2019 should have been a banner year for the legal marijuana industry, with the governors of populous, liberal states trying to legalize retail cannabis use and sales through their state legislatures. The first and only state to successfully pass recreational marijuana use and sales through its legislature this year was Illinois, while others – New York, New Jersey, New Mexico, and Connecticut – fell short. The Democratic-controlled legislature in New Hampshire also stopped working on a bill after Republican Governor Chris Sununu said he would veto it.
As for why certain states could not get legislation across the finish line and what to expect next, here are a couple of examples:
New York: This state’s bill would have allowed cannabis to be legally grown, sold and used recreationally and created a new state agency to regulate the drug. It would have also expunged the records of individuals with prior convictions of marijuana possession and contributed part of the state tax revenue to communities disproportionately impacted by marijuana arrests. Here’s why it has stalled:
- Although Governor Cuomo prioritized legalizing recreational marijuana, he was ultimately unable to include it in his budget as lawmakers could not agree upon a regulatory framework. Subsequently, the stand-alone bill faced discourse on how to use the revenue from cannabis sales, who would have access to licenses and whether towns and cities could ban marijuana sales in their communities. It also faced mounting backlash from individuals in law enforcement, the medical field and the state PTA. In the end, New York did not have enough votes and ran out of time before the legislative session finished last month.
- Alternatively, the New York state Assembly and Senate moved on and passed a bill to expand the decriminalization of cannabis. Anyone possessing up to two ounces of marijuana would face a capped fine of up to $200 rather than facing potential jail time, regardless of his or her record. It also created a process to allow individuals to expunge prior marijuana convictions, potentially benefiting 600,000 New Yorkers. That said, those convicted of selling cannabis or possessing over two ounces of marijuana could still be punished with jail time.
- Looking ahead, those in favor of retail marijuana legalization are still trying to get the bill passed in 2020. Of course, they’ll have to figure out a way to garner enough votes with the same people currently in the state Senate and Assembly.
New Jersey: This state’s governor campaigned on legalizing marijuana and was trying to pass a bill that would allow the use and sale of cannabis through his state legislature. New Jersey would receive an excise tax of $42 for an ounce of marijuana and dismiss all marijuana convictions and pending charges for up to 5 pounds. Here’s why it failed:
- After over a year of trying, the state Senate decided not to put the bill up for a vote because they did not have enough support. One big hurdle for New Jersey was Governor Phil Murphy and state Senator President Steve Sweeney’s disagreements over taxes. Over 60 towns also took steps to ban marijuana stores from their communities.
- Going forward, state Senator Sweeney said lawmakers will have New Jersey’s residents vote on recreational marijuana legalization in November 2020. He expects that to pass given recent polls in the state that show majority support. Consequently, using retail marijuana will likely not be legal here until 2021 as the state will need time to implement a new regulatory framework.
- Until then, lawmakers have turned their efforts to expanding the state’s medical marijuana program and expunging the records of those with past convictions for possessing small amounts of cannabis.
In terms of what this means for marijuana legalization going forward, here are a few points to wrap up:
- Illinois passing both adult-use and sales of cannabis through its state legislature was a significant tailwind for the marijuana industry. Vermont was the first state to legalize recreational marijuana use through its state legislature, but Illinois took it a step further by being the first to include commercial sales. Prior to Illinois, legalizing sales of retail cannabis was passed by ballot measures. Industry advocates now hope Illinois will serve as an example for other states to follow suit, including New York and New Jersey whose state legislatures could still legalize recreational marijuana sales next year.
- Look towards 2020 for the next major push for retail cannabis legalization either through legislative action or ballot measures/constitutional amendments. Efforts are already underway everywhere from New Jersey, New York and New Mexico to Connecticut, Arizona, Montana and Maryland.
- Why this is important for investors: recreational marijuana is currently legal in eleven states. Put another way, 28% of the US population live in a state where adult-use of cannabis is legal. Whether or not populous US states, such as New York and New Jersey, legalize retail marijuana is crucial for public pot companies in order to increase their total addressable markets and growth rates. The sooner, the better, but “sooner” doesn’t appear to include 2019.