How New Adult-Use Markets Accelerate the Expansion of Legal Cannabis

May 5, 2021

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So far this year, Virginia, New York, and New Mexico have legalized adult-use sales, bringing the total of states with adult-use cannabis to 18, in addition to the District of Columbia, Guam and Northern Marianas Islands. With the passage of legalization in these states, more than 108 million Americans aged 21 and over, 43.2% of the country’s adult population, now have access to legal cannabis. While expansion of access to any new states is cause for optimism, these recent moves are notable due to the momentum they will add to further legalization efforts.

New York is the most populous state in the Northeast, with almost 15 million adults age 21 and over. The state’s medical program has seen slow growth since sales began in 2016, totaling just under $111 million in 2020. The adult-use legalization bill signed Mar. 30, 2021 established a new market which is expected to bring in a total of $749 million in sales in 2022, the first full year of adult-use sales.

Source: BDSA

The Empire State’s launch of adult-use sales likely to trigger a domino effect as neighboring states recognize the untenable situation of prohibition. New Jersey’s passage of adult-use legalization in the 2020 election added pressure on New York lawmakers to legalize, with many of them recognizing the amount of potential revenue that would be lost by New Yorkers willing to make a short commute to buy cannabis legally in New Jersey. Similarly, New York launching an adult-use market could push neighboring Pennsylvania to accelerate legalization.

 Soon after New York made news with its legalization, New Mexico Gov. Michelle Lujan Grisham signed a bill to establish an adult-use market in her state, with sales set to start by Apr. 1, 2022. New Mexico has allowed medical cannabis since 2007 and a healthy market has developed there, totaling $177 million in sales in 2020. Adult-use sales are expected to reach $81 million in 2022, with total legal sales forecast to top $261 million. Though New Mexico is only home to 1.5 million people aged 21+, it is the first state neighboring Texas to legalize. Other adult-use markets bordering states with restricted states often see substantial sales due to cross-border buyers, a trend that is expected to be strong in this case given Texas’ strict cannabis laws and large 21+ population.

Virginia also joined the ranks of adult-use cannabis markets, with Gov. Ralph Northam signing a bill Apr. 21, 2021 that will launch an adult-use market as soon as Jan. 1, 2024. With a 21+ population of 6.4 million, Virginia is expected to grow to bring in just under $300 million in total sales in 2024. 

Virginia is the first Southern state to legalize and may signal a turning point in the region regarding cannabis policy. Furthermore, the state’s decision to legalize is especially significant not only as it is the first Southern state to move to adult-use, but also because it may be the start of a wave of states that were former tobacco giants moving to cannabis.

Kentucky, another major tobacco producer, fully leaned into hemp since the passage of the 2014 Farm Bill which allowed for pilot hemp production programs. Kentucky hemp production declined in 2020 after a flooded market caused a price crash in late 2019, but the launch of a lucrative adult-use market in neighboring Virginia may provide incentive for faster cannabis reform.

BDSA expects that cannabis will be legalized federally by 2022, but as many states still have laws criminalizing cannabis, legalization will also need to take place on a state-by-state basis before the country can truly leave prohibition behind. The spread of adult-use legalization to more markets in the South and Southwest could provide momentum for legalization in states where cannabis reform now seems like a pipe dream.

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Tags: Cannabis Industry, Market Trends

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