Four more states legalize recreational marijuana
Posted December 4, 2020 10:54 a.m. EST
Updated December 4, 2020 11:47 a.m. EST
CNN — In a matter of hours on election night, recreational cannabis measures got the go-ahead in four more states: Arizona, Montana, New Jersey and South Dakota.
That doesn't mean that people in those locations can legally buy weed for non-medical use just yet.
Although the moves at the ballot box further bolster the $19 billion US cannabis industry, the passages are early steps in an often complex and lengthy process.
History shows that it could take months or, in some cases, years for the first regulated sales to take place. It takes time to develop regulatory programs; establish testing, tracking and safety protocols; build supply chains; license operators; and, of course, grow the plants. And in two states, legal challenges have been filed against the ballot initiatives, meaning legalization efforts there could be potentially overturned.
Here's a look at where things stand in the latest adult-use states -- and when people might be able to purchase cannabis there.
The Garden State is garnering the lion's share of attention among the newly legal states.
The market size could be fairly significant. It's the first of the Mid-Atlantic states to legalize recreational cannabis, establishing a potentially large regional canna-tourism hub, given its proximity to Philadelphia and New York City. New Jersey is also viewed as a catalyst for other neighboring states to push through legalization plans.
The new law takes effect on Jan. 1, 2021, and if the legislative and regulatory efforts move expeditiously, adult-use sales could start by the end of next year, said Steven Hawkins, executive director of the Marijuana Policy Project, a legalization advocacy organization, told CNN Business.
"There will be time needed for the expansion [of the New Jersey industry]," Hawkins said. "The current [medical cannabis businesses] could not meet the demand that clearly will be there not only from New Jersey residents, but people crossing over from New York."
But first, lawmakers need to align on what exactly their state's recreational cannabis program would look like.
Legislation to implement a legal adult-use cannabis market has started to advance through New Jersey's State House. It has already seen some substantive changes, notably the addition of language to better address social justice concerns by directing more revenue to communities disproportionately affected by the War on Drugs. However, efforts have hit some stumbling blocks in recent weeks. The respective bills moving through the state Senate and General Assembly aren't in full agreement on key aspects such as whether there should be a cap on the number of commercial cultivators.
But the disagreements aren't likely to turn into any kind of substantial impasse, Hawkins said.
An additional hurdle could crop up if the bill passed by the state legislature requires growers of cannabis for medical use to show that they can meet demand for both recreational and medical purposes.
New Jersey, which opened its medical cannabis patient registry in 2012, has 12 companies licensed to cultivate medical cannabis and 13 dispensaries open as of Nov. 30.
Annual sales in New Jersey are expected to land in the $1.8 billion realm by the fourth year of operation, according to New Frontier Data, a data analytics company that specializes in the cannabis industry.
Arizona, where efforts to legalize adult-use cannabis narrowly failed four years ago and passed in a 60-40 margin this year, could very well be the first of the four new adult-use states to start legal cannabis sales.
Unlike New Jersey, where the ballot language left a lot to be decided by the state legislature, the Arizona measure spelled out much of the rules and regulations. It directs the Arizona Department of Health Services to start taking recreation license applications on Jan. 19, 2021, and determine within 60 days whether they meet the qualifications.
"The timeline that they've been given by the initiative is pretty aggressive to start with, so we don't expect that they will be able to do it more quickly," Steve White, CEO of Arizona-based cannabis operator Harvest told KGUN9 earlier this month.
Legal possession of cannabis for recreational use started Monday when the state certified the election results; however, aside from registered medical cannabis patients, Arizonans 21 years and older don't have a legal means of obtaining cannabis just yet.
Typically a recreational cannabis program follows an established medical marijuana program. Earlier this month, South Dakota became the first US state to legalize both simultaneously.
However, the election night results haven't sat well with the state's Republican governor, some business leaders and law enforcement officers. Governor Kristi Noem said the measures were the "wrong choice" for the state, and a county sheriff and highway patrol superintendent have filed a legal complaint to invalidate Amendment A, which legalized the recreational cannabis. The complaint alleges the amendment violates the state's single-subject rule for ballot measures, claiming it amends multiple articles within the state constitution.
The law takes effect on July 1, 2021, and the South Dakota Revenue Department has until April 1, 2022 to develop a licensing system for future businesses, according to the South Dakota Department of Revenue, which has stated it does not expect to start accepting license applications "prior to sometime in 2022."
On average, it takes about 18 months from the time a bill is passed to the time that the frameworks are put in place and open for applications, said Bethany Gomez, executive director of the Brightfield Group, which conducts market research specific to the cannabis industry. However, some states have taken much longer. The first recreational cannabis sale in Maine took place this October, nearly four years after voters there approved legal sales.
"I do expect those Republican governments to slow-walk it, particularly in South Dakota," she said.
In Montana, regulators have a deadline of Oct. 1, 2021, to establish rules for recreational sales and start doling out licenses.
However, like in South Dakota, the establishment of an adult-use cannabis industry might not come free of challenges. Legalization opponents have filed a lawsuit in Montana District Court alleging the measure violates state law by appropriating tax revenue from the retail sale of marijuana to various state departments.
Additionally, the recreational cannabis measure is statutory, meaning that the legislature could delay or slow down the implementation, said Matthew Schweich, deputy director of the Marijuana Policy Project.
"We certainly hope that's not the case," he said.
If the regulatory efforts move forward smoothly, Schweich projects that sales could start by February 2022.