The Marijuana Business: What You Need to Know

Could the green rush be the next gold rush?

Yes, we’re talking about the marijuana industry. In the last few years, perhaps no other sector except technology has generated so much–well, buzz.

In California, for example, which legalized recreational use of marijuana at the beginning of 2018, people are lining up for blocks to buy from pot dispensaries for the first time. People are also congregating at gatherings some have compared to modern-day tupperware parties to sample and exchange marijuana products in busy cities including Los Angeles and San Francisco.

And cannabis entrepreneurs are digging in for what’s expected to be a long, lucrative slog.

“The U.S. is  creating the first truly scalable cannabis industry, and the rest of the world is looking at what is taking place,” says David Rheins, the chief executive and co-founder of the Marijuana Business Association, a trade group based Las Vegas, devoted to the cannabis industry and cannabis business owners.

State Laws  vs. Federal Laws

While federal law still considers pot use and possession illegal, eight states and the District of Columbia have legalized cannabis for recreational purposes in recent years. Colorado was the first in 2014, but California is the the largest state allowing purely personal use of marijuana, with a market that’s expected to top close to $4 billion in 2018.

Cannabis entrepreneurs are digging in for what’s expected to be a long, lucrative slog.

There are now also 29 states that allow doctors to prescribe cannabis for medical purposes, which can include helping to alleviate nausea related to chemotherapy, stimulating appetite for people who are chronically ill, and curing insomnia.

Meanwhile, attitudes are changing. Nearly two thirds of Americans say marijuana should be legal, according to a 2017 Gallup poll. That’s up from 60% in 2016, and just 34% in 2002.

An economic boon?

And this is potentially just the beginning. The marijuana industry is expected to add 200,000 new jobs in the U.S. by 2020, according to New Frontier Data, which provides research on the cannabis market.

Growth is expected for a long list of businesses, such as the cultivators and packagers of the plants, dispensaries for medical and recreational weed, not to mention companies creating products that use cannabis byproducts called CBDs. CBDs are non-pyscho-active derivatives of cannabis, which can be used for a variety of purposes, including helping with inflammation, chronic pain, and depression.

Companies are also capitalizing on industrial uses for cannabis, including the production of hemp, which can be used to make fabrics and textiles, as well as being used as additives to health food and body care products.

And it all makes for big business. Total legal sales of cannabis were about $10 billion in 2017, and are expected to grow to $24.5 billion by 2021, according to reports.

The business of marijuana: The legal landscape

Certainly legal challenges remain for the cannabis industry. In January, for example, the U.S. Department of Justice reversed an earlier policy of non-interference toward states that have legalized pot. That could make things more complicated for growers and sellers in these states. Meanwhile, banks, which are federally regulated, can’t legally take deposits from cannabis businesses.

Nevertheless, lawmakers seem to be working slowly toward a resolution. The Congressional Cannabis Caucus, a bipartisan group of senators and representatives, hopes to resolve the conflict between federal laws banning marijuana use, and state laws that allow it.

And in January, attorneys general from 19 states including Hawaii, Alaska, and Colorado sent a joint letter to members of Congress, urging them to introduce legislation that would allow legal marijuana businesses to access banks and other financial services companies in the U.S.

And momentum seems to be with the industry, especially as it’s already providing important tax revenue to states–since legalizing marijuana, Colorado has pulled in $500 million in tax and related revenue, according to reports. And that could ultimately add billions to federal coffers too.

“There are millions of customers who are excited about legal cannabis,” Rheins says. “[The industry] is getting bigger and bigger and it’s not going to stop.”