Could 2021 be the year in which the legal cannabis industry will truly and truly become a sector of the U.S. economy?
If the answer depends on the achievement of federal legalization, the answer is not yet entirely clear. There is no clear timetable, especially if the Republicans retain control of the Senate.
But that may not be the only factor – not anymore.
It’s because the cannabis industry is booming. And as it continues to accumulate, federal legalization is becoming less about “what’s going to happen” and more about “when it’s going to happen. But it is still a stumbling block to raising capital.
But let’s look at how the dynamic is growing.
One of the key steps in this dynamic was taken this month when the U.S. House of Representatives passed the Marijuana Opportunity, Reinvestment, and Expungement Act (MORE).
Although the Senate has yet to pass the bill in order for it to become law, this is the first time a U.S. House of Congress has voted to decriminalize marijuana.
Add to that the fact that the new Democratic governor has already declared itself in favor of the legal pot industry, and the path to growth for the cannabis industry is easier.
And then, in November, five more states moved to vote for the legalization of cannabis at the state level. That makes a total of 35 states that have done so, with a couple more to join in 2021.
With the majority of Americans living in areas where cannabis is legal, the momentum is accelerating a notch. Indeed, why would one state let the tax revenues from legalization pass through, while watching its neighbor take advantage of it? And given the pressures on state budgets due to the VIDOC-19 crisis, maintaining resistance becomes harder to justify.
To put things in perspective, consider the fact that in 2019 Colorado, which legalized marijuana in 2014, took a major step forward. That’s the year it generated $1 billion in tax revenue for the state from the legal sale of marijuana.
More states legalizing the substance means that the playing field is expanding, and that represents the potential for agreements to move into those spaces. And the momentum continues to build.
In fact, according to a report by S&P Global Market Intelligence, the pace of mergers and acquisitions in the cannabis industry is expected to accelerate in 2021.
The report says:
“‘This is a rapidly consolidating market,” said Nicholas Vita, vice president and CEO of Columbia Care, in an interview. “We expect mergers and acquisitions to continue at a fairly rapid pace.”
Last fall, Columbia Care (OTC: CCHWF) acquired The Green Solution, a large cannabis production company in Colorado, in a transaction valued at $162.8 million, according to Market Intelligence. Columbia Care also announced plans to purchase Los Angeles-based Project Cannabis.
Growing global momentum
There’ s as well a movement on a more global level.
In December, the United Nations voted to reclassify marijuana, setting the framework for the regulation of the drug.
While seen as a largely symbolic gesture, the UN reclassification opens the door for more countries to continue research into the medical benefits of cannabis, and contributes to the momentum.
In the end, although the cannabis industry in 2019 did not match its performance in 2018, which attracted investor interest, its ability to recover from the pandemic that marked much of 2020, combined with the political support it continues to receive, puts its prospects for 2021 in a much stronger position. Watch for business consolidation and expansion as consumer acceptance increases.