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What Investors Need to Know About Pot Legalization in Connecticut

By Eric Volkman – Aug 7, 2021 at 3:00PM

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The New England state is the 19th in the U.S. to sanction recreational marijuana.

Every month, it seems, another state flips the switch on the consumption and sale of recreational marijuana. The latest member of this club is that solid old New England maritime state, Connecticut.

In this video segment from Motley Fool Live, longtime Fool contributor Eric Volkman and healthcare and cannabis bureau chief Corinne Cardina provide a brief rundown of the new law in Connecticut, and identify one pot stock in particular that might benefit from the state becoming "greener." This clip was recorded on July 16.

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Corinne Cardina: Let's talk about a couple of states. We almost always have, out of the 50 states, always something happening every time we get on here on Live.

What we're going to start with first is Connecticut. What is up with Connecticut?

Eric Volkman: Well, Connecticut is now fully legal state. Starting July 1, they turned the light on for recreational marijuana consumption, at least, and they're currently developing a market. Welcome to the club, Connecticut. It's the 19th state to legalize recreational consumption and sale.

Connecticut, I think, was boxed in by geography. They have three neighbors, two of them are big and prominent, that would be New York and Massachusetts. Massachusetts, they'd already gone recreational sometime ago. New York, as probably a lot of our listeners know, earlier this year also turned on their recreational light. To be boxed in by these two big neighbors and not have the same legal regime is a little ridiculous.

Like I say, they're developing a market. The aim is to set one up. It's going to fall under the state's department of consumer protection, and the aim is to get that up and running by next May, so May of 2022. There's going to be limited licensing in early stages because states always tend to be cautious about this. They're going to limit [operations] to one dispensary for 25,000 residents. I don't know why.

Current dispensaries that are only selling medical products -- because of course, previous to this, only medical was legal -- can convert to what they call a hybrid model, which almost self-explanatory. They can sell both recreational and medical marijuana if they meet certain conditions and at least if they pay the state a fee of at least $500,000.

Corinne Cardina: That's quite a fee.

Eric Volkman: Yes, especially for fairly small-scale dispensary operators. Because of this, I think the way it currently is in these very early days, it favors larger operators. In terms of Connecticut legalization, as it develops over the next month and the boundaries are set for the recreational market, I would keep an eye on companies that are interested generally in the New England market.

The most obvious name here is Curaleaf (CURLF -2.73%), which is based in neighboring Massachusetts, and has clear ambitions to be a mighty player in the Northeast. It's got the capital to buy and establish dispensaries and dispensary networks. Of course, because of these limitations in Connecticut, you can't have a giant chain dispensaries. It's pretty limited. So Curaleaf would be one name I'd be looking at as this develops.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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