In November’s election, New Jersey, Arizona, Montana, and South Dakota voted to legalize recreational cannabis, and Mississippi and South Dakota voted to approve medical cannabis programs. Cannabis is now broadly legal for adults in 15 states, while 36 states allow medical cannabis.
So, what’s in store for 2021? Many experts believe that victories at the ballot box in 2020 will set the stage for recreational cannabis legalization in surrounding states seeking to replace tax revenues lost from the COIVID-19 pandemic. Specifically, industry observers anticipate legislative efforts to approve recreational cannabis in Connecticut, Maryland, New Mexico and New York, and Virginia.
New York Governor Cuomo led unsuccessful efforts to legalize recreational cannabis in each of 2019 and 2020 but is optimistic that legislation will pass in 2021. This optimism is driven in no small part to the approval of recreational cannabis in neighboring New Jersey, which could siphon potentially massive tax revenues from cannabis sales to New Yorkers in the absence of New York legislation. “This should have been passed years ago,” Cuomo told reporters at a recent briefing. “This is a year where we need the funding, and a lot of New Yorkers are struggling, and I think this year will give us momentum to get us over the goal line.”
Virginia Governor Ralph Northam signed a bill decriminalizing marijuana earlier in 2020 that enjoyed bipartisan support. Democrats took control of both chambers of Virginia’s General Assembly during 2020 and have been generally receptive to approving legislation for recreational cannabis. Governor Ralph Norton recently announced his support to legalize recreational cannabis, and pledged to propose legislation in 2021, but noted that approval could take up to two years. “Legalizing marijuana will happen in Virginia,” Northam said.
Annual medical cannabis sales in Maryland are almost half a billion and, with enormous state funding shortages, there is tremendous pressure to legalize recreational cannabis. However, there is no certainty when Maryland will introduce legislation for recreational cannabis. This uncertainty is the result of ongoing state investigations into medical cannabis licensing disparities based on race and gender.
New Mexico Governor Michelle Lujan Grisham is a strong advocate for cannabis reform and has included legalization in her list of priorities for the 2021 session. Senate Majority Leader Peter Wirth announced this is near the top of the agenda for the session, and House Speaker Brian Egolf expects the House to approve a legalization bill. Pressure is mounting to pass, especially in light of the legalization of recreational cannabis in neighboring Arizona and Colorado.
Connecticut Governor Ned Lamont pledged his support for legalizing recreational cannabis during his annual State of the State on January 6, 2021. “I am working with our neighboring states and look forward to working with our tribal partners on a path forward to modernize gaming in our state, as well as the legislature on legalization of marijuana. . . Sports betting, internet gaming and legalized marijuana are happening all around us. Let’s not surrender these opportunities to out-of-state markets or, even worse, underground markets.” House Speaker Matt Ritter stated that legalization in the state is inevitable and that legislation has “a 50–50 chance of passing” in 2021. Ritter will attempt to put a constitutional question on the state’s 2022 ballot that would leave approval to voters. A poll published in March of 2020 revealed that over 63 percent of Connecticut voters supported the legalization of recreational cannabis.
It is well known that cannabis remains an illegal Schedule I drug under federal law. However, Joe Biden’s election as President and Democratic control of the House and Senate could bode well to reverse this status. In December 2020, the House voted on the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, a bill to legalize marijuana and expunge the records of those convicted under previous laws. Vice President Kamala Harris sponsored a prior version of the MORE Act in the Senate. Furthermore, President Biden has expressed support for federal decriminalization of cannabis.
What does this all mean for commercial lenders? The cannabis industry, already a multi-billion marketplace, is growing at historic rates. However, the legal landscape is complicated, and it is critical for lenders to properly collateralize, structure, and document cannabis loans. Geraci Law Firm has unparalleled expertise in assisting lenders with loans secured by properties engaging in cannabis operations.