The thick clouds of controversy and regulatory uncertainty surrounding cannabis are beginning to clear. Catalysed in 2013 by Canada’s medical legalisation efforts to transition cultivation from home-growers and government sources to government-licensed producers (LPs), commercial operators sprouted to capture the green field opportunity.1 Five years later, under the progressive leadership of Prime Minister Justin Trudeau, Canada became one of the first developed countries to nationally legalise cannabis for recreational use, expanding the addressable population 100x from 300,000 patients to 30 million adults, and sowing the seeds of a multi-billion dollar industry.2
South of the Canadian border, strict federal regulations have long constrained the industry’s advancement, but a growing tolerance among state governments has helped to offset the headwind, incubating new businesses and drawing in capital to support the embryonic market. Encouraged by this capital formulation, increasingly relaxed regulation, and a slate of favourable legislation on the docket, we expect a softening federal posture toward cannabis in the United States and anticipate that the plant will achieve full legalisation status within five years.
2019 might mark the year that cannabis goes mainstream with states including Connecticut, New York, New Jersey and Illinois looking to legalise recreational use. In 2020, Arizona, Florida, Ohio and North Dakota could also join the recreational ranks while Mississippi, Nebraska and South Dakota contemplate legalising medical use in the same year.3
Scott Canning, assistant vice president, research analyst and Katherine Kelly, assistant vice president, research analyst, Mellon.
1Andrew Kessner. Cannabis. Equity Research Report. William O’Neil+Co., August 20, 2018. Page 4.
3Tom Angell. “These states are most likely to legalize marijuana in 2019.” December 26, 2018. Accessed at: https://www.bostonglobe.com/news/ marijuana/2019/01/02/these-states-are-most-likely-legalize-marijuana/8KjYjG6OQfVON6vO9VbqXP/story.html on January 2, 2019.