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With the cannabis industry in a constant state of evolution, it can be difficult to predict what’s coming next. But with the pace of legalization increasing across the U.S. and new states coming online every year, it’s more important than ever to identify the trends shaping the cannabis space.
What are the states to watch, and why? What is the status of social equity efforts, and who is getting it right? When will there be movement on federal reform legislation?
At the Green Growth Summit, a one-day cannabis business event recently held in Chicago, entrepreneurs, investors, and business owners gathered together to learn, network, and discover new opportunities in the cannabis business. To weigh in on where cannabis is headed next, a panel of seasoned industry experts including Jessica Billingsley, CEO and board chair, Akerna Corp.; Joe Caltabiano, CEO, Choice Consolidation Corp.; Sammy Dorf, co-founder of Verano; and Kris Krane, CEO, Kranewreck Enterprises; discussed the future of cannabis and why they remain excited about the industry they love.
The states to watch
Several new states have opened regulated markets in recent years, most notably New York, New Jersey, and Connecticut, which recently flipped from medical-only to adult-use cannabis sales. Driving enthusiasm for these new markets is the sheer number of new consumers gaining access to legal cannabis sales.
“It is obviously New Jersey, New Mexico, and Connecticut, but New Jersey is really in an incredible market,” Dorf said. “It is intensely populated, and is an incredible medical market already.”
According to Dorf, New Mexico is also an exciting new market to watch with its population centers and close proximity to Texas.
Billingsley agreed that the emerging markets with large populations are interesting. She was also intrigued by the movement in the Deep South, with Alabama coming online for medical sales soon and decriminalization making headway in the legislature.
“It helps that I’m from Atlanta originally,” she said. “My family owns a timber farm in Alabama, so I know firsthand about agriculture in the South, the deep history of roots in agriculture. We’ve done some research and looked up some of the stats on the top crops across the south, which are cotton and hay at $300 and $500 an acre, respectively. Of course, we all know you can make a lot more money producing cannabis.”
Likely to move to adult-use sales in the next few years, states like Missouri, Ohio, Pennsylvania, Maryland, and Arkansas are essential to watch, according to Krane.
With its vast population and influence, New York’s importance for the industry cannot be overstated, said Caltabiano. “New York is the center of the financial world. So inevitably, it also brings Wall Street,” he said. “It is going to be front and center. JP Morgan Chase is going to have to deal with employees consuming cannabis. Goldman Sachs can’t have a moratorium on people consuming cannabis. So you will see this evolution occur from New York, separate and apart from just the revenues that are getting generated, but it will infuse this industry like nothing else ever before, in my opinion.”
Social equity, justice trends
According to the panel, the movement to address social justice inequities in the cannabis industry is growing and here to stay. The recognition that Black and brown populations were unfairly and disproportionately targeted by the decades-long War on Drugs is nearly universal today, and states are recognizing this reality.
“What the states are doing to go back and try to fix those issues is incredible. We saw it in Illinois. Illinois was one of the first states that really took a go at it, and they structured it well,” Dorf said. “Obviously, there are a lot of lawsuits, but I think that we will continue to see (movement toward more social equity) throughout the states that have already enacted medical. And then obviously with recreational, I think when a lot of states go from medical to recreational is when they will start enacting social equity programs. But it is something we support. And I think it will be more prevalent as more states come online.”
But the challenge with social equity and social justice programs can’t be understated.
“I think states are starting to do a good job of figuring out how to get licenses in the hands of social equity operators,” Caltabiano said. “But that is not enough. If you can get someone a license, but you can’t set them up to succeed with capital and operational support, you’re not solving the problem. That access to capital is not available in the industry, especially to somebody who may have a criminal record or who may not have access to high net worth individuals within their personal friends and family network.”
“Capital is absolutely the number one thing that will ultimately make social equity work,” he said. “Without that, it’s just a great idea.”
Progress on social equity programs has largely been made through Democratic-controlled legislatures. Still, according to Krane, whether Republican-led legalization efforts will lean so heavily into these efforts remains a question.
“My prediction is Pennsylvania will probably be the first Republican legislature to pass legalization,” he said. “And I’m not trying to get partisan here, but I’ve seen no evidence that Republican legislators care one bit about social equity. So I’m not super optimistic that the next wave of legalization laws will be as friendly to this issue.”
In addition, the panel agreed that without federal reform on banking and criminal justice, social equity efforts would never meet their highest objectives.
How tech is creating the modern cannabis industry
Technology is finally catching up to the specific needs of the industry. As a result, cultivation, production, and distribution are improving, allowing the industry to scale in ways that were impossible in the past. As these new tools advance the industry, they also generate the data every business needs to refine operations and grow.
“The reason I started Choice was to learn from the mistakes that were made when we started Cresco,” Caltabiano said. “The available tools at the time were rudimentary at best. We couldn’t use Salesforce. You could barely get a Microsoft account. So you had to build all these other custom tools. To be able to focus on throughput in your facilities is incredibly important. Automation and the ability to track customers is important because we are limited on what we can do from a marketing standpoint. So you have to take those tools that you can get and utilize them to the maximum potential.”
The long and winding road to federal reform
Unfortunately, the window for meaningful federal reform is closing fast in the current election year. Despite slim Democratic majorities in both bodies of Congress, the panel’s assessment was that infighting among the caucus and an unenthusiastic White House administration appear destined to squander the opportunity for full legalization this year. And with Democrats expected to lose the House and potentially the Senate in this year’s midterm elections, the window for progress will snap shut in 2023.
“I hate being a pessimist, but it’s going to be a very difficult road to get anything done federally this year,” Caltabiano said.
Banking reform combined with some criminal justice measures may be where any substantial movement is made, according to Krane.
“I’m cautiously optimistic that we can probably get SAFE Banking ‘Plus,'” he said. “I think it will be SAFE Banking, plus some social equity provisions. I actually think there’s a path probably sometime this summer for us to get SAFE Banking ‘Plus’ done. If we don’t, then I agree. Starting next year, the chances of a full reform at the federal level are basically dead.”