The California Effect: 2016 Could Be A Watershed Year For Cannabis Legalization

The California Effect: 2016 Could Be A Watershed Year For Cannabis Legalization

Taylor West

Taylor West, Deputy Director of the National Cannabis Industry Association.

For growers who are looking at the potential for cannabis production but are trying to get a sense for the regulatory lay of the land – know that 2016 could be a watershed year for cannabis legalization.

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That belief was echoed at the Cannabis Business Summit held recently in Denver, Colo., where many of the nearly 2,000 attendees felt that if California legalizes recreational (or “adult use”) marijuana, as looks likely, it could set up a domino effect for much of the rest of the country.

A proposition to legalize cannabis in California narrowly failed in 2010, and there were “lessons learned,” said Taylor West, deputy director of the National Cannabis Industry Association (NCIA), organizer of the event. “If they craft a good initiative, and they’re working on it now, recreational use probably will pass,” she said.

This likely will lead to state-level regulations and legitimization of what already is the largest market in the country for cannabis consumption. The state also has a “significant base” of producers, many of them producing outdoors for several generations.

Nevada, Florida, Ohio Also In Play

Adult-use legalization is likely to be passed, as well, in Nevada in 2016, West said, and Florida could legalize medical use. In 2010, a bill to approve cannabis for medical purposes in the Sunshine State fell just short of a 60 percent vote needed for passage, but cannabis supporters are very optimistic for 2016 – a presidential election year when progressive voters are likely to turn out in greater numbers than they typically do for mid-terms.

“Some very big states are coming online,” West said. “This creates a sense of inevitability for the country, at least for the states that have the potential to go in the direction of cannabis legalization.

Ohio could have an initiative on the ballot this fall called ResponsibleOhio, which would go all the way to legalizing both medical and recreational use. Somewhat controversially, the proposal would establish only 10 producers in a state with more than 11 million residents.

Summit conference panelists debated the wisdom of this restriction, with one suggesting the move was a good way to control quality for consumers, while another decried the potential creation of a constitutionally mandated cabal.

“This could lead to the first billion-dollar cannabis companies,” he said with clear disapproval.

How Many Cultivators Will There Be?

And this, a number of attendees said, is probably the area of greatest uncertainty surrounding cannabis legalization: how many growers (or “cultivators”) are there likely to be, and how large are they likely to get? This is completely a state-by-state issue at the moment. Colorado has not capped its allowable number of medical and recreational cultivators. In medical marijuana, Nevada has many cultivators but only a few dispensaries, while Maryland allows for only 15 cultivators but 100 dispensaries.

National legalization could come as soon as 2020, according to Matt Karnes of GreenWave Advisors LLC. But until then, if not even later, there is likely to be a continuing patchwork of both cannabis laws and approved cultivators, with a long and potentially expensive road for potential growers looking to secure a prized license to produce. Even the criteria to be a cultivator varies by state, West said. Some look for experience, even if it was in another state, while others have a residency requirement. Some base their decisions on a merit system; others have a lottery among growers with a certain base level of expertise and experience.

But for those who do make the cut, the prize could be huge. The size of the U.S. cannabis market is projected to grow from $2.7 billion last year to $10.8 billion in 2019, according to ArcView Market Research. And Karnes said that number could go much higher if cannabis is legalized at the federal level.