Please ensure Javascript is enabled for purposes of website accessibility

Will This Big State Be Next to Legalize Recreational Marijuana?

By Todd Campbell – Updated Apr 13, 2019 at 11:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

New Jersey could clear the way for adult use of marijuana later this month.

Until Congress acts, individual states are taking it upon themselves to legalize marijuana nationwide. So far, 33 U.S. states have passed pro-pot laws, including 10 states that have passed laws establishing recreational, adult-use marketplaces. And marijuana legalization doesn't appear to be losing momentum. This week, New Jersey's governor reached an agreement with top state legislators on a bill that could usher in recreational use in the Garden State soon. 

A pot primer

Cannabis has been used culturally, industrially, and as medicine for thousands of years, but it's been illegal in the U.S. since Congress passed the Marijuana Tax Act in 1937. And prohibition has been strictly enforced since cannabis was classified as a schedule 1 drug following the passage of the U.S. Controlled Substances Act in 1970.

Marijuana buds in front of an American flag.

IMAGE SOURCE: GETTY IMAGES.

Despite its illegal status federally, states have been seeking to end prohibition since California became the first state to legalize medical marijuana in 1996. Today, nearly three dozen states allow marijuana's use medically, 10 states allow recreational use, and all but three states allow the use of cannabidiol, or CBD, a chemical that can be extracted from the cannabis plant that's associated with wellness benefits.

Americans spend an estimated $50 billion on marijuana every year, but legal sales totaled only $8.4 billion in the U.S. in 2018, according to GreenWave Advisors' Matt Karnes. As newly approved markets mature and more states OK the use of pot, legal sales are expected to grow significantly. If marijuana prohibition ends nationwide, Cowen & Company thinks the U.S. market could grow to $80 billion by 2030.

Check out the latest earnings call transcripts for the companies we cover.

A marijuana plant in the foreground. $100 bills in the background.

IMAGE SOURCE: GETTY IMAGES.

New Jersey could be the next pro-pot state

Governor Phil Murphy has been vocal about his interest in legalizing recreational marijuana use in New Jersey. Following negotiations with his state's Senate president and the Assembly speaker, a bill allowing the over-21 crowd to purchase, possess, and use pot could get a yes or no vote as soon as March 25.

If New Jersey's legislature gives the bill an OK, Murphy is expected to sign it shortly thereafter, paving the way for regulators to iron out the details on exactly how the state's market will operate. Putting in place the necessary rules and requirements could take six months or more, though, so it's possible that recreational dispensary sales won't begin until 2020.

If everything goes off without a hitch, it could be a boon for marijuana businesses and the state's tax coffers. The proposed bill includes a $42-per-ounce tax on marijuana, and it allows towns to collect a 3% tax from cannabis retailers, a 2% tax from cultivators, and a 1% tax from wholesalers. GreenWave's Karnes estimates New Jersey's medical marijuana sales were just $66 million in 2018, but legalization of recreational use could grow regulated marijuana sales to $750 million next year and to over $930 million in 2022. If he's on target, the potential growth could benefit dispensaries and greenhouse operators in the state, including Curaleaf, which has a 40% share of New Jersey's medical marijuana market already.

Peak sales in New Jersey could be much higher than that, though. Colorado, the 21st-largest state by population, was one of the first states to legalize adult-use marijuana, and its marijuana market hauled in $1.5 billion in 2018. New Jersey -- the 11th most populous state -- has a population that's 58% larger than that Colorado, suggesting $2 billion dollars or more in future annual revenue isn't out of the question.

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
CURLF
$4.94 (-0.40%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.