The electoral triumph by the Republican party in Virginia this week has thrown into question the rollout of the state’s recreational marijuana market, which would be the first adult-use market in the South and is expected to generate more than $1 billion in sales before 2030.
Stakeholders were divided on what the victory of Republican Gov.-elect Glenn Youngkin, Lt. Gov.-elect Winsome Sears and the GOP in the state House of Delegates will mean for the industry, which is supposed to launch in January 2024.
Some see little impact, but others see fallout that could jeopardize the state’s adult-use program.
The primary question is what state lawmakers and Youngkin will do in 2022.
The two bills approved this year authorizing the new adult-use market must be passed again next year by the full Legislature in order to kick-start the regulatory and business licensing portion of the law.
It’s unclear what Youngkin’s position on the question is. His campaign did not articulate a marijuana policy.
Over the summer, his campaign did tweet that Youngkin “will not seek to repeal” adult-use legalization and will instead focus “on building a rip-roaring economy.”
Glenn Youngkin will not seek to repeal it; his focus will be on building a rip-roaring economy with more jobs and better wages, restoring excellence in education, and reestablishing Virginia’s commitment to public safety.
— Team Youngkin (@TeamYoungkin) July 2, 2021
But not seeking to repeal the legalization of marijuana possession and consumption is a far cry from supporting the creation of a brand-new industry. And the latter is what is now at stake.
The Youngkin campaign did not respond to MJBizDaily‘s request for comment.
The MJBizFactbook projects that Virginia’s adult-use sales will reach $400 million to $500 million in the program’s first full year and $1.2 billion to $1.4 billion by its fifth year.
Parts of law take effect
Though portions of the law that legalized possession and consumption of marijuana for adults 21 and older have been in effect since July and can’t easily be rolled back, the so-called “reenactment” clause for adult-use businesses to get up and running is now uncertain, industry sources told MJBizDaily.
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“Based on 2021 voting records, it is now entirely unclear if any path for a legalization bill to succeed exists in the House of Delegates or the Senate,” said Jenn Michelle Pedini, the executive director of Virginia NORML, which gave Youngkin a “D” grade for his position on marijuana.
Pedini noted that the final votes for the two bills that authorized a recreational market were along party lines, with all Democrats in favor and every Republican opposed in the 47-44 vote.
“At this point, we’re expecting a repeat of the 2021 vote,” Pedini said of the partisan divide. “There’s no reason to believe it will be any different.”
“The lieutenant governor had to cast the tie-breaking vote” in the state Senate on adult-use legalization, Pedini said about how contentious legalization was in the Virginia capitol this year.
“It’s not clear a bill could even make it out of committee at this point.”
Mike Correia, director of government relations for the Washington DC-based National Cannabis Industry Association, agreed with Pedini, mainly because Youngkin has made it clear that he is personally anti-cannabis.
“I’ve never met anybody who habitually used marijuana and was successful,” Youngkin said during an April campaign rally, according to Lynchburg TV station WSET.
In a May interview with CNBC, he referred to marijuana legalization as “another problem that’s going to be dumped at my feet” upon taking office.
“He believes it’s bad. If he believes it’s bad, why would he want to legalize?” Correia said. “I don’t see how this gets reenacted, just reading the tea leaves.”
MSOs see little fallout
But two of the state’s four medical marijuana licensees – multistate operators Columbia Care and Jushi Holdings – are optimistic Youngkin and other Virginia Republicans can be persuaded to support the creation of the new industry or that they won’t need persuading because possession and consumption are now legal.
That reality is going to force Youngkin and the state’s GOP to stand up a new licensed recreational cannabis industry, spokesmen from both companies said, because not to do so would be to tacitly empower illegal marijuana operators that are already opening across the state.
“(Youngkin) recognizes that they have to do something on this,” said Adam Goers, senior vice president of corporate affairs at New York-based Columbia Care, adding that he personally spoke with the governor-elect about the cannabis industry during the campaign.
“Letting another year go past without setting up a legal way to purchase tested and trusted products means that’s a vote for more illegal pop-up shops in our communities,” Goers said.
“And that’s a position I don’t think is tenable for Republicans or Democrats.”
Trent Woloveck, chief commercial director at Florida-based Jushi, said company representatives have also been in contact with the Youngkin campaign and that they’re confident the incoming governor will support a new legal adult-use industry.
“He has not indicated, and we have no reason to believe, that Gov.-elect Youngkin would adjust the adult-use timeline, for new market participants or existing,” Woloveck said.
Woloveck added that Youngkin, with his background as a venture capitalist and former co-CEO at the DC-based Carlyle Group, a global investment company, will be keen on the jobs and tax revenue that come along with legal cannabis, as will Republicans in the Legislature.
“I can assure you,” Woloveck said, “that Republicans have gotten very comfortable with those three things: taxes, jobs, infrastructure spending.
“Cannabis falls into all three of those buckets.”
Both Woloveck and Goers said that, if anything, they expect the timeline for adult-use sales to start sooner than January 2024 because of the proliferation of unlicensed stores and the public safety hazard those shops pose since they sell products that haven’t undergone lab testing for safety.
Regardless, the Virginia Cannabis Control Authority this week announced job postings for five new openings at the agency in advance of its rule-writing for the 2024 launch of the adult-use market, a sign that the state is moving ahead already.
Whether Youngkin and Virginia Republicans will try to upend that or accelerate it, Correia said, “only time will tell.”
John Schroyer can be reached at email@example.com.