Could COVID-19 be the catalyst for the federal government to legalize marijuana?



Mindsets are changing about cannabis, and as more states legalize marijuana, whether for medical or recreational purposes, it is clear that this is not about if marijuana will be legalized in the United States, only when. And while COVID-19 may slow the progress individual states have made in legalizing pot, the pandemic could help advance the prospect of legalizing pot at the federal level. Here’s why legalization could take place sooner than expected:

A new industry would accelerate the recovery of the economy

According to data as of May 14, up to 36.5 million people in the United States have applied for unemployment benefits in the past two months. The COVID-19 pandemic has hit many industries hard and while many employees will return to work, some jobs will be lost forever. And the longer it takes people to find jobs, the longer it will take for the economy to return to where it was before the pandemic. This is where the legalization of marijuana could give the economy a boost to revive it.

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Legalizing the pot would create many new jobs for Americans and could help make a difference for the country. In a recent interview with CNBC, Cresco Laboratories (OTC: CRLBF) CEO Charlie Bachtell said “cannabis needs to be part of this discussion” when it comes to restoring jobs. And there are good reasons to include cannabis in these discussions: the potential for growth would be enormous.

According to New Frontier Data estimates from September 2019, the legal pot market in the United States could reach $ 29.7 billion by 2025. That’s nearly three times the $ 10.3 billion that the pot was worth. market in 2018. This growth factor of legal sales of the existing markets that have already legalized the pot and this does not take into account the possibility of federal legalization. If government officials legalized marijuana nationwide, it would dramatically increase those estimates. Currently, only 11 states have legalized recreational marijuana, and there are over 30 that allow medical cannabis.

A push for marijuana reform amid pandemic

A big challenge for the cannabis industry is that many companies have to operate on cash, as cannabis is illegal at the federal level and the big banks are avoiding the industry like the plague for fear of government repercussions. This created a need for legislation such as the Secure and Fair Enforcement (SAFE) Banking Act that would make it easier for banks to do business with the cannabis industry without worrying about clashing with regulators. However, there hasn’t been much traction on the bill since the House passed it last year.

But in a recent coronavirus relief bill, the Health and Economic Recovery Omnibus Emergency Solutions Act, Democrats included the SAFE Banking Act. There is growing support to help the cannabis industry, which regulators have so far excluded from relief programs. In April, Democrats presented a new invoice, the Emergency Health and Safety for Small Cannabis Businesses Act, which would seek to include cannabis companies in future bills and allow them to access assistance programs related to COVID-19.

Marijuana is the order of the day, at least among Democrats. And as there is more pressure to help turn things around for the economy, Republicans might start to join us as well.

What does this mean for cannabis investors?

Legalizing marijuana would not only help the economy create jobs, it would also instantly create a lot of opportunities for marijuana stocks. Chicago-based Cresco Labs is a vertically integrated cannabis company with operations in nine states of the United States. On May 7, the company announced that it had completed an expansion of a growing and manufacturing plant in Pennsylvania that would triple its growth capacity.

Unfortunately, the company is limited to selling all of the products it makes in Pennsylvania to the Pennsylvania market, as it is not legal for marijuana to cross state borders. Federal legalization of marijuana would change that, and it could help a company like Cresco Labs, which has a strong presence with retail outlets in Ohio, New York, Massachusetts, and Illinois, better manage its business. Supply Chain. This could go a long way in improving the cost structure of the business and making profitability more viable in the long run. In 2019, the company reported a net loss of $ 65.3 million on sales of $ 128.5 million.

For Cresco Labs and other cannabis companies, legalization would open up many more doors and opportunities. And while COVID-19 will likely make 2020 a difficult year for cannabis companies to survive, it could also help lead to the federal legalization of marijuana. If that happens, the compromise would be worth it to the industry.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.



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