• Unofficial Rhode Island Cannabis Ballot Measure Results

    Barrington, RI
    Candidate Total votes Pct
    Reject 4169 52.9%
    Approve 3710 47.1%
    Bristol, RI
    Candidate Total votes Pct
    Approve 4017 51.2%
    Reject 3824 48.8%
    Burrillville, RI
    Candidate Total votes Pct
    Approve 3119 58.9%
    Reject 2177 41.1%
    Charlestown, RI
    Candidate Total votes Pct
    Approve 2144 54.2%
    Reject 1809 45.8%
    Coventry, RI
    Candidate Total votes Pct
    Approve 8302 59.9%
    Reject 5551 40.1%
    Cumberland, RI
    Candidate Total votes Pct
    Approve 6937 54.2%
    Reject 5860 45.8%
    East Greenwich, RI
    Candidate Total votes Pct
    Reject 3284 51.1%
    Approve 3148 48.9%
    East Providence, RI
    Candidate Total votes Pct
    Approve 9233 62.1%
    Reject 5624 37.9%
    Glocester, RI
    Candidate Total votes Pct
    Approve 2461 55.5%
    Reject 1977 44.5%
    Hopkinton, RI
    Candidate Total votes Pct
    Approve 2170 60.8%
    Reject 1397 39.2%
    Jamestown, RI
    Candidate Total votes Pct
    Reject 1608 52.6%
    Approve 1451 47.4%
    Johnston, RI
    Candidate Total votes Pct
    Approve 5443 56.0%
    Reject 4278 44.0%
    Lincoln, RI
    Candidate Total votes Pct
    Approve 4418 50.8%
    Reject 4286 49.2%
    Little Compton, RI
    Candidate Total votes Pct
    Reject 1141 57.1%
    Approve 858 42.9%
    Middletown, RI
    Candidate Total votes Pct
    Approve 3281 56.9%
    Reject 2482 43.1%
    Narragansett, RI
    Candidate Total votes Pct
    Approve 3630 52.6%
    Reject 3275 47.4%
    New Shoreham, RI
    Candidate Total votes Pct
    Approve 372 54.9%
    Reject 305 45.1%
    Newport, RI
    Candidate Total votes Pct
    Approve 4253 60.8%
    Reject 2743 39.2%
    North Kingstown, RI
    Candidate Total votes Pct
    Yes 7061 54.7%
    No 5858 45.3%
    North Providence, RI
    Candidate Total votes Pct
    Approve 5642 56.1%
    Reject 4417 43.9%
    Richmond, RI
    Candidate Total votes Pct
    Approve 2080 58.2%
    Reject 1496 41.8%
    Scituate, RI
    Candidate Total votes Pct
    Reject 2377 50.5%
    Approve 2331 49.5%
    Smithfield, RI
    Candidate Total votes Pct
    Reject 4172 50.7%
    Approve 4063 49.3%
    South Kingstown, RI
    Candidate Total votes Pct
    Approve 7498 60.1%
    Reject 4982 39.9%
    Tiverton, RI
    8. TITLE 21 CHAPTER 28.11 The Rhode Island Cannabis Act
    Candidate Total votes Pct
    Approve 3230 54.8%
    Reject 2666 45.2%
    Warren, RI
    Candidate Total votes Pct
    Approve 2263 57.6%
    Reject 1666 42.4%
    West Greenwich, RI
    Candidate Total votes Pct
    Approve 1543 52.1%
    Reject 1419 47.9%
    West Warwick, RI
    Candidate Total votes Pct
    Approve 5646 60.6%
    Reject 3676 39.4%
    Westerly, RI
    Candidate Total votes Pct
    Approve 4983 55.0%
    Reject 4083 45.0%
    Woonsocket, RI
    Candidate Total votes Pct
    Approve 4574 62.0%
    Reject 2809 38.0%
    North Smithfield, RI
    Candidate Total votes Pct
    Approve 2687 56.1%
    Reject 2101 43.9%
  • Early Michigan Cannabis Ballot Measure Results

    Hagar Township Ordinance for Marihuana Facilities Proposal
    Precincts fully reported: 2 of 2 100.00%
    Ballots: 1,551
    Yes 670 47.93%
    No 728 52.07%
    Total: 1,398 100%
    Niles Charter Township Marihuana Establishments Proposal
    Precincts fully reported: 5 of 5 100.00%
    Ballots: 5,365
    Yes 2,322 48.03%
    No 2,512 51.97%
    Total: 4,834 100%
    Zilwaukee Township Initiated Ordinance Number 2022-0001 Repeal of Marihuana Prohibition
    Precincts fully reported: 1 of 1 100.00%
    Ballots: 35
    Yes 12 36.36%
    No 21 63.64%
    Total: 33 100%
    City Of Laingsburg Marihuana Ballot Proposal
    Precincts fully reported: 1 of 1 100.00%
    Ballots: 636
    Yes 381 62.05%
    No 233 37.95%
    Total: 614 100%
    City of Memphis Proposal Prohibit Adult Use Marihuana Establishments
    Precincts fully reported: 1 of 1 100.00%
    Ballots: 163
    Yes 59 38.31%
    No 95 61.69%
    Total: 154 100%
    South Haven Charter Township Marijuana Dispensaries Proposal
    Precincts fully reported: 2 of 2 100.00%
    Ballots: 1,689
    Yes 892 54.26%
    No 752 45.74%
    Total: 1,644 100%
    *Results may be unofficial – Includes 16 of 83 Counties that posted results.
    Contact us for further information.
  • Utah Accepts Crypto as Currency

    The State of Utah proposed a new rule that allows state agencies to accept digital currency for payment owed. Public comment is being accepted through November 14, 2022. The tentative effective date is November 21, 2022.


    NOTICE OF PROPOSED RULE TYPE OF RULE: New Rule or Section Number: R25-25 Filing ID: 54909 Agency Information

    3. Purpose of the new rule or reason for the change (Why is the agency submitting this filing?):

    This rule has been created in accordance with Subsection 63A-3-112(6) to establish requirements that agencies must meet to accept virtual currency for payments and establishes standards for service providers wishing to contract with the state to covert virtual currency collections into fiat currency to satisfy amounts owed to the state.

    4. Summary of the new rule or change (What does this filing do?

    If this is a repeal and reenact, explain the substantive differences between the repealed rule and the reenacted rule): This is a new rule that has been created in accordance with Subsection 63A-3-112(6) to establish requirements that agencies must meet to accept virtual currency for payments and establishes standards for service providers wishing to contract with the state to covert virtual currency collections into fiat currency to satisfy amounts owed to the state. It establishes requirements for service providers, such as insurance coverage; timing of pricing, conversion, and deposit of funds; regulatory compliance requirements; and service provider fees. It also establishes requirements that state agencies must meet to offer digital asset payments, such as: record retention, fees, refunds and internal controls.

  • Municipal Cannabis Ballot Measures – November 8, 2022

    Municipal Cannabis Ballot Measures – November 8, 2022
    Nov 8, 2022CAKingsAvenal
    Nov 8, 2022CALos AngelesBaldwin Park
    Nov 8, 2022CASan MateoBurlingame
    Nov 8, 2022CALos AngelesClaremont
    Nov 8, 2022CARiversideCorona
    Nov 8, 2022CALassenCounty of Lassen
    Nov 8, 2022CALos AngelesCounty of Los Angeles
    Nov 8, 2022CASacramentoCounty of Sacramento
    Nov 8, 2022CALos AngelesCudahy
    Nov 8, 2022CALos AngelesEl Segundo
    Nov 8, 2022CALos AngelesEl Segundo
    Nov 8, 2022CALos AngelesEl Segundo
    Nov 8, 2022CASonomaHealdsburg
    Nov 8, 2022CALos AngelesHermosa Beach
    Nov 8, 2022CALos AngelesHermosa Beach
    Nov 8, 2022CAOrangeHuntington Beach
    Nov 8, 2022CAOrangeLaguna Woods
    Nov 8, 2022CALos AngelesLynwood
    Nov 8, 2022CALos AngelesManhattan Beach
    Nov 8, 2022CALos AngelesManhattan Beach
    Nov 8, 2022CAKernMcFarland
    Nov 8, 2022CASan BernardinoMontclair
    Nov 8, 2022CAMontereyMonterey
    Nov 8, 2022CAMontereyPacific Grove
    Nov 8, 2022CAMontereyPacific Grove
    Nov 8, 2022CATehamaRed Bluff
    Nov 8, 2022CALos AngelesRedondo Beach
    Nov 8, 2022CALos AngelesSanta Monica
    Nov 8, 2022CAMarinSausalito
    Nov 8, 2022CALos AngelesSouth El Monte
    Nov 8, 2022CAEl DoradoSouth Lake Tahoe
    Nov 8, 2022CALassenSusanville
    Nov 8, 2022CATulareTulare
    Nov 8, 2022CAYoloWoodland
    Nov 8, 2022COEl PasoCity of Colorado Springs
    Nov 8, 2022COEl PasoCity of Colorado Springs
    Nov 8, 2022COEl PasoCity of Colorado Springs
    Nov 8, 2022COTellerCity of Cripple Creek
    Nov 8, 2022COTellerCity of Cripple Creek
    Nov 8, 2022CODenverDenver
    Nov 8, 2022COGrandTown of Grand Lake
    Nov 8, 2022CTNew LondonTown of Ledyard
    Nov 8, 2022CTNew LondonTown of Ledyard
    Nov 8, 2022CTNew HavenTown of Waterbury
    Nov 8, 2022ILSt. ClairBelleville
    Oct 4, 2022MAMiddlesexBillerica
    Nov 8, 2022MAHampshireChesterfield
    Nov 8, 2022MDAnne ArundelState of Maryland
    Nov 8, 2022MEHancockBar Harbor
    Nov 8, 2022MEHancockBar Harbor
    Sep 6, 2022MEHancockBar Harbor
    Nov 8, 2022MEYorkEliot
    Nov 8, 2022MIOaklandAuburn Hills
    Nov 8, 2022MIOaklandBrandon
    Nov 8, 2022MILivingstonBrighton
    Nov 8, 2022MIOaklandCharter Township of Royal Oak
    Nov 8, 2022MIWayneCity of Flat Rock
    Nov 8, 2022MIOaklandCity of Keego Harbor
    Nov 8, 2022MIMacombCity of Memphis
    Nov 8, 2022MIMacombCity of Memphis
    Nov 8, 2022MIOaklandCity of the Village of Clarkston
    Nov 8, 2022MIGeneseeClio
    Nov 8, 2022MIGrand TraverseGreen Lake
    Nov 8, 2022MIOaklandLathrup Village
    Nov 8, 2022MIOaklandLeonard
    Nov 8, 2022MIEmmetPetoskey
    Nov 8, 2022MIWayneTaylor
    Nov 8, 2022MOMillerState of Missouri
    Nov 8, 2022NDSheridanState of North Dakota
    Nov 8, 2022NYDelawareTown of Franklin
    Nov 8, 2022OHPortageCity of Kent
    Nov 8, 2022ORMarionCity of Aumsville
    Nov 8, 2022ORMalheurCounty of Malheur
    Nov 8, 2022RIProvidenceCity of East Providence
    Nov 8, 2022RIProvidenceCity of East Providence
    Nov 8, 2022RIProvidenceCity of Woonsocket
    Nov 8, 2022RINewportNewport
    Nov 8, 2022RIWashingtonSouth Kingstown
    Nov 8, 2022RIProvidenceTown of Burrillville
    Nov 8, 2022RIWashingtonTown of Charlestown
    Nov 8, 2022RIWashingtonTown of Charlestown
    Nov 8, 2022RIWashingtonTown of Exeter
    Nov 8, 2022RIProvidenceTown of Glocester
    Nov 8, 2022RINewportTown of Jamestown
    Nov 8, 2022RINewportTown of Jamestown
    Nov 8, 2022RIProvidenceTown of Johnston
    Nov 8, 2022RINewportTown of Middletown
    Nov 8, 2022RIWashingtonTown of Narragansett
    Nov 8, 2022RIProvidenceTown of North Providence
    Nov 8, 2022RIProvidenceTown of North Smithfield
    Nov 8, 2022RIProvidenceTown of Smithfield
    Nov 8, 2022RINewportTown of Tiverton
    Nov 8, 2022RINewportTown of Tiverton
    Nov 8, 2022RIBristolTown of Warren
    Nov 8, 2022RIWashingtonTown of Westerly
    Nov 8, 2022RIKentWest Warwick
    Contact us for Ballot Measure Details!
  • Acceptance of Cannabis Is Growing: How Are Industry Stocks Performing?

    Each year, at this time of significance for the cannabis industry, Jushi Holdings (JUSHF), a vertically integrated, multi-state operator in the cannabis business, commissions a poll on attitudes to cannabis. This year’s poll

  • The Emerging Cannabis Industry Needs Targeted Capital and Is in Danger of Suing Itself to Oblivion

    When Illinois passed its adult-use cannabis legislation in June of 2019, the future for the business in the state looked bright. Since then, though, it has hit the rocks, mired down by a failure to achieve social equity goals and a string of lawsuits that have held up licensing, especially in the areas of craft growers and retail dispensaries. Even a cursory glance at the OBEDIO™ data and analysis that can be found at thcregs.com shows that things are moving a lot slower than hoped in the state. The state still hasn’t added to the initial 110 retail licenses issued, and even they are now in question following the most recent lawsuit filed.

    There is hope. The Illinois legislature has refined the lottery rules for the latest round on or before December 21st this year, when they will issue fifty additional dispensary licenses. That will help with the immediate issues, but there are more fundamental problems that need to be addressed.

    The Problems

    The two main problems causing the delays are inherently linked and are also indicative of problems in the emerging cannabis industry elsewhere. Illinois, like other states, attempted to give an advantage to communities and individuals disproportionately affected by the “war on drugs” and to local residents, by giving both groups a scoring advantage in the rating system used to allocate licenses to applicants. The problem is that when you give one group an advantage, that obviously means that you disadvantage others and that, according to the basis of the most recent suit, violates the constitution.

    Save time and money. Not only in Massachusetts, zero in on favorable locations and opportunities in over 7,500 jurisdictions across the country. Simple and reasonable monthly pricing. Only at THCREGS.com

    I am not a lawyer and do not intend to get into the legal merit of the case, but the very fact that it exists, along with countless other suits both in Illinois and elsewhere that have been filed to protest social equity measures in adult-use legislation, is itself a problem for the industry. The Law is many things, but speedy is very rarely one of them, and delaying the opening of businesses is sucking enormous amounts of capital out of a very young and undercapitalized industry. For potential small business entrepreneurs, including most of those social equity applicants, that is often fatal.

    As I said, this is not confined to Illinois. A San Francisco study in 2020 found that two years after the licensing process began there, only the 37 licenses granted to existing medical dispensaries were operating. For most small businesses, two years of paying rent, salaries, and other expenses before a dime of revenue is brought in is an impossible hill to climb, and even those that survive will start operating at a huge disadvantage to larger, better capitalized concerns. If you add massive legal fees that are becoming the norm to that mix, the size of the problem is obvious.

    There are two separate, but linked issues here. The first is that, after literally centuries of discrimination, there just isn’t enough money in disadvantaged communities to provide the kind of capital required for success without more conventional outside funding. This can be addressed, as it was with regulation in the brokerage industry that mandated a percentage of business done by minority brokers. It took time in that case and was far from perfect in the early days, but ultimately led to some degree of equity in a business that had typically been inaccessible to minority communities.

    The second is that, while lawsuits from those who feel that they are now being discriminated against are understandable, they are short-sighted and risk destroying the young industry before it gets going. The cannabis business is not without its enemies and using lawsuits to effectively concentrate the benefits from it into the hands of big business helps them. It reinforces the belief that the industry is about the exploitation of the poor and weak to benefit the rich and strong. That was the case in the illegal market but if the industry is to grow, both in size and acceptance, it cannot be so as legalization moves forward.

    One answer may be to adopt the approach of Florida, legislation without any social equity component. The problem there, though, is also one of image. Much of the support for adult-use proposals comes from those who believe it can be an agent for positive change in wealth disparity between communities. Without it, you risk losing their support, particularly at the federal level, and once again reinforce the exploitation argument.

    The Solutions

    The first problem, a lack of capital, particularly among social equity applicants for licenses, can be addressed to some extent by grants and funding, although the experience of Oakland, CA where defaults on interest free loans are becoming a problem, suggests that that too can create its own problems. As with so many issues in the industry, a change to federal law that would give access to traditional banking and make federal grants and assistance possible is probably the best way forward.

    The answer to the second problem is relatively obvious and simple but is in some ways less likely to happen. The adult-use cannabis industry needs to stop eating itself by filing lawsuits that really benefit only the lawyers, and to start prioritizing the long-term success of the industry over perceived short-term gain. Given the oft-quoted litigious nature of America and the equally well-covered short-sightedness of the modern business community, though, I’m not holding my breath while I wait for that to happen organically. That means that future laws and regulations need to be written with potential litigation of that nature in mind. This too would be helped by federal recognition of the industry that would enable some protections to be written into the laws of the nation.

    Young industries are competitive by nature, but they are also often vulnerable and, ultimately, federal law needs to change to make adult-use cannabis fulfill its true potential. At the very least, federal decriminalization of the business is needed to give the industry access to traditional banking and capital markets. For now, though, it is important that states and entrepreneurs protect their already substantial investment in adult-use cannabis themselves and a good start on that front would be for local authorities to make provisions to close the capital gap, and for the industry to stop suing itself into oblivion.

    This article was written based on the data and analysis available to potential investors in the cannabis industry at thcregs.com. Click on the link for more information.

  • The Good and Bad of Massachusetts’ Successful Adoption of Adult-Use Cannabis Legislation

    Massachusetts approved the legalization of recreational, adult-use cannabis by ballot measure in 2016, making it one of the earliest states to do so. Since then, the rollout of the business there has gone well, and the state is often held up by those in the industry as an example of how things should be done. It certainly seems that way, but that doesn’t mean there aren’t problems. As is the case in all states with adult-use laws, Massachusetts regulators have been keeping a close eye on the market as it develops. They have identified both things they have done well and some issues that need to be addressed. Their observations, combined with the OBEDIO™️ data and analysis available at thcregs.com contain some interesting lessons for both potential investors and regulators in new and developing markets.

    There’s enough bad news in the world at the moment, so let’s start with the positives.

    Cannabis Businesses Have Been Well Received

    One of the things that Massachusetts regulators have focused on since the early days is the publication and promotion of the facts around cannabis businesses as they have become established. That is an important thing to do because there, as in other markets, the data and facts contradict what many people “feel” should be true. They feel that, obviously, cannabis businesses will increase crime and reduce property values, for example, neither of which have been observed to have happened in Mass., or elsewhere for that matter.

    There are always some people who will ignore evidence and trust their feelings more than the facts no matter how clearly presented, but they are in the minority. When given the facts, it turns out that Massachusetts residents will form informed opinions. A recent UMass Amherst poll showed that 61% of respondents believe that adult-use laws have been an overall positive for the state. Given the controversial nature of the business, that is a big number, and it will make growth in the industry a lot easier than it otherwise might have been.

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    A Fast-Growing Industry

    That growth so far has been spectacular. From $444.9 million in 2019, the first full year of adult-use retail, sales grew to $702 million in 2020, then soared to $1.33 billion last year. That led to a situation where, last year, for the first time, the state collected more revenue from cannabis sales than it did from alcohol. Some of that growth has come as more locations have opened up, but one of the main drivers recently has been the success of delivery services that were rolled out last year. That is significant for both potential investors and regulators in other markets as they open up. Home deliveries increase sales and therefore revenue for states and localities, while offering good growth for investors.

    As indicated earlier, though, as successful as Massachusetts has been in establishing and growing adult-use cannabis businesses, the process hasn’t been without issues.

    A Few Problems

    Even with a robust public information campaign, opposition to the industry exists and it is important that legislation and regulation address some of the complaints or even, in an ideal world, get ahead of them. For example, Massachusetts took what with hindsight looks like a strange and mistaken decision to treat the newly legalized cannabis in a different way from alcohol when it comes to DUIs. That is being rectified, but unfortunately it took the death of a State Trooper, Thomas L. Clardy after being hit by a cannabis impaired driver during a routine traffic stop, to prompt a tightening of the laws and their enforcement.

    I understand that those that wrote those early laws were trying to avoid a shift back towards a “war on drugs” mentality, where strict enforcement of strict laws ended up being both discriminatory and hugely expensive, but public safety has to be a priority in states that attempt to emulate Massachusetts’ success. Marijuana may not prompt the aggressive or destructive behavior associated with alcohol, but it can impair driving at least as much, and that has to be recognized in both legislation and enforcement.

    Access to Capital

    In recent interviews with Massachusetts Cannabis Commissioners, all of those interviewed identified access to capital as the biggest issue facing the industry when asked what that might be. In large part, this is something beyond their control. As long as federal law lags behind what is happening at the state level, access to traditional banking and therefore capital sources will remain restricted. A more streamlined license application and issuing process would help, as would industry specific capital and investment pools at the state level, but ultimately, federal law needs to get on the right side of history here.

    As you might expect, the lack of access to capital impacts those that the adult-use laws are trying to help, communities of color and those disproportionately impacted by the war on drugs, the most. It is no surprise, then, that worse than expected progress in helping those priority communities gain a foothold in the business is another problem identified by the Commissioners. The solutions here, though, are basically the same as for other issues. Encourage a change in federal law, get in front of possible objections to new businesses, observe and make necessary changes, and look at your own processes to seek state level help, and you have a chance of achieving what you set out to do.

    Those aren’t just the keys to achieving the desired results in terms of social equity, either. What the three plus years of retail, adult-use marijuana sales in Massachusetts show is that, if regulators do those things, the business can get public approval and grow quickly, creating some good opportunities for investors and a situation where everybody wins.

  • Lessons From the World’s Largest Retail Cannabis Market

    Lessons From the World’s Largest Retail Cannabis Market

    California pioneered the cannabis industry in America by passing Proposition 215 in 1996 that legalized medical marijuana. It is now, by most measures, the world’s largest locally regulated cannabis market. In 2021, retail stores in the state sold over $5.2 billion worth of products, a 20% increase on the 2020 numbers, and the market there is still growing. adult-use was approved by a large majority of voters in 2016, so the state also has one of the more mature recreational cannabis markets in the U.S. Its size and state of development mean that the state of the California cannabis industry is an important study for both regulators of newer markets and for potential investors.

    Fortunately, California requires regular, extensive, detailed analysis of the impact of the industry and changes that are taking place, analyses which provide valuable information. The most recent is the Final Report of a team led by Economic & Planning Systems, Inc., who have been analyzing the industry in the state’s capital, Sacramento. It makes for interesting reading.

    Reaffirming The Industry’s Negligible Negative,
    and Overall Positive Impact

    In many ways the most important conclusions of the report are regarding something that has been shown elsewhere too… that the introduction of legal, adult-use cannabis businesses has virtually no negative impacts on the areas that accept them, and significant positive financial impact at both the state and local levels.

    The biggest problem seems to be the aroma in some locations, something that is quite easily solved by updating regulations around air filtration at the indoor cultivation and processing sites. There is, however, no significant impact on more substantial issues such as commercial and residential property values, lease and rent rates, and crime. As studies in other places have shown, if there is any impact, it is a slight positive in all of those areas.

    On the fiscal side, the industry generates a surplus of nearly $20 million annually for the city’s general fund, creating a positive economic impact of $2 billion and around 12,500 jobs annually in Sacramento.

    This all shows, once again, that states that are not moving towards legalization and the municipalities that are opted out are missing out and are probably on the wrong side of history. Right now, the OBEDIO data and analytics of thcregs.com shows that around 38% of California municipalities are participating, and reports like this make it likely that that number will increase over time.

    Where Investment is Going

    The one area where the California regulations are not doing as well is in their goal of promoting social equity and supporting small businesses. There is an increasing trend towards vertical integration by big, outside investors. That, combined with some disadvantageous tax laws such as not allowing depreciation of assets in the industry, is squeezing margins and cash flow for smaller entities, resulting in some falling behind on tax payments.

    The outside investment right now is focused on the distribution side of the business, which makes perfect sense. Limiting the numbers of cultivation and retail businesses any one company can own is fine, but if just a few companies control distribution, they can make sure that their products get maximum exposure and gain a significant advantage in market share. That is true within the state, but it appears that many of these investors are also preparing for a time when cannabis is legalized at the federal level and interstate commerce in products is possible.

    As more and more states legalize in one way or another, that is a reasonable bet. Eventually, as happened with online gambling, the level of adoption will reach a critical mass, where federal bans are impractical and essentially unenforceable. When it does, the law will change.

    Possible Opportunities

    The one area of the cannabis industry that is not attracting big investment so far, but where there are significant opportunities, is that of testing labs. These facilities perform required quality control checks on products but are also used by growers and processors to develop and refine products.

    In the early days, the labs faced a lot of problems, both in terms of their own procedures and a high failure rate among products submitted to them. That led to 66 testing licenses being canceled, revoked, or expired, leaving only 27 testing labs operating in the state. For now, they are managing the workload, but any expansion of the business in the state will require more labs. That, though, isn’t the whole story. The potential for that side of the industry in a state like California with a thriving cultivation business should federal law change is huge so investment here, while flying in the face of recent history and not without risk, has enormous upside potential.

    Risks and Conclusions

    The principal risks for investors in California are around changes to regulations designed to increase the social equity value of the industry. If those are focused on helping small businesses, fine, but if California legislators go down the road of trying to punish larger operations for their success and ambition it will reduce the value of investments considerably.

    However, California’s experience with the legalization of adult-use marijuana has so far been largely positive, and the already large market there can be expected to grow as a result. As it does, there will be further investment opportunities, particularly in distribution and testing, areas that will see increased business as the industry in the state expands, but which offer huge potential should federal law allow the cannabis industry to operate in a more normal manner.

  • Focus on New Jersey

    Focus on New Jersey

    The three states that make up the New York tri-state area, New York, New Jersey, and Connecticut, are all in the process of implementing adult-use cannabis laws. All have some kind of procedure that allows local authorities and municipalities to opt in or out of the licensing process and, as the OBEDIO data and analysis from THCregs.com clearly show, the enthusiasm for cannabis businesses at the municipal level has varied considerably from state to state. Of the three, the most positive responses so far have come in New Jersey, where around a third of the local governments have opted in, allowing at least the possibility of cultivation, processing, and/or retail businesses under their jurisdiction.

    Why So Many Opt-Ins In NJ?

    In some ways, that is surprising. People think of New York and Connecticut as more reliably liberal, Democratic controlled states which should, according to conventional wisdom, make them more open to recreational use than New Jersey. So, why would New Jersey be more receptive to adult-use cannabis? There are two probable reasons.

    First, the demographics of the state as compared to the other two. New York, and to a lesser extent Connecticut, have populations largely concentrated in a few big urban areas, with many rural, conservative municipalities. New Jersey, by contrast, has a more even spread of population, making for numerically more jurisdictions that are not completely closed to the idea of cannabis from the outset. The state also has a history of seeking alternative tax revenue in order to keep income taxes lower. They were, for example, one of the earliest adopters of legal online sports betting.

    That openness and proven propensity to tax vice, makes the second factor all that much more powerful. There is hard evidence that the cannabis industry can be beneficial to communities in terms of tax revenue, while not in and of itself resulting in increases in crime or other problems.

    The first legalization and regulation of medical marijuana came in California in 1996 and, as you might expect with such a controversial subject, there has been a lot of research done on the impacts in the intervening 25 years or so. Mostly it, and subsequent more recent research around the legalization of cannabis for recreational use, has shown that crime is little impacted, if anything maybe decreasing slightly, and that there are benefits for previously disadvantaged communities. However, if local politics are dominated by a sense that the given locality is too upmarket to embrace marijuana, none of that matters, regardless of the potential tax revenue.

    NJ’s Marijuana Tax Structure

    That potential tax revenue is substantial. Estimates of the potential revenue to the state of NJ from pot vary, but most settle somewhere around $150 million annually, roughly the midpoint of the estimate by Rutgers University. There are a couple of things about the New Jersey tax structure for marijuana that are interesting.

    Sales of recreational marijuana will be taxed under the general sales tax, but with an added excise fee. That fee has been structured in a way that seems counterintuitive in some ways but is actually designed with a specific goal in mind. It is a regressive tax in a way, that is structured as:

    • up to $10 per ounce if the average retail price of an ounce was $350 or more.

    • up to $30 per ounce if the average retail price of an ounce was less than $350 but at least $250.

    • up to $40 per ounce if the average retail price of an ounce was less than $250 but at least $200; and

    • up to $60 per ounce if the average retail price of an ounce was less than $200.

    The idea here is to keep total retail costs in check and ensure that legal, regulated marijuana stays competitive with the illegal market, a goal in New Jersey that dates back to the days when just medical pot was legal. To that end, NJ Health’s Division of Medicinal Marijuana releases a biennial report. The latest version of that report deals with 2017 and 2018, and tracks prices relative to crowd-sourced estimates of the going rate in the illegal market, from various possibly questionable sites. That report showed that while the average price of regulated, quality-controlled medicinal marijuana was higher than of illegal weed, that difference was largely due to taxes. The above tax structure was designed to alleviate that problem to some extent.

    In addition to sales taxes and excise fees, local authorities in NJ are permitted to charge a tax of 2% or less on each transaction, but that applies to each phase of the business. Thus, municipalities can charge 2% tax on cultivation revenues, then another 2% on processing, then 1% on distribution by a wholesaler, and finally 2% on retail sales. That leads to “tax pyramiding”, which upsets The Tax Foundation, whose research I have used above, but makes the business much more appealing to local governments.

    Impacts on Investment Opportunities

    In some ways, the relatively enthusiastic response to legalization of marijuana from NJ towns and cities make the state a good target for investment. Municipalities that have actively opted in to permitting are less likely to introduce obstacles to successful businesses at the planning, zoning, and local permitting level, which is obviously a plus. If we assume that the opt-ins also reflect positivity towards adult use establishments among the NJ population, that should also result in strong demand within the state.

    There are, however, a few downsides to NJ from an investment perspective.

    The aim of keeping legal weed at least competitive with the illegal market is a noble one, but it may well lead to disadvantages for NJ pot businesses, particularly at the retail level. If prices diverge despite the tax system, then a “logical” way to address the difference would be through outright price controls. If it did come to that, it would mean that should there be a local supply problem due to a weather event or whatever, retail prices might be capped, leading to a margin squeeze for outlets.

    It might not even need an unusual event for prices to be squeezed. The NJ regs limit the number of cultivator licenses to 37 for at least a year or two, meaning that supply will be limited. There is no cap on the number of microbusinesses that can be allowed, but the relatively small limit to their canopy means that they will probably only be an attractive business proposition if prices are already high. You don’t need a Yale economics degree to know that if, as the OBEDIO data suggest, demand in NJ will be quite high and if, as the effective production caps suggest, supply will be restricted, wholesale prices will climb.

    That in itself is not a problem, but history suggests that it may lead to a push for regulators to intervene, which would probably severely disadvantage retail businesses in the state.

    Recent criticism of high prices for medical marijuana led to a state response that said in part “Unfortunately New Jersey is not a price regulated state.” The use of the word “unfortunately” there tells you a lot. However, economic history shows that price regulation leads to harmful distortions of almost any market, no matter how well intentioned. To avoid temptation in the future it may therefore be a good idea for regulators to look at restricting the opportunity to implement price controls now, before a situation arises.

    In addition, the number of opt-ins make it likely that there will be plenty of businesses in NJ, with a wide geographic spread. Good for NJ residents, but not necessarily for retail businesses from a competition perspective. Here, regulators should pay close attention to the competitive environment if they want the businesses to survive and thrive.


    Unsurprisingly given the state’s demographics and history and the significant potential tax revenues, New Jersey municipalities have embraced marijuana legalization more enthusiastically than have some of their near neighbors. That makes it an appealing state for investors, but the tax structure and stated aims of the state legislature make it seem at this point as if the cultivation, processing, and wholesaling businesses may be more tempting targets for investment than retail. 

  • Spotlight on Cannabis in… Connecticut

    Spotlight on Cannabis in… Connecticut

    Last year, Connecticut passed a law that made possession and consumption of marijuana legal from July 1st 2021 and which paved the way for the legal cultivation, processing, distribution and retail of the drug for adult use. Those that expected that by now, almost eight months later, those businesses would be underway, however, will have been disappointed. Progress towards that is slow. That has often been the case with adult-use cannabis legislation that has passed recently, but there are a few things about the law and regulations in Connecticut and the nature of the state that will make it even slower than elsewhere.

    The Moratorium Option

    Unlike in New York, where failure to opt out of the licensing process by a set date (December 31st 2021) meant that municipalities were automatically opted in, the Connecticut legislation allowed for them to essentially delay a decision by invoking a moratorium on license applications and the approval process. That has so far proven significant, as the OBEDIO data and analysis by THCREGS.com clearly shows. Up until the time of writing, 22 towns and cities have taken that option, as opposed to 20 that have opted out, and 11 that have actively embraced the opportunity.

    That shouldn’t come as too much of a surprise. Maybe I am just a cynic, but it seems to me that if you give a politician an opportunity to kick the can down the road on a controversial decision, most of them will take it. That inevitability, however, doesn’t detract from the importance of the idea of a moratorium for potential investors. The popularity of the option means that there will be a significant number of locations where, while retail stores and other businesses won’t be opening soon, there is still the possibility that they will at some point. It is important to factor that in when looking at the opt in/out data.

    It remains to be seen how many of those delaying will eventually allow marijuana businesses but, if they make their eventual decision based on data rather than on opinions, there is a good chance that it will be the majority of them. The studies that have been done so far, including the Federally funded one referenced here along with research by the Cato Institute and RAND, show little or no impact on property or violent crime rates following legalization or, in some cases, a reduction in those crimes.

    However long it takes, though, and whatever the total of eventual opt-ins, the demographics of the state make it likely that the rollout will be successful, if geographically uneven.

    Connecticut Demographics

    When most outsiders think of Connecticut, they think of what those of us who live here often refer to as the ‘Gold Coast’, towns like Greenwich, Westport, and Darien close to the New York border that are populated largely by Wall Street refugees and high earning commuters to the big city. That, though, is only a tiny part of a quite economically diverse state that also includes large rural areas and some quite poor, post-industrial towns.

    According to a survey released by the census bureau in 2018, at that time median household incomes by town in Connecticut ranged from around $200,000 in those Gold Coast towns to well under $50,000 in other parts of the state. One might think that legalization and the attendant economic opportunities would be more rapidly embraced by those poorer parts of the state but so far, that isn’t necessarily the case. Of the three Connecticut municipalities with the lowest median incomes, Hartford, New London, and New Haven, only Hartford has already opted in. That is despite the fact that the legislation allows them and other targeted towns significant advantages in the licensing and approval process.

    Priority Towns

    35 towns and cities in Connecticut, including the three mentioned above, have been designated priority areas for cannabis licenses and will be given earlier consideration and approval, allowing them a head start. The priority status was awarded to areas that had been disproportionately affected by the prohibition of cannabis in the past, defined as those with “…either a historical conviction rate for drug-related offenses greater than one-tenth, or an unemployment rate greater than ten percent, as determined annually by the Social Equity Council.”

    It would seem logical that, priority status or not, municipalities that fit that description would be keen to start the licensing process early, if for no other reason than to start getting the 3% tax that local authorities are allowed by the act to levy on cannabis sales, but that hasn’t been the case. So far, only six of the priority towns have opted in, with two having opted out and the rest yet to decide. For potential investors, though, priority towns should be just that…a priority, as anything that streamlines applications and approvals in a regulated market is welcome.

    What Next?

    Retail sales of cannabis are scheduled to begin in Connecticut on July 1st, 2022. However, without a fixed deadline for municipalities to opt in or out and with the option of a moratorium available to those that do address the issue, it is likely that even then, the scale and scope of the market in the state will be unclear. It would be helpful if authorities could force the issue somewhat by creating a deadline, after which an opt-in would be assumed, but I have not seen any mention of that to date.

    Even if they do, of course, there will still be zoning issues to be negotiated. Local authorities have the right to set zoning rules and restrictions around the cannabis industry and, if the history of legalization so far is to be trusted, they will enthusiastically embrace that right. There are some statewide rules relating to the proximity to schools, churches and the like but, as with all states, there is a risk that as the comment process gets underway, local groups will ask for additional restrictions.

    Still, even with those potential problems, the cannabis market in Connecticut will probably turn out to be a decent one. It is a generally prosperous state with enough municipalities incentivized and willing to embrace the industry to take advantage of the inherent demand. Progress will be slow, but it will be progress, nonetheless.