Marijuana firms main funders of recent legalization efforts, overtaking advocacy groups

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Chart showing how cannabis industry funded 2022 legalization efforts.

Cannabis companies provided nearly all the money behind the five legalization initiatives in last November’s midterm elections, representing a dramatic shift from a decade ago when marijuana reform’s principal bankrollers were advocacy groups and wealthy individuals.

According to campaign finance records, the adult-use legalization campaigns in Arkansas, Maryland, Missouri and North and South Dakota raised nearly $20 million combined.

At least $19.05 million, or 95% of the total, came from sources identifiable as cannabis industry businesses, the latest campaign finance records show.

The spending data reflects the growing financial heft of the $33 billion U.S. marijuana industry, which scored mixed results last November with two victories and three losses.

This shift has also signaled new priorities, with existing medical marijuana companies pushing for limited-license markets in adult-use states, in contrast to past advocacy-driven campaigns that merely asked voters to treat marijuana like alcohol, with other details to come later.

“We’re moving into a time period where this is no longer about whether to tax and regulate cannabis like alcohol,” said Toi Hutchinson, the president and CEO of the Washington DC-based Marijuana Policy Project (MPP), which was one of the chief forces behind Colorado’s landmark 2012 legalization campaign.

“Now we have a burgeoning industry that exists.”

Campaign veterans and leaders of advocacy organizations told MJBizDaily that the 2022 election foreshadows how future legalization efforts might unfold in the states where adult use remains prohibited.

It also reflects a passing of the torch.

Advocacy groups such as MPP and the New York-headquartered Drug Policy Alliance - which spearheaded adult-use legalization a decade ago in Colorado and Washington state - have moved on to new efforts, including the legalization of psychedelics and the decriminalization of other drugs.

“People feel the mission’s been accomplished,” Mason Tvert, a key figure in the 2012 Colorado legalization campaign who is now a partner at VS Strategies, a major Denver-based political consultancy, said, echoing that view.

Indeed, more than 30 states have since legalized medical and adult-use marijuana, and the industry's financial muscle and influence have grown considerably.

"Obviously in the early days, there wasn't much of an industry," said Douglas Berman, a law professor at Ohio State University who studies drug policy.

After the industry's emergence, "there was a shift of attitude, 'You guys need to step up,'" Berman said of marijuana industry companies.

"There was a sense of, 'Hey, it's important for you industry players to continue the forward momentum of legal change. Don't continue to ride off of our backs. We got this started; now it's your job to keep this momentum going."

However, the mixed results from the November elections - wins in Maryland and Missouri and losses in Arkansas and in North and South Dakota - underscore the potential risks for industry-driven campaigns, according to some experts.

As emboldened marijuana industry players push for limited-license markets, they risk losing support from activists who want criminal justice reform, home-grow allowances and social equity provisions packaged with legalization laws - a microcosm of the similar ongoing struggle over federal marijuana reform in Washington DC.

"It's not a coincidence that we are seeing more industry-driven legalization measures and voters in more places rejecting legalization measures," said Shaleen Title, an attorney and former Massachusetts state cannabis regulator who has become a vocal critic of what she believes is industry overreach at the expense of legalization's social justice origins.

"Voters care about the details of legalization bills. ... Voters care about market structure," she added. "When you have wannabe monopolists directly writing measures, the trend has been for them to propose market structures that are increasingly brazen and unserious."

"The lesson moving forward is to give up on the idea of buying or tricking voters into giving you a monopoly by funding a ballot initiative."

Passing the torch

Beginning a decade ago in Colorado and Washington state and continuing through the watershed year of 2016 - when voters in four states on both coasts, including California, legalized adult-use cannabis - the major funding behind successful legalization pushes came from established nonprofits such as MPP or the Drug Policy Alliance.

Other civil-society organizations including the American Civil Liberties Union also played a role.

These activist-focused legalization campaigns, meanwhile, tapped millions from activist billionaires.

Prominent funders included Peter Lewis, the late Progressive Auto insurance chair; financier George Soros; and early Facebook investor Sean Parker, who was the major bankroller behind California’s 2016 campaign.

While the early campaigns were more focused on treating cannabis like alcohol, they were less focused on social justice components - think expungements of marijuana offenses from criminal records or minority participation in the industry via equity programs.

They also didn't focus on thornier questions such as license caps, taxation and other details.

Fast forward to today. Those debates are now happening in Congress and state capitols, and with no clear formula for victory, "the terrain is way more complicated,” MPP's Hutchinson noted.

Industry leaders in, individuals out

In four out of the five states with legalization initiatives last November, industry spending accounted for almost all of the money behind legalization campaigns.

“There are more businesses, they are more organized, and they’re taking a more direct approach based on their priorities,” noted Tvert of VS Strategies.

In Arkansas alone, cannabis companies spent $13.95 million in Arkansas out of a total of $13.97 million, according to the latest disclosures.

In Missouri, the industry contributed at least $3.98 million of a to-date total of $4.2 million, records show.

In Maryland - where the state Legislature passed the question to the ballot, negating the need for a costly signature drive - the industry accounted for $385,983 out of $389,478.

Only in North Dakota - where advocacy organizations New Approach PAC and MPP contributed at least $398,529 - did the industry follow advocacy’s lead.

But even there, established medical marijuana companies chipped in at least $195,000 of a total of nearly $600,000.

And in the states where the industry took the lead, individual contributors once considered essential to successful grassroots campaigns ponied up very little.

In Arkansas, five donors chipped in $25,900, with $25,000 of that from one individual.

Legal Missouri, the organization behind the campaign in that state, reported one $500 check from an individual, according to records.

Legal Missouri did not respond to a request for comment.

In Maryland, 12 donors wrote checks ranging from $10 to $500 - though the latter check writer identified herself as involved in the cannabis industry.

Only in South Dakota, where New Approach and MPP were heavily involved, was there anything resembling grassroots fundraising.

There, campaign finance records revealed 39 individual donors contributing $53,697.

Practical matters

As the focus shifts from liberal states on the coasts to more conservative areas in the heartland - from the “low-hanging fruit,” to the tougher nuts to crack - both philanthropic donors and the general public believe advancing legalization is now the responsibility of the burgeoning marijuana industry, observers said.

There's also a practical benefit from a campaigner's point of view.

“We went to the industry for investment because, quite honestly, that’s the biggest recipient of the economic benefit of investing in legalization,” said Eugene Monroe, the campaign chair of MD Can 2022, the Maryland legalization measure.

“It’s the industry now, because it’s not so much focused on advocates fighting for their health or human rights, or battling against prohibition,” he added.

“Now you have business that are fighting for future revenue or future marketplaces.”

And, at times, those approaches prioritize business considerations at the expense of social justice goals.

Looking ahead, critics such as Title argue that larger, more established marijuana companies - including multistate operators - must balance their desire for market share and profits with social justice considerations.

Otherwise, their efforts might backfire.

In 2015, for example, Ohio voters rejected a legalization measure that critics said would have enshrined a limited-market oligopoly in the state constitution.

More recently, cannabis activists faulted the losing campaign in Arkansas for failing to include expungements of criminal records.

That ballot measure also banned home grows while ensuring that the limited number of existing medical cannabis cultivators would get first crack at an adult-use market.

Eddie Armstrong III, a former Arkansas state legislator who chaired the legalization campaign, declined to discuss what missteps the campaign might have made.

But, as for funding sources, the industry was the obvious choice, he said, and will continue to be in Arkansas and beyond.

"As I see it, the complexity and cost of citizen-driven initiatives for the ballot in Arkansas will require enormous resources," he said via email.

"The industry is the biggest source of money/resources."

But that could produce fallout for industry executives and companies.

Ohio State's Berman, for example, said future state legalization efforts might likely see "competing proposals," with clear distinctions drawn between activist and industry-generated measures.

And that could generate sniping from both sides.

"The details can get contentious," Berman noted.

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.