(Editor’s note: This story is part of a recurring series of commentaries from professionals connected to the cannabis industry. Nicole Cosby is the chief compliance officer at Fyllo, a cannabis compliance software company based in Chicago.)
Everyone in the cannabis business has their eyes on the Northeast, and for good reason.
The MJBiz Factbook projects that the impending New York recreational marijuana market will generate more than $2 billion in sales a year by its fourth year, for example.
But marijuana multistate operators should think about setting their sights a bit farther west, to states such as Michigan, Missouri, Nebraska and Ohio.
Midwest remains America’s cannabis capital
With all the coastal buzz, it’s easy to forget that established Midwest markets such as Illinois and Michigan are consistently among the top for cannabis revenue.
Much of this revenue is generated by the MSOs that have helped establish clear business guidelines across these states.
The companies that follow can enter local markets that are already open to cannabis sales, cultivation, distribution and delivery.
Some are even extending licenses ahead of state expansion.
The states with new/pending legislation in 2022, including Missouri and Nebraska, have learned a lot from how things work in Illinois and Michigan.
This should help these new states roll out more comprehensive regulations for both medical and recreational marijuana across a wide variety of license types.
Eight new pieces of legislation related to cannabis have been filed in Missouri and five in Nebraska. Expect developments from these markets to accelerate in the coming months.
Northeast’s moment is coming, just not this year
While the long-term growth in the Northeast will be transformative, it will be a longer journey than the industry thought.
We’ve seen all over again that New York state is not New York City – it’s more conservative and moves at a different pace.
It took a long time for New York to establish a cannabis regulatory board, and once the body was set up, it became clear sales wouldn’t begin until 2023.
While New Jersey was the first to sign recreational marijuana into law, in February 2021, the state is trying to do a lot at once – expanding licenses, handling expungement and more.
The state has had a slow rollout because of the way New Jersey is structured.
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There is an endless array of counties, townships and even villages – and they all need to be heard from.
So far, 70% of the state’s 564 municipalities have opted out of all six categories of marijuana licensing.
The surprise standout in the Northeast has been Connecticut.
As it turns out, small is beautiful. With fewer approval hurdles, that market got greenlighted fast and pushed ahead faster than New York.
Initially expected to be the last mover of the big three Northeast states coming online, Connecticut has rapidly accelerated and looks likely to be a strong market, with sales expected to begin as soon as the third or fourth quarter of 2022.
Future watch: mid-Atlantic
Executives would be wise to pay attention to the mid-Atlantic region, particularly Maryland and Pennsylvania, where support for legalization reform is high.
In Pennsylvania, for example, medical marijuana dispensaries alone have generated close to $2 billion in sales to date.
Longer term: Florida
Florida has been a medical cannabis state since 2016 and already has the largest MMJ business by volume of any state. Still, the future is unclear.
On the one hand, the Florida Legislature recently blocked recreational cannabis expansion and pushed it out for a revote.
On the other hand, new legislation to open the market for recreational use is being considered and decriminalization ordinances have already gone into effect everywhere from Miami Beach and Key West to Sarasota.
But the earliest that voting will happen is 2024, and it might take two or three years after that for sales to begin.
Still, smart MSOs will hustle while they wait.
They know it pays to get ready for license applications well ahead of time.
When the New Jersey Cannabis Regulatory Commission started taking applications from recreational marijuana growers, manufacturers and testing labs, nearly 500 individuals and entities established accounts within the first four hours.
Remember that MSOs already holding medical licenses are far ahead of the game.
Their business models are already set up. They generally have a positive reputation with legislators and a strong sense of how the process will work.
Entrepreneurs need to remember that getting a cannabis license is like a grant-writing proposal.
They’ll need to be ready to show their business plan, revenue projections, staffing plan, tax status, proposed dispensary locations and more.
Also, all the states we’re talking about will have some licenses reserved for social equity purposes, as well as license caps.
Staying on top of legislation is key
As markets launch, they tend to open slowly and selectively.
CBD might be where it starts, and THC might follow much later, as could infused beverages or food.
There are also variances in allowances at the city level.
For example, while some cities in Colorado allow ingestibles, others don’t.
Tracking thousands of jurisdictions – all of which have regulations that are a constantly moving target – on a spreadsheet isn’t practical.
Technology that tracks it all and leverages AI to update the hyperlocal picture in real time makes more sense.
The shifting landscape is why executives need to watch cannabis regulations carefully: The initial headlines about which markets will open first or be most attractive don’t always turn out as predicted.
Wherever MSOs look to expand, they must stay smart about compliance. Armed with the right compliance knowledge, MSOs can pursue opportunities faster with less risk.
Nicole Cosby can be reached at firstname.lastname@example.org.
The previous installment of this series is available here.
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