You can count the number of multibillion-dollar marijuana markets, at least of the legal variety, on one hand and still have some fingers left over. Even then, several of those markets haven't topped more than $2 billion in annual legal marijuana sales yet. California is already there, while Canada and Colorado shouldn't be too far away from becoming multibillion-dollar marijuana markets.

It appears there could be one less finger left over in the not-too-distant future. Illinois is considering the legalization of recreational marijuana. And based on a recent report, the state could be the next likely multibillion-dollar marijuana market.

Now entering Illinois sign with a marijuana leaf on it

Image source: Getty Images.

A big potential market

A study conducted by Colorado cannabis consulting firm Freedman & Koski projects that the annual marijuana market in Illinois could be between $1.69 billion and $2.58 billion. The midpoint of this range is $2.14 billion, enough to make Illinois a multibillion-dollar market for legal recreational marijuana.

The authors of this study included two men with connections to Colorado's recreational marijuana industry. Andrew Freedman is the former director of marijuana coordination for Colorado Gov. John Hickenlooper, while Lewis Koski is the former director of the Colorado Marijuana Enforcement Division. As you might expect, the analysis these men performed used Colorado for much of the basis in estimating the potential size of the recreational marijuana market in Illinois.

There are some key differences between Colorado and Illinois, though. Colorado is much smaller, with only around 43% of the population of Illinois. Colorado also has significantly less tourism than Illinois does, in large part because of the popularity of Chicago as a convention site and tourist destination. However, the average cannabis usage rate for Illinois residents is less than half that of Coloradans, according to the National Survey on Drug Use and Health.

Illinois wouldn't have a recreational marijuana market of more than $2 billion right out of the gate, though. The report from Freedman & Koski noted that "in every market that has come online, there has been a steady windup before supply met demand and consumers made the full transition from the illicit market to the legal market." 

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Next steps for Illinois

Freedman & Koski's report was commissioned by two state legislators, Sen. Heather Steans and Rep. Kelly Cassidy, both Chicago Democrats, who are sponsoring legislation to legalize recreational marijuana in Illinois. The legislators plan to introduce a proposal to legalize recreational pot in the state by no later than April.

Rep. Carol Ammons (D-Urbana) has already introduced another bill, called the Cannabis Legalization Equity Act. This legislation would allow anyone 21 or over to buy or sell marijuana legally with a valid ID. 

The state legislature should have plenty of support from Illinois' new governor, J.B. Pritzker. During the campaign last year, Pritzker promised to "put in place a framework to license businesses to sell marijuana to consumers for recreational use." The billionaire businessman's gubernatorial victory in November 2018 was a big win for the U.S. marijuana industry but didn't receive as much attention because Michigan legalized recreational pot and two states legalized medical marijuana. 

Legalization of recreational marijuana in Illinois isn't a slam dunk. Several groups oppose legalization, including the Illinois Catholic Conference, the Chicago Crime Commission, and the Illinois Association of Chiefs of Police.

Still, past surveys indicate significant public support for legalization. And with the Freedman & Koski report projecting potential additional tax revenue of up to $676 million, the bills to legalize recreational pot could attract support in Illinois' state legislature.

Ways for investors to profit

With another big recreational marijuana market potentially on the way, are there ways for investors to profit? Of course. There are three stocks that especially stand out.

Green Thumb Industries (GTBIF -0.80%) is based in Chicago. The company has operations in 11 states, including its home state of Illinois. With its cultivation and manufacturing capabilities along with its RISE retail chain of cannabis dispensaries, Green Thumb Industries would probably be a big winner from legalization of recreational marijuana in Illinois.

MariMed (MRMD -2.94%) is another stock that could jump if Illinois legalizes recreational pot. The company focused in the past on providing advisory services for its customers in the medical cannabis industry. However, MariMed has acquired several of its customers, including two medical cannabis dispensaries in Illinois. MariMed also owns Betty's Eddies, the most popular brand of cannabis edibles in Illinois.  

MedMen Enterprises (MMNF.Q) is the largest cannabis retailer in the United States. It's acquiring Illinois-based PharmaCann, which has operations in eight states. PharmaCann runs four cannabis dispensaries and two production facilities in Illinois.

Of these three stocks, Green Thumb Industries has been the biggest winner so far in 2019 and over the past 12 months. If efforts to legalize recreational pot in Illinois are successful, though, all three stocks should enjoy nice gains.