One of the most significant growth catalysts in the cannabis sector is related to a change in legislation.
The opening of additional recreational cannabis markets in the US has served as the most substantial growth driver for companies that are levered to these markets. If you look at a market like Illinois or Michigan which recently legalized recreational cannabis, we have seen an incremental increase the amount of cannabis that is being sold and this is a trend that we are bullish on.
With the election less than one month away, the recreational cannabis topic has been gaining traction. In the election, we expect to see additional states pass recreational cannabis legislation and want to highlight 3 states that will be voting on the topic.
Arizona will be voting on recreational cannabis legislation after the bill failed to pass in 2016. This time around, we expect the state to be successful and are favorable on the impact this will have on the market.
Arizona is one of the largest medical cannabis markets in the US and we expect the legalization of recreational cannabis to serve as a substantial catalyst for growth. During the last year, several of the largest US multi-state operators (MSOs) have acquired cannabis assets that are based in Arizona and a positive outcome should be a catalyst for these businesses.
One of the reasons we expect the legislation to pass is related to the types of organizations that are against the bill. In 2016, the legislation faced hurdles as big pharmaceutical companies spent millions of dollars on advertisements that were against the bill. Since then, some of those pharmaceutical companies have filed for bankruptcy and we are favorable on the outlook for Arizona’s cannabis market.
New Jersey is another state that will be voting on recreational cannabis legislation in November and this is a market that we are excited about. The state shares a border with New York, and we are favorable on the amount of traffic that would come to this market from the big apple.
Similar to Arizona, New Jersey is a state that we previously expected to pass recreational cannabis legislation. The state has a positive stance on legal cannabis and several high-profile MSOs are levered to the market.
If voters pass recreational cannabis legislation in New Jersey, we expect the timeline for legalization in New York to speed up. A positive outcome in New Jersey could prove to be a substantial catalyst for the entire cannabis sector and is an opportunity to be aware of.
South Dakota is a state that surprised us for the 2020 election. The state will be voting on both medical and recreational cannabis in the upcoming election and this is a first for the cannabis industry.
According to Marijuana Business Daily, it is proving challenging to predict the outcome in South Dakota as there have been no independent polls on the support for cannabis. This is a market that we have not been closely following and do not expect a positive outcome in upcoming election.
Although we expect cannabis to play an important role in the upcoming US election, the industry remains in the early innings of a major growth cycle. Our prediction for the election is that more cannabis legislation will pass than will fail. If all cannabis legislation is passed, we expect the market to respond favorably to the development and this is a potential event-driven catalyst to be aware of.