Could 2021 be the year the legal cannabis industry really and truly becomes a bonafide sector of the U.S. economy?
If the answer hinges on whether federal legalization is finally realized, the answer is still not entirely clear. There is no clear timeline, especially if the Republicans maintain control of the Senate.
But that may no longer be the only factor—not anymore.
That is because the cannabis industry has momentum. And as that continues to build, federal legalization becomes less of a “will it happen” issue, and more of “when it happens” issue. But it is still an issue and one that has its sticking points when it comes to raising capital.
But let’s look at how momentum is gaining.
One of the biggest measures of momentum came just this month when the U.S. House of Representatives passed the MORE Act, or the Marijuana Opportunity, Reinvestment and Expungement Act.
Although the Senate still needs to pass the legislation for it to become law, it marks the first time a chamber of the U.S. Congress has voted to decriminalize marijuana.
Add to that the fact that the incoming Democratic administration has already declared itself in support of the legal pot industry, and the path for the cannabis industry to grow is smoother.
Then, in November, five more states voted to legalize cannabis at the state level. This brings the number of states to have done so to 35, with a few more to follow in 2021.
With the majority of Americans living in areas where cannabis is legal, the momentum gets ratcheted up another notch because why would a state pass up the tax revenue that comes with legalization, yet watch its neighbor benefit from it? And given the strains on state budgets due to the COVID-19 crisis, maintaining resistance becomes harder to justify.
For perspective, consider the fact that in 2019, Colorado, which legalized marijuana in 2014, hit a milestone. That's the year it generated $1 billion in state tax revenue from legal marijuana sales.
More states legalizing the substance means the playing field expands, and that represents the potential for deals to move into those spaces. And the momentum continues to gain.
In fact, according to a report by S&P Global Market Intelligence, the pace of mergers and acquisitions is predicted to accelerate in the cannabis industry in 2021.
The report cites:
"'It's a quickly consolidating market,' Nicholas Vita, Columbia Care's vice-chairman and CEO, said in an interview. 'We think M&A will continue at a pretty rapid pace.'"
Last fall, Columbia Care (OTC:CCHWF) acquired The Green Solution, a large cannabis company in Colorado, in a deal valued at $162.8 million, according to Market Intelligence. Columbia Care also announced a plan to purchase the Los Angeles-based Project Cannabis.
Mounting Global Momentum
There is also movement on a more global scale.
In December, the United Nations voted to reclassify marijuana, setting the framework of how the drug can be regulated.
Although viewed as a largely symbolic move, the UN reclassification opens the door for more countries to pursue research into the medical benefits of cannabis, and contributes to the momentum.
In the end, although the cannabis industry in 2019 did not live up to its performance in 2018 that ignited investor interest, its ability to regain its footing through 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 companies to consolidate and expand, as consumer acceptance grows.Leave a comment