Since the early days of state-level cannabis programs, speculation has been rampant around federal cannabis reform. Going into 2022, hopes were high as a result of the Democratic trifecta and numerous high-profile politicians claiming cannabis reform as a priority. However, as 2023 rolls around, the federal government still has yet to take significant action. Here, we’ll explore what happened to federal cannabis legalization efforts, when legislation could pass next, and the states most likely to legalize cannabis in the meantime.
Get the Data: 2023 US Cannabis Forecast
Prospects for cannabis reform were promising in April 2022, following the U.S. House of Representatives passing the Marijuana Opportunity Reinvestment and Expungement Act. However, it took months until the bill’s counterpart was introduced in the Senate, and little additional action was taken.
The SAFE Banking Act saw similar stagnation and was blocked from being included in an omnibus spending bill. We have watched this bill evolve unsuccessfully since 2019. SAFE Banking would have made it easier for cannabis companies to use financial institutions and access traditional capital sources and was regarded as less divisive than a plan for fully legal weed.
With a slim Republican majority in the House, federal cannabis reform seems unlikely in 2023 or 2024. Republicans tend to follow the “Hastert Rule,” an informal principle dictating legislation will not be voted on unless a majority of the governing party supports it. Though many Republican lawmakers support reform, it's not likely enough to trigger a vote. With House Speaker Kevin McCarthy's power recently weakened by his rocky election process, any legislation that could cause division within the party is unlikely to find its way to the floor.
After the prominence of cannabis in Democratic campaigns during the 2020 election cycle, even being tenuously embraced by historically anti-drug candidates such as President Biden, the lack of action taken during the 2021-2022 legislative session is a disappointment. Though Democrats have vowed to continue pushing for reform, the institutional barriers now in place mean that the industry will likely have to be looking toward November 2024 for the signs that serious legislative initiatives will be on the horizon.
Which States are Likely to Legalize?
With three states already having implemented cannabis programs in 2023, the year is off to a strong start at the state level. In addition to states like Maryland implementing their regulatory frameworks, expect proposals to continue making their way into legislative halls across the nation. So, which states will legalize weed next? Here are a couple of states that have the potential to pass legalize cannabis before the end of the year.
Exploring Ten New U.S. Cannabis Markets
Minnesota is one of the states to legalize weed in 2023. With a Democrat-led government, legislators are pushing for cannabis reform. Its adult-use market has a relatively high likelihood of success, even if it comes at the cost of the state’s hemp-derived THC market. It would likely take over a year to get sales up and running, given the state’s restricted medical infrastructure at present, adult-use cannabis sales in Minnesota could begin no later than 2026.
Pennsylvania is another state seeing the continuous buzz around adult-use, though such discussions are certainly not new in the state. With its fairly robust medical program, Pennsylvania could skip a lengthy licensing period and provide medical market operators the ability to sell recreationally.
In 2022, PA’s medical market had the second-largest dispensary sales in the country and the sixth-largest market overall at nearly $1.5 billion in annual sales. Adult-use sales will likely start by the end of 2025 with first-year sales expected to eclipse $800 million, growing to nearly $2.6 billion by the end of 2028.
While many other states are likely to legalize weed in the coming years and are likely to have measures introduced to their state legislatures, many of the timelines are uncertain. Among the states expected to tackle medical cannabis reform and implement sales before 2028 are Georgia, Kansas, Nebraska, North Carolina, and Wisconsin.
On the adult-use side, Delaware is likely to continue its efforts for legal cannabis, though they may have to wait until the current anti-cannabis governor leaves office to find success, Hawaii seems poised to tackle the issue, Virginia’s market is stuck in purgatory, and New Hampshire is expected to overcome its conservative streak and formalize a sales framework in the face of overwhelming regional pressure.
The failure to pass cannabis reform in 2022 is a disappointment to industry members and citizens in favor of reasonably controlled substance policies nationwide. However, not all of the legislation introduced would have had a near-term positive effect on cannabis markets.
The Cannabis Administration and Opportunity Act (S.4591) introduced in the Senate would impose a 10% excise tax on large cannabis producers, ramping up to 25% over several years. For smaller and mid-sized firms, this would be halved – increasing from 5% to 12.5%. Without state-level reform, the additional tax burden could very well increase prices, hurt businesses, and negatively impact well-established cannabis markets.
It is difficult to arrive late and expect to tax and regulate an industry successfully doing so at the state level for years. In many ways, it could be better for the federal government to take a hands-off approach to cannabis. Opting to pass banking protections and federal-level decriminalization and de-scheduling would empower the industry rather than imposing additional burdens on already operational businesses.
As we look forward to future federal action, it is worth considering what form the legislation should take to best help early advocates and existing members of the industry.
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