[12/27/18] Pot Explosion
The last year was a 12-month champagne toast for the legal marijuana industry as the global market exploded and cannabis pushed its way further into the financial and cultural mainstream.
Liberal California became the largest legal U.S. marketplace, while conservative Utah and Oklahoma both embraced medical marijuana. Canada ushered in broad legalization , and Mexico’s Supreme Court set the stage for that country to follow.
With buzz building across the globe, the momentum will continue into 2019.
Luxembourg is poised to become the first European country to legalize recreational marijuana, and South Africa is moving in that direction. Thailand legalized medicinal use of marijuana on Tuesday, and other Southeastern Asian countries may follow
“It’s not just the U.S. now. It’s spreading,” said Ben Curren, CEO of Green Bits, a San Jose, California, company that develops software for marijuana retailers and businesses.
Curren’s firm is one of many that blossomed as the industry grew. He started the company in 2014 with two friends. Now, he has 85 employees, and the company’s software processes $2.5 billion in sales transactions a year for more than 1,000 U.S. retail stores and dispensaries. Curren hopes to expand internationally by 2020.
“A lot of the problem is keeping up with growth,” he said.
Legal marijuana was a $10.4 billion industry in the U.S. in 2018 with a quarter-million jobs devoted just to the handling of marijuana plants, said Beau Whitney, vice president and senior economist at New Frontier Data, a leading cannabis market research and data analysis firm. There are many other jobs that don’t involve direct work with the plants but they are harder to quantify, Whitney said.
Investors poured $10 billion into cannabis in North America in 2018, twice what was invested in the previous three years combined, he said, and the combined North American market is expected to reach more than $16 billion in 2019.
With all its success, the U.S. marijuana industry continues to be undercut by a robust black market and federal law that treats marijuana as a controlled substance like heroin. Financial institutions are skittish about cannabis businesses, even in U.S. states where they are legal, and until recently, investors have been reluctant to put their money behind pot.
Marijuana businesses can’t deduct their business expenses on their federal taxes and face huge challenges getting insurance and finding real estate for their brick-and-mortar operations.
“Until you have complete federal legalization, you’re going to be living with that structure,” said Marc Press, a New Jersey attorney who advises cannabis businesses.
In November, Democrats won control of the U.S. House and want to use it next year to pass legislation that eases federal restrictions on the legal marijuana industry without removing it from the controlled substances list… that could open up banking for the industry nation and make it easier to secure capital.