If you live in a state that hasn't yet legalized medical marijuana, you're in the minority among Americans. Twenty-nine states plus the District of Columbia allow use of medical marijuana, with many of the most populous states included in that list.
On the other hand, if you live in a state that hasn't yet legalized recreational use of marijuana, you're still in the majority. So far, only eight states and the District of Columbia have changed their laws to allow recreational use of the drug.
Another big state could be on the way to making recreational marijuana legal, though. And if it happens, it would become the second-largest state for the marijuana industry after California.
Image source: Getty Images.
Shoring up support in Jersey
New Jersey legalized medical marijuana in 2010. The market for medical marijuana in the state, however, is limited. Only around 15,000 patients currently obtain the drug for medical purposes from five authorized dispensaries.
Gov. Chris Christie has been firmly opposed to the legalization of recreational marijuana. Arrests for marijuana possession in New Jersey are at all-time highs, according to the American Civil Liberties Union of New Jersey. So why is New Jersey potentially on the way to legalizing recreational marijuana? Elections are coming.
On Nov. 7, 2017, New Jersey citizens will elect a new governor and state legislature. All 80 seats in the state's general assembly are up for grabs. The Democrat Party gubernatorial candidate, Phil Murphy, is way ahead in the polls right now. Going into the election, Democrats hold a 52-28 majority in the general assembly.
New Jersey state capital building. Image source: Getty Images.
Murphy, a former U.S. ambassador to Germany when former President Barack Obama was in office, has publicly stated his support for legalization of recreational marijuana. He could have a legislature that agrees with him.
Democratic state senator Nicholas Scutari introduced a bill earlier this year to legalize recreational marijuana. Scutari thinks that, if Murphy wins in the November elections, a law to establish a retail marijuana industry in New Jersey could be passed within 100 days.
Ranking the states
How big would it be for the U.S. marijuana industry if New Jersey legalizes recreational marijuana? Just look at how the state would rank among others that have already legalized recreational use of the drug.
Data source: U.S. Census Bureau. Chart by author.
The U.S. market for recreational marijuana could potentially increase by at least 13% if New Jersey moves forward with legalization. Realistically, though, growth could be even higher. Supporters of the effort in the state estimate that the market would be worth around $1.2 billion annually from consumers in New Jersey and surrounding states.
Those surrounding states are Delaware, Pennsylvania, and New York. While Delaware has a small population, Pennsylvania and New York state have more residents than New Jersey does. Legalization of recreational marijuana in New Jersey would likely attract customers from these adjacent states. It's also possible that these neighboring states could be more likely to legalize recreational marijuana, as well, if New Jersey's revenue increases significantly.
A potential green rush
If something similar to the plan Nicholas Scutari put forward in May is adopted, an agency will be established to set up regulations and licensing programs for growers and distributors within a year of passage of the bill. It wouldn't be surprising to see a "green rush" of existing U.S.-based marijuana growers into New Jersey.
Terra Tech, which is currently a micro-cap marijuana stock, is one of many companies closely watching how things unfold in the state. The company's wholly owned subsidiary, Edible Gardens, already markets non-cannabis hydroponic produce in New Jersey and other states.
Image source: Getty Images.
Canadian marijuana growers could also look to their south. Aphria (NASDAQOTH: APHQF) has already done so. The company owns a stake in Arizona medical-marijuana provider Copperstate Farms. Aphria is also moving forward with plans to acquire a medical marijuana grower in Florida. New Jersey would be even closer to home for the Ontario-based company.
One of the biggest winners if New Jersey legalizes recreational marijuana could be Scotts Miracle-Gro (SMG +2.20%). Scotts sells practically all of the supplies needed by marijuana growers, including fertilizer, lighting systems, and hydroponic products. There's a pretty good chance that whichever companies gain approval to grow marijuana will turn to Scotts Miracle-Gro's extensive line of products. While Scotts isn't really a marijuana stock, it's a good way to profit from the marijuana boom for those leery of buying pure-play marijuana stocks.
At this point, of course, this is all speculation. However, unless the polls reverse course between now and November, the Garden State could have a new crop in its gardens in the not-too-distant future.
