Despite the drubbing that marijuana stocks took in 2019, it was still a year filled with cannabis firsts. We witnessed Canada become the first industrialized country to launch derivative pot products and watched Illinois do what New Jersey and New York failed to do -- legalize recreational weed while also passing an expungement clause for those people with previous cannabis possession or use convictions.
The current year also looks as if it'll be filled with marijuana milestones. For instance, Mexico should become the third country in the world to give adult-use cannabis the green light by no later than the end of April. But the single-biggest event in 2020 will likely be the November elections in the United States.
Just as we witnessed in 2016, when nine states voted on a marijuana initiative or amendment (eight of which passed), the current year should feature a number of state-level votes on recreational or medical cannabis. However, none of them will be as unique as what South Dakota is bringing to the voting booth.
The Mount Rushmore State is set to make history
The Mount Rushmore State has two separate marijuana initiatives that'll be appearing on the ballot. The first is the South Dakota Marijuana and Hemp Initiative, which, if approved, would lead to amendments of the state's constitution. This ballot measure would allow persons aged 21 and over to possess, use, transport, and distribute cannabis, with possession and distribution limits set at one ounce. It would also authorize the State Department of Revenue to handle the issuance of marijuana-related licenses for growing, testing, retailers, and so on, with a 15% excise tax ultimately being slapped on adult-use weed sales. As is consistent with other recreationally legal states, the revenue raised from taxing pot would be used to supplement the in-state education budget.
Interestingly, this amendment doesn't legalize hemp. However, it would require the state's legislature to pass laws regarding the cultivation, processing, and sale of hemp by no later than April 1, 2022, as well as establish regulations regarding a medical cannabis program.
The other initiative, known as Measure 26, is a statutory measure designed to create a medical marijuana program in South Dakota for patients with a debilitating medical condition. As currently written, a "debilitating medical condition" would be one that leads to "cachexia or wasting syndrome, severe debilitating pain, severe nausea, seizures, or severe and persistent muscle spasms, including those characteristic of multiple sclerosis." The Department of Health would be free to add additional qualifying conditions, according to the measure.
In other words, South Dakota residents will be the first ever to vote on adult-use marijuana and medical marijuana in the same election. Ohio tinkered with the idea a few years back, but it never came to fruition.
South Dakota won't be alone come November
Although South Dakota will offer the most original marijuana vote to date, it's certainly not going to be the only state with major cannabis implications.
New Jersey residents will absolutely be voting on a recreational cannabis measure come November. The Garden State looked to be on track to legalize adult-use pot at the legislative level in March of last year, but it all fell apart very quickly. Though Democrats in the state legislature are in favor of legalizing and taxing recreational pot, disagreements arose after some lawmakers wanted to see an expungement clause introduced for those folks with prior convictions for possession or use. This caused on-the-fence supporters to back away, ultimately killing momentum. However, support for adult-use weed looks strong among New Jersey residents, making it a good candidate to legalize in 2020.
Even though it's not even guaranteed to have a ballot measure as of yet -- signatures are currently being gathered -- Arizona is a fairly sure bet to legalize recreational pot in 2020. You see, states that fail to pass adult-use weed measures have resounding success on the second go-around. Following Arizona's Proposition 205 failing to pass in 2016 by a mere 2%, it looks highly likely that residents will have softened their stance on cannabis by November.
Even Nebraska, which is traditionally a Republican-led state, looks as if it'll be voting on a medical marijuana initiative in November, assuming residents can gather enough signatures. Though Republican support for recreational cannabis is hit or miss, the general consensus, regardless of party lines, is that medical marijuana being prescribed by a physician is A-OK.
It's possible that, by the beginning of 2021, there could be only 15 (or fewer) states that haven't legalized medical pot in some capacity.
Legalizations mean opportunity for MSOs
It's no secret that the U.S. is already the largest marijuana market in the world by sales. If additional states join the ranks of those to have legalized, it's going to mean even more opportunity for vertically integrated multistate operators (MSO). After all, both New Jersey and Arizona are forecast to produce more than $1 billion in annual weed sales by 2024.
On a pro forma basis (i.e., if all pending acquisitions close), both Curaleaf and Harvest Health will each be able to open around 130 retail dispensaries in 19 and 18 states, respectively. Harvest Health has in the neighborhood of 210 total licenses, which includes cultivation farms and processing sites. Not surprisingly, Wall Street is counting on incredible growth from these MSOs in 2020, with Curaleaf having a shot at $1 billion in full-year sales and Harvest Health expected to top $660 million, making it one of the fastest-growing pot stocks.
We're still a couple of months away from knowing exactly how many states will be voting on cannabis come November, but MSOs appear set for a much better year than 2019.