(TMU) — While the U.S. economy has faced a catastrophic shake-up due to the coronavirus pandemic, many Americans still proceeded to celebrate April 20, also known as “4/20,” the unofficial holiday for recreational cannabis users.
But while marijuana aficionados are enjoying their online smoking sessions and live-streamed concerts—a pale virtual shadow of the typical festivities enjoyed on 4/20—executives in the legal cannabis market are faced with both the shock waves created by the economic downturn and hopes that the crisis could clear the way for the federal legalization of the plant.
Legal marijuana hasn’t been unaffected by the crisis. While demand for the plant skyrocketed following stay-at-home orders and quarantine rules put in place across the United States, consumers faced with unemployment or lost job hours are reducing their spending or turning to the black market to get their flowers, edibles, and other consumables rather than going to dispensaries where prices are higher due to taxes and regulations.
Still, some cannabis CEOs told CNBC that they believe marijuana will play a role in any potential economic recovery following the current crisis unleashed by the coronavirus.
Charlie Bachtell, CEO of Cresco Labs, told the network:
“When we all start to be able to lift our heads from this Covid experience, we are going to be faced with a scenario where a lot of jobs have gone away, a lot of economic development impact has disappeared.
“How are we going to bring that back? I think cannabis has to be part of that discussion.”
The timing of the pandemic couldn’t have been worse for the legal cannabis market, however. And many small non-cannabis businesses have relied on federal loans and banks to weather the storm—a luxury that hasn’t extended to pot companies who still remain illegal in the eyes of Washington, D.C.
Los Angeles dispensary owner Jerred Kiloh, who also heads the United Cannabis Business Association, told Associated Press:
“We were already teetering on … an edge of a cannabis collapse.
“It’s going to be very difficult for cannabis businesses to make it through this pandemic.”
Steve DeAngelo, a co-founder of California’s Harborside dispensaries, believes that the industry has the sort of in-built resilience that will allow it to get through this rough patch in consumer demand.
“There is not going to be an extinction moment.
“It’s going to prove more resilient than many, many other industries.”
According to analysts from multinational independent investment bank Cowen, the U.S. cannabis market is worth around $56 billion in 2020, and only ten percent of it is actually being taxed in the legal market.
Some cannabis businessmen believe that the potential for legal marijuana to become a source of tax money for federal authorities could signal an end to prohibition on a national level.
Curaleaf Executive Chairman Boris Jordan explained that cannabis could enjoy a post-crisis role as a “a significant revenue generator” for the cash-strapped feds. Citing the conditions that led to an end to the anti-booze Prohibition Era, Jordan said:
“One of the programs by the federal government right after the Great Depression was to focus on tax revenue generation.
“They lifted prohibition on alcohol and therefore started to tax it — and it became a major revenue generator for both the federal and the local governments around the country.”
As states and cities across the U.S. deem cannabis companies essential, some cannabis execs are looking at such signals as a sign that the federal legalization of marijuana is only a matter of time. In eight out of 11 of the states where adult use of the plant is legal, cannabis dispensaries were designated as essential.
Matt Hawkins, a managing partner of Entourage Capital and big-time investor in cannabis production, said:
“You can just point to the fact that we have been deemed essential, why are we not legal?
“There is going to be a need for increased tax revenue and where else to look but at a legalized industry like cannabis, that is one of the few growth sectors in the world right now.”
Meanwhile, some are hoping that the general trend of states legislating adult-use cannabis bills will create the sort of critical mass capable of changing minds in Washington.
“The great American experiment will become more real as the federal government sees what’s happening at the states,” Green Thumb Industries CEO Ben Kovler said.
New Jersey, Arizona, and South Dakota will all have legalization bills on their November ballot, while New York, Connecticut, and Rhode Island also have pending bills that could see prohibition lifted. New York Gov. Andrew Cuomo has also been a robust supporter of legalization, arguing that revenue from taxes on pot go toward everything from traffic safety to transit upgrades, addiction treatment, public health education and intervention, and small business developments.
The drying-up of state coffers in the midst of the public health crisis let loose by COVID-19 will no doubt add extra luster to those arguing the benefits of legalizing and regulating cannabis.
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