Cannabis Startups and Investing Series

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The states where cannabis may be legal in 2017

Arizona, California, Maine, Massachusetts, and Nevada could legalize cannabis for recreational use

Innovation series by Ronny Kerr
September 19, 2016 | Comments
Short URL: http://vator.tv/n/4731

Editor's note: Our 6th Annual Vator Splash LA conference is coming up on October 13 at the Loews Hotel in Santa Monica. Speakers include Mark Cuban (one of the hosts of Shark Tank and owner of the Dallas Mavericks); Brian Lee (Founder & CEO, Honest Company); Leura Fine (Founder & CEO, Laurel & Wolf ); Nick Green (Co-Founder and Co-CEO, Thrive Market); Tri Tran (CEO & Co-founder, Munchery); Adam Goldenberg (Founder & CEO, JustFab); Andre Haddad (CEO, Turo); Mike Jones (Founder, Science) and many more. Join us! REGISTER HERE.

Though cannabis remains illegal as far as the U.S. federal government is concerned, laws regulating the drug on state and municipal levels have been rapidly evolving over the past several years. Dozens of states have legalized cannabis for limited (typically medicinal) use cases. A few states have decriminalized it, and four states (Colorado, Washington, Oregon, and Alaska) have legalized it for recreational use.

In the upcoming November election, five more states will be voting on whether to join the short list of places where cannabis is fully legal for adult use. Here are those states.

Arizona

If passed, Proposition 205 would legalize possession and consumption of cannabis by adults aged 21 and older in Arizona.

Specifically, an adult would be able to possess up to an ounce of cannabis and grow up to six plants for personal use. There would be a 15 percent tax on the sale of cannabis. And, as in other states where legalization has been enacted, Prop 205 would allow local counties and cities to regulate cannabis businesses. Additionally, there would be fines for consuming cannabis in public places or for possessing over the legal limits.

Today, cannabis is only legal in Arizona for medicinal use. Prop 203, which legalized medical cannabis in the state in 2010, narrowly passed with just 50.1 pecent of the vote.

The market: Given the 15 percent tax, Arizona could earn $113 million in new revenue every year, according to a report by Tax Foundation that looked at per capita sales in Colorado and Washington. That's assuming the market will be larger than $750 million.

The odds: A toss-up. In three separate polls conducted by The Arizona Republic and OH Predictive Insights between April and August 2016, two found the measure opposed by 49 percent and 51 percent of voters (repectively). The third came up with exactly 50 percent of voters in support of the measure.

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California

If passed, Propositon 64 (also known as the "Adult Use of Marijuana Act") would legalize the possession, cultivation, and sale of recreational cannabis to adults aged 21 and older.

Specifically, adults could possess up to an ounce of cannabis and grow up to six plants for personal use. Initially, there would be a 15 percent excise tax on retail sales and cultivation taxes ($9.25 per ounce of flowers and $2.75 per ounce of leaves), though counties and cities could set their own local taxes.

As of now, it's only legal for patients and caregivers to possess and cultivate cannabis for medical use if the patient receives a recommendation from their physician. That's the way the law has been since 1996, when California became the first state in the nation to legal cannabis for medicinal use.

Though California residents voted against Prop 19 in 2010, which would have legalized cannabis for recreational use, the state did pass SB 1449 that same year to reduce the penalty for possession of less than an ounce of cannabis to an infraction, punishable by a $100 fine and no arrest.

The market: Today, California's medical cannabis industry is a $2.7 billion market, according to The ArcView Group, which means it accounts for nearly half of the total $5.7 billion (legal) cannabis industry. The firm predicts that, if Prop 64 passes, the recreational market would add an estimated $1.4 billion in its first year.

The odds: Likely to pass. Two polls by Probolsky Research, one from February and one from August, predict that Prop 64 will pass with about 60.9 percent of residents voting "Yes." Two newer polls have affirmed these results.

For more background:

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Maine

If passed, the Maine Marijuana Legalization Measure (also known as "Question 1") would legalize cannabis for adult use.

Specifically, the measure would allow adults aged 21 and older to possess up to 2.5 ounces of prepared cannabis and cultivate up to six flowering plants for personal use. Cannabis consumption would be restricted to nonpublic places (like your home), but smoking in public would only warrant a $100 citation at most. The initial sales tax would be set at 10 percent for cannabis products.

Cannabis for medical use has been legal in Maine since 1999. Additionally, the state decriminalized cannabis in 2009 when possession of up to 2.5 ounces was reduced to a civil infraction. Notably, Maine's cities of Portland and South Portland have already legalized possession of recreational cannabis within city limits.

And even if Question 1 fails to pass, there's already another very similar proposal—the Maine Marijuana Legalization Initiative—that could potentially make the 2017 ballot.

The market: In 2014, Maine generated approximately $60-75 million in revenue through its medical cannabis program. At the end of 2015, Patricia Rosi (CEO of the Wellness Connection of Maine) predicted the state could earn $26.7 million in tax revenue every year through adult use legalization. (If we're using the 10 percent tax as a basis, then total sales would be around $267 million.)

The odds: A toss-up, leaning toward likely to pass. A March 2016 poll by Maine People's Resource Center found that 53.8 percent of voters support Question 1. Another poll by Critical Insights from the same period found that 55 percent support legalization.

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Massachusetts

If passed, the Massachusetts Marijuana Legalization Initiative (also known as "Question 4") would legalize cannabis for adult use.

The initiative says adults would be able to possess less than 10 ounces in their homes and under one ounce in public. They could also cultivate up to six plants for personal use. Cannabis sales would see state taxes along with a 3.75 percent excise tax. Local cities could also add another two percent tax.

In a reversal of what other states have done, Massachusetts decriminalized cannabis overall first, and then legalized medical use. The state first decriminalized cannabis in 2008, when the penalty for possession of up to one ounce was reduced to a $100 civil infraction. In 2012, the state legalized medicinal cannabis.

The market: ArcView estimates the legal cannabis market would reach $300 million in its first year and triple to $900 million by 2020. Combined with medical cannabis sales, this would put the Massachusetts' total market at $1.2 billion by that time.

The odds: A toss-up. A July poll conducted by Gravis Marketing for Jobs First found that 51 percent of voters oppose Question 4. A more recent poll by WBUR/MassINC found that 50 percent of voters support the measure.

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Nevada

If passed, the Nevada Marijuana Legalization Initiative (also known as "Question 2") would legalize cannabis for adults aged 21 and up.

Specifically, adults could possess up to one ounce of cannabis for recreational use and cultivate up to six plants. There would a 15 percent excise tax imposed on sales of cannabis.

Since 2000, medical cannabis has been legal in the state of Nevada. Additionally, cannabis is decriminalized for adults 21 and up, while it's still a misdemeanor for those under 21.

The market: The Nevada Dispensary Association (NDA) estimates that Nevada would see cannabis sales of around $400 million from tourism alone—and that would account for just 54 percent of sales. So the total market could be as large as $800 million.

The odds: A toss-up. A July poll conducted by KTNV-TV 13 Action News/Rasmussen Reports found that 50 percent of likely voters support Question 2. 41 percent are opposed and nine percent are undecided.

Ed. note: Our 6th Annual Vator Splash LA conference is coming up on October 13 at the Loews Hotel in Santa Monica. Speakers include Mark Cuban (one of the hosts of Shark Tank and owner of the Dallas Mavericks); Brian Lee (Founder & CEO, Honest Company); Leura Fine (Founder & CEO, Laurel & Wolf ); Nick Green (Co-Founder and Co-CEO, Thrive Market); Tri Tran (CEO & Co-founder, Munchery); Adam Goldenberg (Founder & CEO, JustFab); Andre Haddad (CEO, Turo); Mike Jones (Founder, Science) and many more. Join us! REGISTER HERE.

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