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Recreational marijuana sales began in Chicago on Jan. 1, and five states were voting Tuesday on decriminalizing the drug.
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After Election Day 2020, one-third of Americans could live in states with legalized recreational cannabis sales.
Four states — Arizona, Montana, New Jersey and South Dakota — voted on measures to decriminalize marijuana Tuesday, with New Jersey’s initiative declared a winner by the Associated Press just before 10 p.m. Eastern time. Any victories would add to the 11 states that have allowed recreational sales of the drug since Colorado and Washington broke the seal in 2012.
After Illinois and Maine legalized marijuana in 2020, more than 93 million Americans could legally purchase cannabis in their home states, according to census figures; Arizona, Montana, New Jersey and South Dakota would add more than 18 million people. If all of Tuesday’s measures were to succeed , 33.8% of Americans would live in legal states, and just Arizona and New Jersey would push the total to one-third of the U.S. population, according to U.S. census figures.
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New Jersey voters were approving marijuana legalization by a better than 2-to-1 margin Tuesday evening, with 58% of precincts reporting.
“We anticipated an influx of negative publicity and press trying to block the vote [in New Jersey], none of that happened,” said Rob DiPisa, co-chairman of the Cannabis Law Group at law firm Cole Schotz.
“New Jersey will be a big deal because it will be the first mid-Atlantic state to legalize cannabis for adult use. It’s also between Pennsylvania and New York, two states that have been discussing legalization for some time,” DiPisa said. “New Jersey will influence those neighboring states and usher them over the edge, especially because COVID-19 has created big budget deficits.”
Along with the four recreational-marijuana initiatives, Mississippi voted on legalizing medicinal marijuana, which is legal in at least 33 states; the measure was receiving greater than 2-to-1 support with 16% of precincts reporting Tuesday evening. South Dakotans were voting on separate measures to approve marijuana for medical-use or recreational, with results from there, as well as Arizona and Montana, expected later in the evening.
The national election also could have an effect on cannabis-legalization efforts. Former Vice President Joseph R. Biden Jr. and his Democrat running mate, Kamala Harris, have voiced support for decriminalizing marijuana on a federal level. Incumbent Donald Trump has previously voiced support for decriminalizing marijuana but has not openly endorsed Democratic pushes in Congress for pro-marijuana initiatives such as the SAFE Banking Act, which could only grow if the Senate flips.
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“Arguably, just as important to continued cannabis reform as who occupies the White House is which party controls the Senate,” Canaccord Genuity analyst Bobby Burleson wrote in a note on the elections. “With a Democratic-controlled House of Representatives that has been making significant strides as of late in drafting new cannabis-related bills, the Senate has been the major roadblock to virtually all of these initiatives’ ability to become law.”
The largest American cannabis businesses are known as multistate operators, or MSOs, maintaining marijuana businesses in several states despite the continuing federal prohibition on the drug. They are not allowed to list on the major stock exchanges in the U.S. because the business is federally illegal, so many have fled to a small Canadian exchange and list their shares over-the-counter in the U.S.
Some of the MSOs are already operating in states where medical marijuana is legal, including New Jersey and Arizona. Burleson pointed out that Curaleaf is the No. 1 operator in New Jersey and No. 2 in Arizona, behind Harvest Health & Recreation, which also has many stores in Pennsylvania’s medical market that many believe could turn to recreational operation soon.
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“MSOs are well-suited to survive as the market in these new states come online and get more saturated. … It’s those who perfected the craft and can operate lean that will survive,” DiPisa said.
“This is not the industry of five years ago,” he said. “It moves in dog years.”
The legalization of marijuana in Canada in late 2018 as well as large states such as California led to a boom in investment in marijuana companies, but the companies and their stocks have struggled greatly amid shifting regulations, high tax rates and continuing black-market sales.
Much of the remaining investment in the space is betting on the U.S. opening up, with large public Canadian companies such as Canopy Growth Corp. CGC, -2.24% WEED, -2.95% and Aurora Cannabis Inc. ACB, +3.80% ACB, +2.72% — which can list on the major U.S. exchanges because recreational pot is legal in Canada — acquiring warrants to own MSOs and other U.S.-focused businesses if the sale of recreational marijuana becomes federally legal.
Burleson pointed out that Biden voiced support for reclassifying marijuana in the Controlled Substances Act and making medicinal marijuana federally legal — as it is in at least 33 states — could end punitive taxes on pot companies and bring their effective tax rates down from more than 50% to closer to 21% of net income.
