Marijuana legalization on the ballot in five states

state snapshot

Voters in five states will decide whether to legalize medical and recreational marijuana in November, with billions of dollars in new business opportunities hanging in the balance.

The ballot measures also promise to have regional ripple effects from the East Coast and Deep South to the heartland and Mountain West.

Not a bad turnout for a year in which even more initiatives were expected to qualify for the November ballot, but some were derailed by the coronavirus pandemic and other factors.

Below, you’ll find detailed snapshots for each of the five states, including what’s on the ballot as well as the outlook for passage.

 


Arizona
Ballot measure:
Proposition 207
Population: 7.3 million
Projected first-year sales: $375 million-$400 million
Projected 2024 sales: $700 million-$760 million

If approved by voters in November, Arizona’s commercial adult-use marijuana program is expected to generate up to $760 million in sales in 2024.

It’s no wonder Arizona’s medical marijuana market has attracted enormous investor interest. Between February 2019 and February 2020 alone, seven multistate operators either acquired or expanded operations in the state’s medical cannabis market.

Arizona cannabis attorney Janet Jackim recently said in-state and out-of-state marijuana companies and investors “are trying to gobble up any (MMJ) licenses they can.”

Those acquisitions would pay off if the ballot measure is successful, because Arizona’s industry-backed recreational marijuana initiative overwhelmingly favors existing MMJ operators.

The initiative also calls on the state to issue 26 social equity licenses targeting minority entrepreneurs. State marijuana regulators would decide the final rules governing the program.

Arizona-based Harvest Health & Recreation and Massachusetts-based Curaleaf bankrolled the Smart and Safe ballot initiative and are poised to be big winners if it passes.

Harvest already has the largest retail presence in the state with 15 dispensaries supported by four cultivation sites and two processing facilities.

Harvest CEO Steve White told analysts during an earnings call in August that the company is expanding its cultivation and processing capacity in preparation for adult-use marijuana legalization.

“You’re not going to see what you saw in Illinois, where people are running out of product,” White said.

Voters narrowly defeated an adult-use measure in 2016, but support for legalizing recreational marijuana keeps increasing, so the industry is optimistic the initiative will pass this time around.

 Initiative: Legalize a regulated, commercial adult-use marijuana market.

Sponsor: Smart and Safe Arizona

License opportunities:

  • Arizona has issued roughly 130 vertical medical marijuana licenses to companies that would be eligible to receive recreational MJ licenses as long as their operations are in good standing.
  • Additional licenses would be available in counties that don’t have at least two MMJ dispensaries.
  • Twenty-six social equity licenses would be available to entrepreneurs living in communities disproportionately affected by the war on drugs through a program to be developed by the state health department.
  • Additional recreational marijuana licenses could be granted based on a 1:10 ratio with pharmacies in the state. For example, if the number of pharmacies statewide grows by 100, then the state could issue an additional 10 retail adult-use licenses.

Tax rate: 16% tax on the retail sale of adult-use marijuana products.

Other important business factors:

  • The initiative would set up a recreational program quickly by allowing existing medical marijuana operators to apply for dual licenses between Jan. 19, 2021, and March 9, 2021. The state would then have 60 days to issue a license from the time an application was filed.
  • Not-for-profit MMJ businesses would have the option of converting to for-profit status.
  • Potency of infused edibles would be limited to 10 milligrams of THC per serving, 100 milligrams per package.
  • The state would be required to adopt rules for delivery no later than Jan. 1, 2025, though it could happen as soon as Jan. 1, 2023.

 Likelihood of passage: 51% of registered voters said they would vote for the initiative while 41% would vote against it, according to a poll conducted in September by Monmouth University.

This margin shrinks among likely voters in a “high-turnout scenario” to 49% for and 43% against. And it disappears in a “low-turnout scenario” of 47% for and 47% against.

 


Mississippi
Ballot measure: Initiative 65, Initiative 65A
Population: 2.9 million
Projected first-year sales: $240 million-$265 million*
Projected 2024 sales: $750 million-$800 million*

* Figures are for Initiative 65 only.

Mississippi medical marijuana industry advocates hope their state will be the second in the Deep South to legalize MMJ.

A strong vote of support, industry experts say, also could influence neighboring states such as Alabama, which has yet to legalize MMJ. But legalization advocates in Mississippi face a battle because of a restrictive competing initiative that triggers a tougher voting threshold for passage.

Citizen advocates put forth a business-friendly measure (Initiative 65) in this conservative state, but then lawmakers countered with a measure that is largely undefined but would limit licenses and allow just terminally ill patients to smoke medical marijuana (Initiative 65A).

“It’s just another attempt (by the Legislature) to kill medical marijuana,” said Jamie Grantham, communications director for the citizen-led Medical Marijuana 2020 Campaign.

With competing measures on the ballot, voters will be asked two questions: Whether MMJ should be legalized and, if so, which initiative the voter favors.

An initiative must receive at least 40% of all votes to pass, according to the state’s election rules. In other words, a strong majority will need to answer yes to the first question about legalizing medical marijuana and then clearly support one initiative over another.

Details of the citizen initiative:

Initiative: Legalize a commercial medical marijuana market through a constitutional amendment.

 Sponsor: Mississippians for Compassionate Care

License opportunities:

  • State regulators would be prohibited from limiting the number of MMJ licenses or setting product prices.
  • The initiative calls for the Mississippi Department of Health to adopt final program rules by July 1, 2021, and start issuing MMJ licenses no later than Aug. 15, 2021.

Tax rate: A state sales tax (currently 7%) would apply. Otherwise, self-funded by user fees.

Other important business factors:

  • Dispensaries would be able to sell no more than 2.5 ounces of marijuana in 14 days per qualified patient.
  • More than 20 medical conditions would qualify patients for medical marijuana; physicians also would be allowed some discretion in recommending MMJ.
  • Medical marijuana operations would have to be at least 500 feet away from churches, schools and child-care centers.

 Likelihood of passage: It could be close. A recent survey by California-based political polling firm FM3 Research found that the citizen measure could have just enough support to pass. The poll, funded by the group behind the citizen initiative, showed that 81% of Mississippians favor doctors being able to recommend medical marijuana and 52% favor the citizen initiative.

If those figures hold, the citizen initiative would pass with about 42% of the overall vote (52% of 81% equals 42.6%).

 


Montana
Ballot measure: Initiative 190
Population: 1.1 million
Estimated 2019 MMJ sales: $55 million-$70 million
Projected 2020 MMJ sales: $60 million-$75 million

Montana would join Colorado and Nevada in legalizing recreational marijuana in the Mountain West if residents vote to pass a commercial adult-use initiative in November.

The initiative would allow existing medical marijuana operators first entry for a year.

Local jurisdictions could vote to opt out of recreational marijuana, so it’s unclear how robust of a market the state would have—at least initially.

The state’s MMJ market is expected to reach $60 million-$75 million in revenues this year, according to the Marijuana Business Factbook.

New Approach Montana started collecting signatures for the initiative May 9, while observing strict public health protocols, after being denied permission to gather digital signatures.

A recent poll showed a slim majority of residents favor adult-use marijuana legalization, with about 10% of survey respondents still undecided.

Initiative: Legalize a commercial recreational marijuana program.

Sponsor: New Approach Montana

License opportunities:

  • The state Department of Revenue would license and regulate the industry, with the business license application process beginning by Oct. 1, 2021.
  • Existing MMJ operators would get first entry into the adult-use market for a 12-month period.
  • Montana doesn’t have a medical marijuana license cap and has issued roughly 300 MMJ cultivation licenses, 200 processing licenses and 360 dispensary licenses.
  • Local jurisdictions could hold elections for voters to decide whether to prohibit adult-use stores.
  • The adult-use initiative calls for 10 cultivation tiers of up to 30,000 square feet, plus a micro-tier of up to 250 square feet.

Tax rate: 20% retail sales tax.

 Other important business factors:

  • Smokable flower would be permitted.
  • A seed-to-sale tracking system would be implemented.
  • Montana residency would be required for licensees.
  • Marijuana operations would have to be at least 500 feet from churches and schools.

Likelihood of passage: In this moderately conservative state, residents supported recreational marijuana legalization by a margin of 54% to 37%, with 10% undecided, according to a University of Montana Big Sky poll published in February 2020.

 


New Jersey
Ballot measure: Public Question 1
Population: 8.9 million
Projected first-year sales: $375 million-$400 million
Projected 2024 sales: $850 million-$950 million

New Jersey residents are being asked to legalize a commercial recreational marijuana program in November that promises eventually to become a multibillion-dollar business—one that could spur neighboring states to follow suit.

The sparsely worded initiative lacks details such as how many business licenses would be made available. Those laws and regulations would be hammered out later by state lawmakers and cannabis regulators if the measure is successful with voters.

Scott Rudder, president of the New Jersey CannaBusiness Association, is among those who believe current medical marijuana operators would get first crack at the adult-use market in order to accelerate a market launch that could occur by late 2021.

Rudder predicts a “level of urgency” for lawmakers to pass the ensuing legislation and for regulators to establish the rules because of pressure to generate economic opportunities and tax revenues in wake of the coronavirus pandemic.

Bridget Hill-Zayat, a cannabis attorney with Hoban Law Group who is licensed to practice in New Jersey, agreed. “If the motivation is a drive for tax revenues, they are going to want to move as quickly as possible,” she said.

With racial justice even more of an issue in recent months, Hill-Zayat said New Jersey might issue micro-licenses and loan programs to encourage applicants from diverse backgrounds to apply.

Municipalities, which could levy up to a 2% retail tax on adult-use marijuana products, also might be more motivated to opt-in to recreational marijuana, given their own budget pressures, Rudder said.

Experts expect the ballot initiative to pass, noting that the latest polls show roughly two-thirds of New Jersey residents in favor of the initiative.

If New Jersey Public Question 1 is successful at the ballot box, Rob DiPisa, partner and co-chair of cannabis law group Cole Schotz in Hackensack, New Jersey, predicts a market launch in the second half of 2021, given the likelihood of existing MMJ operators to be fast-tracked for adult use.

 Initiative: Legalize a commercial recreational marijuana program by constitutional amendment.

Sponsor: A supermajority of New Jersey lawmakers passed a measure that put the referendum to legalize an
adult-use marijuana program before voters in November.

 License opportunities:

  • Lawmakers and regulators would decide on the number and type of marijuana business licenses available, but existing MMJ operators are expected to get first crack at the adult-use market.
  • Currently, New Jersey has 12 vertical medical marijuana licensees. The state plans to issue 24 additional MMJ licenses—four of them vertical and the remainder stand-alone cultivation, processing and dispensary licenses.
  • Presuming the ballot measure is successful, state lawmakers would pass enabling legislation and regulations would be developed by the New Jersey Cannabis Regulatory Commission, which was created last year but has yet to get up and running.

 Tax rate: 6.625% sales tax on adult-use products. Municipalities could pass ordinances to charge local taxes of up to 2%.

Likelihood of passage: Residents favor the legalization proposal by a margin of 68% in favor and 26% against with 6% unsure, according to a July poll commissioned by the cannabis law practice of Brach Eichler and conducted by DKC Analytics. An April poll conducted by Monmouth University found 61% of respondents in favor of adult-use legalization.

 


South Dakota
Ballot Measures: Amendment A and Measure 26
Population: 884,659
Projected first-year sales: $1.5 million-$2 million*
Projected 2024 sales: $10 million-$12 million*

* Figures are for medical marijuana only

South Dakota could become the first state in the nation to simultaneously legalize medical (Measure 26) and adult-use marijuana (Amendment A) in November.

That would be a milestone for the politically conservative state, especially considering that MMJ supporters weren’t able to collect enough signatures to get a legalization initiative on the ballot in 2018.

Initiative: Legalize a recreational marijuana market through a constitutional amendment.

Sponsor: South Dakotans for Better Marijuana Laws

License opportunities:

  • The initiative calls for the state Department of Revenue to issue “enough licenses to substantially reduce the illicit production and sale of marijuana throughout the state.”
  • But state regulators also are directed in the initiative to limit licenses “to prevent an undue concentration” in any municipality.
  • Four license types would be available: cultivation, wholesale/processing, retail and lab testing.

Other important business factors:

  • Local jurisdictions could ban marijuana operations in their areas or limit the locations of such operations. But a local government could not prohibit the transportation of marijuana products on public roads by those who are licensed elsewhere.
  • The state Department of Health would have to establish program rules within 120 days of the passage of the act, including scoring criteria should a local jurisdiction receive more applicants than the number of licenses allowed.
  • Individuals who have a debilitating medical condition as defined by the state would be eligible for MMJ as long as a physician certifies the condition. Such conditions include “severe” or “debilitating” pain.
  • A dispensary could not sell more than 3 ounces of cannabis to a qualified patient during a 14-day period.

 

NEXT: The Domino Effect

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