We often rely on industry consultants to identify trends in a wide variety of growth sectors that are being targeted by economic development agencies to bring new jobs and investments to their locations. A sure sign of the staying power of an emerging industry is the arrival of a legion of consultants who have made that industry their specialty.
The budding marijuana industry is no exception. This week, the numbers crunchers at ArcView Group—which bills itself as “a cannabis industry consultant firm”—released an analysis reporting that the legal marijuana industry in the U.S. generated $6.7 billion in sales in 2016. ArcView put the exponential growth of the weed biz in perspective with this declaration: “marijuana sales are outpacing the dotcom boom of the 2000s.”
That’s right, legal weed is the fastest-growing growth sector in America. The cannabis industry received a major boost in the November election; voters in eight states approved initiatives to legalize recreational or medicinal marijuana, including California and Massachusetts, which joined six other states that have given the green light to recreational pot. Medicinal use of marijuana now is legal in 29 states.
Shifting public opinion in favor of legalizing weed (national polls now indicate that nearly two-thirds of Americans want to end legal prohibitions on pot) has been lifting the sails of the legalization movement. But much more than a cultural shift is turbocharging this trend: the recent empirical economic data from places that already have legalized pot has caught the attention of state legislators across the country.
Colorado, which in 2012 became the first state to legalize the sale and consumption of marijuana for recreational purposes, recorded $1.3 billion in marijuana sales in 2016. The explosive sales revenue for weed in the Rocky Mountain State, a 30-percent increase over 2015 sales figures, generated an estimated $170 million in tax revenue for CO.
State legislators grappling with budget deficits in places that haven’t legalized weed are looking at these numbers and experiencing the fiscal equivalent of the rush induced by a hefty bong hit. A prime example is New Jersey, which bet big on sports gambling as a new source of tax revenue but (thus far) has been blocked by the federal courts. Steve Sweeney, president of the NJ Senate, recently said marijuana legalization is a top priority for the legislature next year, as soon as Gov. Chris Christie leaves office.
In his State of the State address this week, Christie threw down his own gauntlet: he declared that combatting the heroin epidemic is the top priority of the last year of his tenure as NJ governor, reiterating his belief that marijuana is a gateway drug that can lead to heroin addiction and restating his opposition to the legalization of pot.
But if you think the trend toward legalization of marijuana is unstoppable, think again. This trend not only can be stopped in its tracks, it can be rolled back and prohibition can be reinstated from coast to coast—and one man has the power to do it.
A glaring anomaly between federal and state laws on marijuana has yet to be resolved. Federal law still classifies marijuana as a dangerous drug in the same category, in terms of law enforcement efforts to stop its distribution and use, as heroin. Colorado and a handful of other states were able to legalize recreational use of pot because the Justice Department under President Obama basically decided to look the other way.
A memo from Deputy Attorney General James Cole, sent to all federal prosecutors in August 2013, instructed them to focus on eight “priorities” regarding states that have decided to legalize marijuana, including: preventing the distribution of marijuana to minors; preventing revenue from pot sales from going to drug cartels; preventing states with legal pot from shipping it to other states; preventing sales of legal pot from being used as a cover to sell other drugs; preventing “drugged driving;” preventing the growing of marijuana on public lands; and preventing the possession and use of marijuana on federal property.
In 2014, Congress passed a spending law prohibiting the Justice Department from using federal funds to go after marijuana programs that comply with their respective state’s laws, but that federal law must be reauthorized each year to remain in effect.
While Cole’s advisory memo established a regulatory framework for states that legalize pot, it did not change the federal government’s drug classification system, which is the primary reason the United States has the largest prison population in the world. A significant percentage of the nearly 2 million people incarcerated in the U.S. are first-time drug offenders. Congress considered a wide-ranging reform of the penal code last year, including revisions to drug classifications, but the bill never came to a vote. So the classification anomaly remains on the books, and it’s up to a new Attorney General to decide whether to enforce the federal law on marijuana.
President-elect Trump’s nominee to be Attorney General, Sen. Jeff Sessions, was asked on the first day of his confirmation hearing this week to define the incoming Administration’s position on legalized marijuana. Sessions has been an outspoken opponent of legalized pot, often repeating the mantra that “good people don’t smoke marijuana.” During last year’s presidential campaign, he said “we need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized…that it is, in fact, a very real danger.”
At his confirmation hearing, Sessions declined to specify a new policy but candidly admitted that it would be a difficult undertaking to apply his primary governing principle—”to enforce the law”—to a situation in which state and federal laws are diametrically opposed to each other. Sessions conceded that disrupting states’ legal marijuana markets by enforcing federal marijuana laws could “create an undue strain on federal resources,” which is a diplomatic way of saying it may be logistically impossible. He also straddled the fence on Cole’s guidelines, stating “some of them are truly valuable in evaluating cases, but, fundamentally, the criticism I think that is legitimate is that [the guidelines] may not have been followed.”
Pressed by Sen. Patrick Leahy to indicate whether he’s willing to extend Cole’s memo indefinitely, Sessions took cover in a double negative, stating he “won’t commit to never enforcing federal law.” Asked how to resolve the difference between state and federal law on this issue, Sessions helpfully noted “Congress could change the law.”
Sessions promised to use “good judgment” in deciding how to enforce federal marijuana laws, adding “I know it won’t be an easy decision, but I will try to do my duty in a fair and just way.” But then he told Sen. Mike Lee “it is not the Attorney General’s job to decide what laws to enforce.”
So when it comes to the future of the marijuana industry in the U.S., a hazy fog seems to have rolled into Washington. Find a comfortable chair, open a bag of Doritos and stay tuned.