If there's one big takeaway from the elections this week, it's that Americans overwhelmingly support cannabis reform.
One-third of Americans will live in places where marijuana is legal for all adults over the age of 21 after four states voted Tuesday to legalize the drug for recreational use, and Mississippi backed legalizing medical marijuana. It's a massive shift from a decade ago, when no state had a legal recreational-marijuana market.
"There are not many issues this country agrees on like they do with cannabis," Ben Kovler, the CEO of the Illinois-based cannabis company Green Thumb Industries, told Business Insider. "It seems to be pretty universal."
Charlie Bachtell, the CEO of US cannabis company Cresco Labs, agrees.
"While there are still a lot of unknowns as it relates to the election, I think one thing we do know is that cannabis won last night," he told Business Insider on Wednesday, the morning after the elections.
On Friday, Decision Desk HQ projected that Democrat Joe Biden will win the presidency. That could give a further boost to cannabis in the US.
Business Insider spoke with seven top executives at US cannabis companies to gain a deeper understanding of how the state legalization victories would affect the industry. The execs said they sent a strong signal to the federal government, no matter who wins the presidency, that legal cannabis is uniquely popular among voters and here to stay.
'Another good year for cannabis'
Vivien Azer, a Cowen analyst, summed it up in a note early Wednesday morning.
"While results are still in play, make no mistake, like 2016, 2020 was another good year for cannabis," she wrote.
She said the results of Tuesday's election added more than $3 billion to her predictions for the size of the US market in the near term. Her team said cannabis in the US would become a $34 billion industry by 2025 and could expand to $100 billion by 2030.
Including the ballot measures that passed on Tuesday, cannabis will soon be legal for medical purposes in 36 states and for recreational use in 15.
What happened in Tuesday's elections
- New Jersey voted to legalize cannabis for adults over age of 21. It's up to the state's Legislature to pass laws governing the new industry.
- Montana will legalize the possession and use of less than 1 ounce of marijuana.
- South Dakota passed both medical and recreational cannabis at the same time, becoming the first state to do so.
- Arizona legalized recreational marijuana after failing to do so in 2016.
- Mississippi passed Initiative 65, a far-reaching medical-marijuana measure. Mississippi voters rejected a narrower medical legalization option on the same ballot.
- Lastly, Oregon passed two measures for drug-policy reform. One decriminalizes the possession and use of all drugs, including cocaine and heroin, and the other legalizes psilocybin-assisted therapy. Washington, DC, passed a ballot measure decriminalizing plant-based psychedelics.
New Jersey is 'the first domino falling in the Northeast'
Cannabis executives said New Jersey, with its proximity to New York City and Philadelphia, represented the biggest prize. And it could be a "tipping point" for other populous, economically powerful Northeastern states to legalize.
"I think it's put a lot of pressure on places like New York and Pennsylvania and Connecticut to do the same thing," said Joe Bayern, the president of the Boston-based Curaleaf, the largest US cannabis company by market value. "This is just the first domino falling in the Northeast, and we think the Northeast could be a really compelling market."
Still, the execs pointed out that the New Jersey ballot measure kicked it over to the state Legislature to come up with laws governing the new industry, meaning that consumers probably won't be able to buy cannabis legally in the state until well into next year. Other states could also be slow to follow.
Jason Ackerman is the CEO of the cannabis company TerrAscend, which has a large presence in New Jersey. He said that though the state could be a "catalyst" for cannabis reform in the Northeast, states like New York and Pennsylvania will have to pass legalization through the legislature — a process that has failed twice successively in New York.
"It can be a little harder than people think to work through the legislative process," he said.
Still, cannabis companies are actively preparing for the Northeast to become a booming cannabis market.
Kim Rivers, the CEO of the Florida-based Trulieve, said that while it was too early to say whether Pennsylvania and other Northeast states would pass recreational marijuana, the company is expanding its operations in Massachusetts, Pennsylvania, and Connecticut. (Pennsylvania and Connecticut allow medical cannabis).
Cannabis companies are scrambling for control of the rapidly expanding legal-cannabis map
Arizona's embrace of recreational marijuana is another huge opportunity for cannabis companies — particularly for Harvest Health & Recreation, which is headquartered in the state.
"I can't overstate how big of a deal it is for our organization," Harvest CEO Steve White told Business Insider. He estimated that the state's market could eventually reach $2 billion.
Already, cannabis companies are jockeying for control of these new markets. AYR Strategies, a New York-based cannabis company, announced on Wednesday that it would acquire three dispensaries and a cultivation facility in Arizona.
Expect to see more deals like this as cannabis companies scramble to control the rapidly expanding legal cannabis map, executives said.
TerrAscend's Ackerman said there was going to be a race to consolidate the industry. "There's lots of room for the top players to consolidate in these states," he said.
Cannabis is federally illegal in the US
But cannabis companies still exist under a cloud of federal uncertainty because cannabis is federally illegal in the US.
Companies that sell or cultivate THC in the US can have a difficult time attracting investors and can't list on major US stock exchanges. They're barred, by and large, from the banking system. They also have to contend with a Reagan-era tax rule, 280E, which raises their taxes.
Prospects for federal action to loosen restrictions on cannabis may depend on which party wins control of the US Senate and presidency, and some races have yet to be called.
Dan Ahrens, the portfolio manager of AdvisorShares MSOS, a US cannabis exchange-traded fund, said cannabis reform was coming, no matter who wins the White House.
"It's just who wins the White House might move it quicker or less quick, but reform is coming," Ahrens said.
Some executives, like Trulieve's Rivers, are confident that the success of cannabis at the state level will spur action at the federal level, even if Republicans maintain control of the Senate.
She said she was looking forward to passage of legislation known as the SAFE Act, which would allow cannabis companies to access the banking system like any other business but stop short of federal legalization. It could be included in the next stimulus bill.
"Certainly if there's a message to be gleaned from last night, it's that cannabis is here, it's real, and it's going to become much more prevalent over time," Rivers said.
This article was updated on November 6 with election results.
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