December 20, 2018
New York Governor Andrew Cuomo knows what he wants in his Christmas stocking: Funding to pay for crucial subway repairs. And while he has never been an advocate for legal marijuana, Cuomo now thinks that statewide recreational use by adults could be the best way to “sweeten the pot.”
Indeed, the Big Apple is looking for about $37 billion to upgrade its antiquated underground system of trains, tracks, and tunnels—and Cuomo now has been convinced that he can raise the revenue by legalizing adult-use recreational marijuana within the next year, according to a report by Real Money.
Justifying his sudden turnaround on legalizing pot, the governor said in a speech before the New York State Bar Association on December 17, “The fact is we have had two criminal justice systems: one for the wealthy and the well-off, and one for everyone else,” Cuomo said in describing marijuana laws that he maintains “for too long [have] targeted the African-American and minority communities.”
During the midterm elections, the New York state government shifted to Democratic control and it was expected that the new lawmakers would fully legalize cannabis, after approving medical marijuana last June. So, Cuomo really is just getting ahead of this expected move, Real Money notes.
Financial experts agree that legalization could raise much-needed revenues for the state. Last May, New York City Comptroller Scott Stringer published a report estimating that the New York statewide cannabis market could see up to $3.1 billion in annual sales, with up to $1.1 billion generated in New York City alone. In terms of tax revenue, legal cannabis could generate up to $436 million for New York state and $336 million for New York City.
Other states already have profited immensely off their marijuana sales. In 2015, Colorado collected $135 million in legal marijuana tax revenue. And during the first five days of sales in Massachusetts, the state’s two pot shops pedaled more than $2.2 million worth of legal marijuana products.
Cuomo probably isn’t thinking just about the tax dollars, but also is looking at job creation. A study published by Joblift shows that cannabis career growth in California is steadily declining, while New York State is experiencing a strong market. New York is now third in terms of gross domestic product and is experiencing a “surge in medical marijuana job postings,” with the study saying it could hold “the most potential for overall growth in the sector.”
Cuomo does not want New York to lose these jobs to neighbors, such as New Jersey and Massachusetts, which also are legalizing cannabis use.
Next comes the question that investors want answered: Who is poised to capitalize on the New York market?
Cannabiz Media is a company that tracks license holders in states around the country. According to its data, it looks like MedMen Enterprises is poised to be the big winner as a result of its acquisition of PharmaCann, which had the highest number of permits awarded in the state. MedMen acquired PharmaCann for $682 million in an all-stock deal back in October. The transaction not only doubled the reach for MedMen, but expanded its presence in New York.
Vireo Health is next on the list, Real Money reports. Vireo is a physician-led multi-state medical cannabis company that says It is “committed to safely alleviating pain by providing patients with best-in-class cannabis products and compassionate care.” This company is still private, although it did raise $17 million back in August and said it is planning on going public at some point.
And number three would be Columbia Care, which isn’t public yet but soon will be following a merger with Canaccord Genuity Growth. The deal is expected to close in the first quarter of 2019. Columbia Care was selected to be one of five licensees in Virginia and became the first U.S. company licensed in the European Union. It was recently awarded one of the six new licenses in New Jersey.
To date, eight U.S. states have legalized recreational marijuana use: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, and Washington. Washington, D.C., also allows the recreational use of marijuana.
Research contact: @WallandBroad