Several states could legalize cannabis sales in 2020 as marijuana industry eyes lucrative East Coast market

(This story has been updated to include new information about efforts to place recreational cannabis on the ballot in Florida. It also has been updated to note that Arizona could have a 16% excise tax on legalized marijuana under a ballot measure.)

Up to a dozen states could legalize adult-use or medical marijuana in 2020 through their legislatures or ballot measures, although only about a handful will likely do so.

Much of the cannabis industry’s focus will home in on a possible recreational marijuana domino effect along the East Coast, which could create billions of dollars in business opportunities.

Adult-use legalization efforts in New York and New Jersey stalled in 2019, but optimism has rekindled this year.

Potential legalization activity runs from the Southwest to the Dakotas to the Deep South. Mississippi in particular has a business-friendly medical cannabis initiative that has qualified for the 2020 ballot.

Here are three factors to keep in mind as states address either recreational or medical legalization this year:

1. In the past, marijuana legalization has primarily occurred through the ballot box. But in a momentous development, Illinois legalized a projected $2 billion adult-use program through its Legislature in 2019. Expect that trend to amplify in 2020. “Increasingly, legalization is moving toward legislatures,” said Karen O’Keefe, director of state policies for the Marijuana Policy Project. “That’s the biggest shift.”
2. State marijuana laws historically have reflected a patchwork of regulations. But a more mature industry means that legalization increasingly involves conversations over what has worked and hasn’t worked in legal states. The lack of industry diversity is one common topic. “There’s a strong focus on making sure communities most hard-hit by the war on drugs benefit,” O’Keefe noted.
3. Democratic governors in the Northeast are trying to coordinate adult-use legalization efforts. New York Gov. Andrew Cuomo hosted a summit in October to begin discussing common approaches to licensing, taxation, minority and small-business participation, product potency and other issues. Cannabis businesses would still need a lot of resources to apply for licenses and to operate on the East Coast, but they might be able to use one application as a template for others in the region. But experts say a regional approach is easier said than done, with each state facing its own internal politics.

What follows is a rundown of some of the states expected to consider recreational and medical marijuana ballot and legislative measures this year, listed in order of their likelihood of passing.

Adult-use legalization prospects

• Vermont: This could prove as close to a slam dunk for legalization as any state in the East. The state Legislature legalized adult use and home growing two years ago, and in 2019, the Vermont Senate gave its blessing to a commercial sales program. The state House of Representatives is likely to follow suit this year.
• New Jersey: Lawmakers voted to put the issue on the November ballot, where it has a good chance of passing. The initiative is broadly written, meaning the state would decide licensing specifics later.
• New York: Cuomo has made adult-use legalization a top priority again this year. But potential stumbling blocks remain, including agreeing on where revenues should go and ensuring communities of color benefit from legalization.
• Connecticut: Democratic Gov. Ned Lamont started predicting last year that Connecticut would legalize adult use, and he’s emerged as a key player with New York’s Cuomo in the effort to develop a regional approach. Connecticut also is feeling the effects of Massachusetts’ legalization of recreational marijuana.
• New Mexico: Sentiment shifted toward legalization when Gov. Michelle Lujan Grisham took office in 2019. Legislation stalled in 2019, but a governor’s legalization advisory group is setting the stage for an agreed-upon approach this year.
• South Dakota: 2020 will mark the first time a state has voted on medical and adult-use legalization on the same ballot. The adult-use initiative calls for a 15% sales tax. The state Department of Revenue would determine licensing, with a mandate to allow enough licenses to drive out the illicit market.
• Arizona: Two initiatives are in play, including one that calls for a 16% excise tax. Even if one makes the ballot, passage is uncertain.
• Montana: National groups are backing a ballot initiative in Montana, which also could put pressure on a resistant state Legislature to consider a pre-emptive bill.
• Pennsylvania: Democratic Gov. Tom Wolf has come around on the issue, and he participated in Cuomo’s Northeast summit. But state Senate Republicans recently were adamant they have no intention to consider a legalization bill this year. However, if New York and New Jersey both legalize, pressure could increase on Pennsylvania to do so as well.
• Florida: Some hope remained even as late as last week, but proponents ran out of time to collect the 766,200 signatures needed to place the adult-use marijuana issue on the ballot. The group backing the initiative, Make it Legal Florida, recently filed a suit challenging the constitutionality of the state’s ballot initiative process. That group announced Monday it will instead focus on getting recreational marijuana on the 2022 ballot.

Medical cannabis legalization prospects

• Alabama: While long known as one of the most conservative states in the nation, Alabama is actually one of the more likely to pass a medical cannabis program via its Legislature in 2020. A study commission approved a draft bill that would legalize MMJ for diagnosed medical conditions but prohibit smokable flower and edibles.
• Mississippi: Another Deep South state known for its conservatism, Mississippi has a strong chance to pass a medical cannabis program via ballot initiative in 2020. The initiative is very business friendly too, with no limits on the potential number of licenses. But the state Board of Health already is pushing back.
• South Dakota: Voters will decide on a medical cannabis initiative that gives local governments the power to decide how many licenses are issued in their jurisdiction.
• Kentucky: The home of U.S. Senate Majority Leader Mitch McConnell has remained focused on cultivating a large hemp industry, but in a step toward legalizing medical cannabis, the state House Judiciary Committee approved an MMJ bill in 2019. Could the full Legislature embrace the idea? Gov. Andy Beshear, a Democrat, says it’s time.

Jeff Smith can be reached at jeffs@mjbizdaily.com