3 months after the 2020 election – what’s happening in the cannabis industry?
Three months have passed since the 2020 parliamentary elections. US voters elected a new president, congress, lawmakers and governors – most of whom have already settled in their positions for the legislative year. In addition, voters in five states made cannabis history by legalizing cannabis to some extent, either by establishing markets for medicinal or adult use, or in one case by introducing both at the same time.
In Arizona, Mississippi, Montana, New Jersey, and South Dakota, voters approved legalization. Arizona, Montana, and New Jersey already have medical cannabis programs in place. Montana’s vendor-centric program has a network of smaller operators with acreage and a limited number of pharmacies, while Arizona and New Jersey both have significant multi-state operator (MSO) presence. Mississippi and South Dakota will move from a ban to a medical-only market and to new medical and adult markets.
This article reviews the current status of each state’s emerging legal framework, including updates to schedules and expectations for upcoming launches, as well as possible legal challenges that stand in the way of program implementation.
Arizona Cannabis Market Update
Arizona The medical cannabis industry has had time to prepare for legalizing adult use, with another measure not getting enough votes a few years ago. The medical industry has expanded in the state of Grand Canyon in recent years, and new testing regulations came into effect right before the November elections. Regulators and the industry were ready for a smooth transition, and on January 22nd, sales began at a Harvest location in Scottsdale.
As an MSO-strong market, Arizona’s 131 existing pharmacies were given the first opportunity to apply for retail licenses in existing pharmacies. In addition to Harvest’s Scottsdale site, over 100 retailers have been approved to date, with regulators granting approval with a fast turnaround.
Some of the state’s lower-population counties will be forced to wait until the end of this year for new retailers to obtain licenses in the area. As part of an approval process, 26 licenses will be issued this spring in districts in which there are currently no pharmacies. The Arizona Department of Health will continue to act as the regulator for both programs.
Montana Cannabis Market Update
Earlier this month Montana Legislators turned down a request for a $ 1.35 million budget to fund implementation. The Treasury Department’s efforts to advance the rulemaking and licensing process are currently on hold. Applications are expected to be available this fall and sales are set to begin in early 2022. Several lawsuits were previously filed to prevent the implementation of the measure. So far, none have succeeded.
In the first year, only existing medical license holders can apply for adult use licenses, leaving large national companies largely out of the market. Some estimates suggest that it could generate over $ 230 million in revenue over the next five years.
Mississippi Cannabis Market Update
The Mississippi The state parliament reacted to the proposal of Initiative 65 with its own: Initiative 65A. The legislature’s proposal would not have forced a medical cannabis market into the program, and the legislation failed. Instead, voters approved Initiative 65, which sets up a program of medical cannabis treatment centers, licenses, and a variety of initial medical conditions for which cannabis can be recommended.
The rules are imminent and licensing is expected to begin in time for the program’s launch on August 15, 2021. At the same time, the Mississippi Supreme Court announced on February 1, 2021 that it would hear a legal challenge to the change in April that could delay the implementation of the program.
New Jersey Cannabis Market Update
The New Jersey The legislature has repeatedly stalled in relation to the enabling legislation of public question 1. The change to legalize cannabis in the state allowed ownership, but provided few details on the structure of the market. Despite continued growth in recent years and a significant presence from MSOs, including Acreage, Columbia Care, Curaleaf, Green Thumb Industries, and Verano, state lawmakers have been unable to reach an agreement on initiating operations for adult use.
Forbes said legalization was due to begin on New Years Day – over a month ago – but January 1 came and went without changing the existing ban. Medical patients continue to have access to cannabis through pharmacies, but personal ownership restrictions have not taken effect.
This status quo will continue until the legislature and the governor agree on a legal framework. This includes the future of growing, manufacturing, distributing and the availability of retail licenses, social justice, local restrictions and taxes, among others.
As of this week, a new compromise law is working through the legislature. A group of lawmakers had previously cracked down on the criminal offense of the law against minors, claiming it would disproportionately affect black and brown youth. The same lawmakers remain unhappy, but the bill was passed by the committee.
South Dakota Cannabis Market Update
South Dakota Voters paved the way for legal cannabis in two ways: through a constitutional amendment and a legal electoral initiative for adult (and hemp) and medicinal use, respectively.
Since the election, a legal battle calling the amendment a violation of the state constitution has become an obstacle to implementation. The state governor remains opposed to the change, and a recent lawsuit from the State Highway Patrol superintendent and a sheriff is on trial to overturn the election. Still, Governor Kristi Noem recently requested $ 4 million to start implementation, and cannabis revenues could reach $ 30 million by 2024.
According to MJ Biz Daily, the state tax and health departments are working together to develop adult use and licensing of medicinal cannabis. Market structure details are still limited, but with local authorities unable to ban medical businesses entirely, there will likely be some communities with dual use adult and medical businesses, while other communities will only have medical businesses, similar to in other states, including California. Colorado, Massachusetts and Nevada.
The big picture
While lawsuits threaten to delay or derail legalization efforts in Montana, Mississippi and South Dakota, the MSOs and states they dominate are likely to be the clear winners from the class of new cannabis markets in the 2020 election.
Arizona has already cleared the first major hurdle: sales start; while New Jersey stumbles upon a new start date. In the remaining states, the litigation is expected to close in late spring or early summer. Clarifications on rules, public comment deadlines, and motions are expected in many of these states by the end of this year.
Over the past decade, adult rollouts have averaged over two years: California, Colorado, Massachusetts, and Oregon had extended periods of delays, even before limited early sales. It took Maine lawmakers nearly four years to open a voter-approved market.
Given these deadlines, Arizona and New Jersey are likely to make early sales and beat historical trends. An existing medical market is likely to benefit Montana, while the absence of a market in South Dakota and Mississippi will bring opportunities and challenges.