh Kurtz - April 4th, 2021
- Baltimore City State's Attorney Marilyn Mosby: 'The War on Drugs Is Over' - Essence - March 31st, 2021
- Bill Maher Blasts America's Excessive Spending And 'Drug War' On HBO's 'Real Time' - Decider - March 31st, 2021
- Saskatchewan First Nation creates its own police force to enforce a war on drugs - Toronto Star - March 31st, 2021
- War on drugs! - The Point - The Point - March 31st, 2021
- Biden, Harris showing their true colors with their long-standing war on 'drugs' - Southgate News Herald - March 31st, 2021
- CHR finds strong indication of intent to kill in Dutertes war on drugs - GMA News - March 31st, 2021
- CA Supreme Court issues historic ruling its unconstitutional to detain people who cannot afford bail; Plus: How will Oakland spend its federal... - March 31st, 2021
- Poundmaker Cree Nation declares state of emergency to fight the war on drugs - Global News - March 31st, 2021
- Firms and labour markets in times of violence | VOX, CEPR Policy Portal - voxeu.org - March 31st, 2021
- Fluresh Invests In Next Generation Of Cannabis Industry With The Launch Of The 'Fluresh Accelerator' Program - PRNewswire - March 31st, 2021
- The Biden Administration Takes a Step Toward Undoing the Damage of the War on Drugs - Slate - March 21st, 2021
- The New War-on-Drugs Target: White House Staffers - National Review - March 21st, 2021
- Opinion | The United States should decriminalize all drugs - University of Pittsburgh The Pitt News - March 21st, 2021
- PAX Labs Explores the 'Human Toll' of America's War on Cannabis - Muse by Clio - March 21st, 2021
- Bounty programs: Ineffective in the war on money laundering - The Conversation CA - March 21st, 2021
- Billie Holiday was the godmother of civil rights: Andra Day on playing the first lady of blues - VOGUE India - March 21st, 2021
- How The War On Drugs Reinforced Structural Racism - Benzinga - March 7th, 2021
- The war on drugs took him across the country. Now, he's back home to lead the DEA's Houston office. - Houston Chronicle - March 7th, 2021
- Why It's Time to Abandon Drug Courts - Crime Report - March 7th, 2021
- Philippines drug war victims land in leased graves that expire - Los Angeles Times - March 7th, 2021
- Cannabis should be regulated like tobacco and alcohol, ADPD says - MaltaToday - March 7th, 2021
- Trump's Policy Failures Have Exacted a Heavy Toll on Public Health - Scientific American - March 7th, 2021
- 'A Sledgehammer To The War On Drugs': Oregon Decriminalizes Illegal Drugs - Here And Now - February 8th, 2021
- New coalition looking to end the War on Drugs - New Jersey Globe | New Jersey Politics - February 8th, 2021
- End the failed war on drugs - Gainesville Sun - February 8th, 2021
- What the War on Drugs Can Teach Us About Fighting COVID-19 - Reason - February 8th, 2021
- The PNP Chiefs' Scorecard on the War on Drugs; Bato Tops in the Number of Kills - Vera Files - Vera Files - February 8th, 2021
- War on use of mushrooms, cacti and ayahuasca has been called off in Cambridge by council order - Cambridge Day - February 8th, 2021