Cannabis Can Be An Accelerator For Economic Recovery

By Ryan G. Smith, co-founder and CEO of LeafLink.

As the ongoing COVID-19 health crisis reaches the six month mark in the United States,, policymakers and business leaders alike are increasingly shifting their focus toward economic recovery. According to the Bureau of Economic Analysis, real GDP decreased at an annual rate of 32.9% in the second quarter of 2020 as states began implementing shelter-in-place orders, and the Department of Labor reports that unemployment rates have risen to historic highs since then; in the first week of September alone, over 800,000 people filed new unemployment claims. At the same time, states across the country are facing unprecedented budget cuts as they try to balance COVID-19 relief with annual spending.     

Whatever action we as a country take over the few months will have long lasting effects on our future. There are many theories on how best to proceed, but to those of us working in cannabis, it is clear: this burgeoning industry could be the accelerator towards recovery that our economy needs.

To date, the legal cannabis industry has been both a big job creator and an aid in generating tax revenue for many states. According to MJBizDaily, the number of people working in the industry is expected to increase by 50%, reaching up to 295,000 by the end of 2020, and the industry generated over $300 million in 2019 revenue in Colorado alone.  

Cannabis’ essential status in recent months has arguably fortified the industry’s long-term growth trajectory. LeafLink facilitates 32% of all wholesale cannabis transactions in the United States between over 7,000 businesses, providing us with the largest wholesale cannabis data set in the country. According to our analysis, the cannabis industry grew approximately 45% between January and May. In key markets like Colorado, California and Oregon, wholesale purchasing in April and May was up nearly 60% compared to the start of the year. Since then, national demand for cannabis has experienced continuous upward momentum -- in August, we saw our best month ever in terms of transactions through the marketplace, reaching $3.1 billion in annualized Gross Merchandize Value (GMV).

This upward trajectory extends beyond cannabis sales. In The State of the Cannabis Industry 2020, a report we collaborated on with Vangst and Flowhub, we found that revised revenue projections for business across the sector remained optimistic. 40% of businesses surveyed for the paper reported that their revenue projections remained unchanged, despite COVD-19, while one third actually reported increases from their original 2020 forecasts.  

These encouraging economic indicators point to a unique opportunity for various legalization efforts at the local, state and federal levels. In particular, if the cannabis industry continues to grow as projected, its tax revenue can help ameliorate deficits in state budgets. This is already happening in Illinois, which legalized adult-use cannabis in January 2020. The state generated a record $12 million tax revenue in June, topping the $11.5 million amassed in April. That money either did not exist or was solely funneled into the illicit market prior to legalization. 

States such as Arizona, Montana, Mississippi, New Jersey, and South Dakota are putting adult-use and/or medical marijuana initiatives on their ballots this November. In addition, smaller Californian cities, such as San Bruno, Yucaipa, and Montclair, are all considering November ballot initiatives to locally legalize cannabis sales in an effort to boost tax revenue. 

Furthermore, cannabis is poised to become a potential trailblazer in social equity initiatives, which will have positive hiring and business benefits long-term. The proliferation of the legal industry will play an integral role in rectifying the disproportionate incarceration of Black and Latino populations caused by prohibition. As a rapidly growing industry, cannabis can be a model for other industries on how to implement inclusivity and equality as local economies  begin to recover. 

Los Angeles, in particular, is set to approve an overhaul of the city’s social equity initiatives guiding the cannabis industry. The city is leading by example by granting temporary approval for all social equity license applicants, allowing applicants and businesses to relocate within the city, limiting new storefront retail licenses and delivery licenses to social equity applicants until 2025 and improving processes to minimize “predatory practices” in the social equity program are all on the docket. This is exactly the kind of social equity blueprint that other municipalities can follow in all kinds of industries--not just cannabis.

At the end of the day,cannabis has indeed been deemed an “essential” industry in much of the country.  Everyday people need it as medicine, whether to treat an epilepsy disorder, pain from cancer treatments or general anxiety disorder, along with a long list of other ailments. They also need it for stress relief and recreational purposes, which is as necessary as ever considering the events transpiring in the world.

Although legal cannabis has not been entirely impervious to COVID-related market contractions, the industry has emerged as one of the most attractive paths to economic recovery. Although the fate of federal legalization remains uncertain, several local and state governments are beginning to embrace the cannabis industry for its potential as a job creator and revenue generator. It’s time to get political action behind the legalization movement to further boost the economy and make cannabis available to all.

Benzinga's Related Links:

• How Covid-19 Is Affecting The Cannabis Industry
• Cannabis In The Age Of COVID-19: A Doctor Breaks It Down