Pennsylvania's Cannabis Market: What Investors And Entrepreneurs Need To Know

Pennsylvania's medical cannabis market has been one of the better success stories in the industry to date.
By June 2021, the state had topped $900 million over a one-year period during the pandemic. Data from the state Department of Health reported that total sales fell just short of $3 billion as of June.
Operators in the state say the market is booming. However, uncertainty lies ahead regarding licensing and adult use.

A Booming, Stable Marketplace

Operators tell Benzinga that a stable medical marijuana program helps produce substantial results, including over $400 million in announced M&A deals between March and May 2021.
Jushi Holdings Inc. JUSHF founder, CEO and chairman Jim Cacioppo said there are several positive signs in the PA market including the most comprehensive medical program in the country.
"Its program was purposefully created to cater to increasing patient demand, and it has already proven its resiliency, which bodes well for the growth we expect to see in the future," he said, adding that sales goals often exceed expectations and that adult-use sales could further improve market size and jobs.
"While we certainly don't presume to set a timetable for the Pennsylvania General Assembly, we do believe conditions are favorable for serious, near-term consideration of adult-use legislation," he explained.
Seth Goldberg, a partner and team leader at Philadelphia-based law firm Duane Morris' cannabis department, said PA's program has remained stable during its three years of operation. He added that the state's marijuana department has "worked out the administrative program kinks" to create a smooth-running program.
Goldberg highlighted achievements, including over 400,000 registered MMJ patients and soaring tax revenue, both of which help boost public support for the program.
Fox Rothschild's Josh Horn agrees, noting that the program has been robust while serving citizens. He added that license caps, allowing only 25 permits for growers/processors, helps make the state "an attractive investment."
Horn sees the future looking bright. "All of the recent M&A transactions in Pennsylvania suggest that it is a very attractive state ahead of adult use." 

Adult Use, Licensing Uncertainty Remains

Goldberg saw the current licensing regulations as a concern. Under the current rules, investment in plant-touching brands is done through currently licensed operators.
He added that because the state does not allow licenses to be freely transferred, this investment scenario presents regulatory hurdles due to ownership disclosure and approval requirements.
"The medical-only market, which is robust by all accounts, is nonetheless limited compared to states with adult-use laws, especially given the size of Pennsylvania's population," Goldberg said.
Still, the most frequently discussed drawback to the market is the uncertainty surrounding adult-use expansion.
Horn said a lack of bipartisan support continues to sink efforts, noting that the Republican-held legislature needs to come around on reform before any laws move forward.
Despite public support for decriminalization, two bills addressing the matter have not been taken up by the legislature this session.
"The lack of traction may mean that Pennsylvania will lag behind its neighbors who either have adult-use laws or are in the process of considering adult-use laws," Horn said.
Jushi's Cacioppo didn't appear as concerned about adult-use cannabis legislation gaining steam nearby. He said that neighboring New Jersey lacked the infrastructure to rollout adult use like Pennsylvania.
"As a mature program with existing infrastructure, the Commonwealth is much better positioned to implement and roll out an adult-use program in a safe, effective and timely manner," he stated.
Still, dispensaries opening along Pennsylvania's borders will likely attract buyers, Cacioppo noted. "You'd hate to see the state lose out on taxable revenue and new jobs"

Image source: Wikicommons/King of Hearts