The marijuana industry is blossoming before our eyes in North America.

In the mid-1990s, not a single state in the U.S. had given the green light to medical marijuana, while Mexico and Canada both held cannabis to be an illicit substance. Furthermore, a survey from national pollster Gallup found that a mere 25% of respondents favored nationwide legalization in the United States.

Today, 33 U.S. states allow physicians to prescribe medical weed to patients, with 10 also allowing adult-use consumption. To our south, Mexico legalized medical marijuana in June 2017, and looks to be inching closer to passing recreational legislation. Meanwhile, to our north, Canada last year became the first industrialized country in the world, and only the second overall behind Uruguay, to legalize recreational pot. And all told, two out of three Americans in Gallup's annual poll now want to see marijuana become legal nationally.

A black silhouette of the United States, partially filled in by baggies filled with dried cannabis, three pre-rolled joints, and a scale.

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New Jersey and New York attempt to tackle recreational legalization

Even with the federal government standing pat on its Schedule I classification of cannabis, it hasn't stopped the industry from thriving at the state level. The only real question has been, which state is next?

New Jersey, which is required to pass laws entirely through the legislative process (i.e., without residents voting on the matter), looks to be on the verge of becoming the 11th state to wave the green flag on recreational weed. According to New Frontier Data, New Jersey could near $1 billion in annual sales by 2023, making it yet another lucrative market for the legal cannabis industry. The state's Democrat-run Senate and Assembly, and its Democrat governor, Phil Murphy, clearly support legalization. The only delay had been on deciding the tax rate for retail sales. With that now out of the way, legalization looks to be a mere formality.

New York might also be right around the corner from joining the recreational-weed legalization wave. The state's Department of Health found that the benefits of cannabis outweigh its risks, and Gov. Andrew Cuomo, also a Democrat, favors legalization. With New York also lacking the initiative and referendum process, recreational pot legalization would have to be approved through the state's Legislature, which seems increasingly likely to happen in 2019.

But even though we're facing an off-year election, there's still one state where voters will potentially get their chance to chime in on recreational marijuana in November.

A row of voting booths with pamphlets attached.

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Is the second time the charm for Ohio?

In Ohio, legalization proponents have filed the Marijuana Rights and Regulations Amendment, which would allow for the use, possession, and sale of cannabis for persons age 21 and over, and for the Ohio General Assembly to impose a tax on recreational weed. The initiative is currently pending official review. But if given the green light, it would appear on the ballot on Nov. 5, 2019. 

If this all sounds sort of familiar, it's because Ohio tried to become the first state to pass a medical and recreational pot all-in-one initiative in 2015, in another off-year election. Issue 3, as the measure was dubbed, would have legalized medical weed, allowed adults 21 and over to purchase recreational marijuana, and apportioned 10 grow farms throughout the state for supply purposes. Despite growing support for cannabis, Issue 3 fell flat on its face in the voting booths, with nearly a 2-to-1 margin of "no" votes to "yes" votes. Voters worried that having only 10 grow farms would create an oligopoly within the state, which could have a detrimental impact on per-gram flower prices.

A parallel measure known as Issue 2 was voted on as well in 2015, which was specifically designed to prevent monopolies and oligopolies from infiltrating the state's cannabis industry. It would up passing by a slim margin.

Since Ohio chose to legalize medical marijuana through the legislative process in 2016, the infrastructure needed for the recreational side of the industry is already present. Plus, with cannabis favorability having improved nationally since 2015, and the latest initiative having no mention of a grow farm oligopoly, the chance of a recreational weed measure passing in Ohio (pending regulatory review) looks promising. 

Check out the latest earnings call transcript for Innovative Industrial Properties.

A marijuana dispensary sign, with a cannabis leaf above the word dispensary.

Image source: Getty Images.

Marijuana stocks gear up for legalization in the Buckeye State

Considering that Ohio's medical cannabis industry could be worth up to $400 million in annual sales by itself, investors can pretty safely assume that the legalization of recreational pot would push peak annual sales estimates of medical and adult-use marijuana to north of $1 billion for the Buckeye State.

Anticipating a positive vote in 2019, we've witnessed a handful of well-known pot stocks angling for their piece of the pie in Ohio. Less than two weeks ago, cannabis real estate investment trust Innovative Industrial Properties (IIPR 1.17%) announced that it was purchasing land and providing reimbursement for a 26,000-square-foot industrial facility, and a 32,000-square-foot greenhouse, both in Ohio. The purchase, which will cost Innovative Industrial Properties $20 million, inclusive of its tenant reimbursements, pushes the company into its 11th state. Even though Innovative Industrial Properties prides itself on purchasing and leasing medical cannabis facilities, there's no doubt that there's value from the demand side of the equation in owning greenhouse assets in states that also legalize recreational pot. 

Speaking of which, Innovative Industrial Properties' Ohio lease goes to PharmaCann, a privately held vertically integrated dispensary that's being acquired by MedMen Enterprises (MMNF.Q) for $682 million. MedMen, which aims for an upscale experience that normalizes the weed-buying process, will double its national presence with the purchase of PharmaCann, including gaining exposure in Ohio.  Assuming New York and Ohio do move forward with adult-use legalization this year, half of the 12 states MedMen is operating in, once its deal closes, will be medically and recreationally legal.

Ohio may not rank as prominently as California, which could tally up to $11 billion in annual weed sales by 2030. But there's clearly money to be made if regulators put the initiative on the 2019 ballot, and voters give the measure their blessing. It's definitely a development worth keeping an eye on.