Voters in four states — Arizona, Montana, New Jersey, and South Dakota — will decide in November whether to legalize cannabis use for all adults.
Arizona and New Jersey are most likely to legalize the drug, according to Cowen analyst Vivien Azer. Those states have the biggest prospective markets, which could be a boon for some of the largest US cannabis companies.
If New Jersey and Arizona legalize adult-use cannabis, the moves would likely "have overarching positive implications" for the legal-cannabis market, according to Azer. She wrote in a September 10 note that the two states "represent by far the biggest revenue opportunity" among states with ballot referendums in November.
Curaleaf, Green Thumb Industries, Acreage Holdings, and Cresco Labs, all of which have operations in New Jersey and/or Arizona, are well positioned to benefit if adult-use passes in the two states.
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Curaleaf, which has operations in both New Jersey and Arizona, stands to do the best. Azer projected legalized cannabis in New Jersey and Arizona would increase the company's revenue by $64 million in 2021, $201 million in 2022, and $237 million in 2023.
Green Thumb Industries and Acreage Holdings would also gain hundreds of millions of dollars in additional revenue between 2021 and 2023 if New Jersey legalizes cannabis, and Cresco Labs is expected to gain more than $150 million in revenue, Azer estimated.
In Mississippi and South Dakota, voters will decide whether to make cannabis more widely accessible for medical use. If those votes pass in addition to the New Jersey and Arizona measures, US cannabis revenue would increase by $284 million in 2021 and $1.7 billion in 2022, assuming the programs roll out quickly, according to Azer's estimates. By 2025, total revenue would stand at $33.9 billion, up from the current estimate of $30.9 billion, Azer estimated.
"Among the adult-use states, we remain the most optimistic on NJ, which has demonstrated steady favorable polling and grade the state an A," Azer wrote. "We also remain constructive on AZ, though we grade the state a B based on less convincing polling data than NJ."
On the national level, the presidential, Senate, and House elections could all have big implications for the pace of cannabis legalization in the US. Marijuana is federally illegal, but it's legal for recreational use in 11 states, and more than 30 states have legalized medical use. Cowen predicts that Democratic presidential nominee Joe Biden will win the presidential election and that Democrats will also take the Senate.
Biden's polling lead is a "positive sign for the industry,"Azer wrote in a note published on September 7. She added that the real potential for cannabis reform depends on the Senate as opposed to the White House.
"A Democratic sweep means 2021 legalization," she added.
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