New Jersey will be bring in recreational cannabis money at the register by 2019 – others will follow. That’s why the East Coast is becoming the market to watch and could surpass California’s market size.
Since even before the launch of the National Institute for Cannabis Investors I’ve been predicting that New Jersey would legalize cannabis for adult use sooner rather than later.
Yesterday, New Jersey cleared the last notable obstacle left to prove me right – and a recreational use bill could pass the legislature and be signed by the governor as soon as next month.
A joint budget committee of the state Assembly and Senate agreed to send a legalization bill to each house of the legislature. The respective votes will bring about a fast-track debate and vote on each side, but these joint committee meetings are where the fate of a New Jersey law is decided barring some kind of shock move.
The only significant difference between the legislative bill passed yesterday and the plan envisioned by first-year Gov. Phil Murphy is the level of taxes. Governor Murphy originally wanted a 25% tax placed on cannabis, whereas the legislation going to the Assemply and Senate provides for a much lower tax of 12%. Municipalities can add another 2%.
That’s great news for consumers, the businesses who serve them, and sharp investors like ourselves.
New Jersey will move forward once everything is passed – which should happen on the final day of the state legislature’s session, December 17 – and Murphy has signed it into law.
Our contacts in New Jersey believe dispensaries will be selling recreational cannabis within just a few months through existing medical cannabis facilities. Even those who are pessimistic about the time it will take to set up the regulations say it won’t take any longer than six months.
Adding New Jersey to the list will grow the market by at least $640 million. That’s a conservative estimate. It’s much more likely at least worth $800 million.
As great as that number sounds for the cannabis industry, it’s not even close to the biggest takeaway here.
Here’s what matters far more about Thursday’s vote…
Dominos Are Falling in a Hurry
That $640 million or $800 million number, depending on how you look at it, is based on New Jersey residents alone.
It does not count “cannabis tourism,” which in the case of New Jersey will be more like cannabis commuting for the huge population of people living just over a bridge or beyond a tunnel. New York City and Philadelphia are two of the five most populated U.S. cities, according to Census data.
Neighbors will take note. New York already has official discussions about it raging in state capital of Albany and the governor doing an about-face on his formerly anti-cannabis views during this past election season.
New York’s Gov. Andrew Cuomo is going to start having nightmares about millions of New York residents driving right past a medical-use dispensary in his state to purchase recreational cannabis in New Jersey, Massachusetts, and Canada.
All of those potential tax dollars leaving the state to provide good jobs elsewhere will move him and the legislature that began picking up the pace on cannabis reform earlier this year to move even quicker. New York, itself, would add another $2.8 billion to the market.
That’s an even bigger domino to fall and one that will cause some major collateral effects.
The Push of New Markets Will Beat California
Businesses, investors, and cannabis-use advocates saw legalization in California as a sort of golden ticket. It can still get there, but Year 1 of the program has been marred with inefficiencies and sky-high tax rates that have left many black market providers in place.
California has an adult population bigger than all of Canada and a heavy pro-cannabis lean by its residents. So, it will still be a huge success once lawmakers eventually fix the program.
Still, many have their eyes elsewhere.
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That’s because New Jersey and New York will be bringing in recreational cannabis money at the register by 2019, just like Massachusetts.
Other nearby states would be crazy, if not reckless, to do nothing in response.
That’s why the East Coast is becoming the market to watch in a hurry. And don’t just take it from me.
During an earnings call yesterday, KushCo Holdings Inc. CEO Nick Kovacevich predicted that the East Coast collectively would surpass California’s market size over time. That’s why he ordered a warehouse construction project in Massachusetts, one for a facility that will actually be larger than the company needs right now.
Kush, and other experienced companies in the industry – MedMen Enterprises, General Cannabis Corp., etc. – are planning for the future. And that future is eyeing the East Coast recreational market.
Congress Is About to Be Surrounded.
As New Jersey and other eastern states allow recreational cannabis, this will increase the pressure on federal lawmakers in Washington, D.C. Congress already has no fewer than 70 pro-cannabis bills being considered at present – to relax its various restrictions on banking, to change punitive tax laws, to encourage legitimate businesses and researchers to invest more heavily in growth, and so on.
Congress has never had so much of the pro-legalization momentum from the states right in its backyard.
Plus, a congressman from a state with no legal cannabis or only a small medical program will have little incentive to expend precious political capital on fighting legalization when the money it brings in can be used for programs that directly benefit many of his state’s residents. We’re already hearing about funds from cannabis being used out West to make needed repairs on public buildings and schools.
Each piece of news helps complete the puzzle. A vote in New Jersey right now doesn’t just impact the people of New Jersey – it’s so far beyond that now.
And that’s why the Institute is here – we already know what the completed puzzle will look like and we’re going to keep enabling you to build a fortune along the way.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
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November 27 2018