New Mexico just became the 16th state to legalize adult-use cannabis.
If you add to that number all the states that have legalized medical cannabis as well as states that have at least decriminalized it, there are now only six states remaining that have no form of legalization or decriminalization on the books.
Of course, on a federal level, prohibition remains.
But its days are numbered.
You see, last month, the United States Senate, with about 30% of the chamber signing on as co-sponsors, reintroduced the Secure and Fair Enforcement (SAFE) Banking Act, which, if passed, would make it possible for financial institutions to provide services to cannabis businesses without risking prosecution.
Today, because of the federal prohibition on cannabis, most banks don’t work with cannabis clients, and it’s why the industry still has to operate as a “cash-only” business.
This has been a monumental hurdle for the industry, as it has kept it from accessing “cheap” money while adding to what any other industry would consider unnecessary overhead. In addition, if the cannabis industry were allowed to work with major financial institutions, it would be able to enjoy a more efficient use of time as financial matters would become more streamlined and less burdensome.
Of course, the passage of the SAFE Banking Act is not a done deal.
While we’re starting to see a lot more Republicans embrace legalization — as poll after poll indicates that the majority of voters believe cannabis should be legalized — historically, Republicans have turned legalization into a moral issue in an effort to placate a dying breed of voters.
And while Democrats do have the majority, the sitting president, who is a Democrat, has been less than enthusiastic about legalization, which, of course, is a direct contradiction to his call for criminal justice reform. There has been no greater threat to “justice” than the war on drugs, particularly the prohibition of cannabis.
But here’s the good news…
Partisan buffoonery can’t win this one.
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It’s All About the Money!
While I’ve long been an advocate of legalization for the simple fact that the prohibition of cannabis is a violation of personal sovereignty and human rights, the primary reason so many states have recently decided to legalize is because they need the cash.
Particularly this year.
You see, after more than a year of lockdowns, which has absolutely decimated our economy, individual states are facing massive budget shortfalls. And make no mistake, cannabis is a very strong generator of tax revenue.
Take Colorado, for instance.
Colorado was the first state to legalize recreational sales of cannabis in 2012.
Since then, the state has generated about $1.5 billion in state tax revenue. And those revenue numbers have grown year after year, now representing a compound annual growth rate of 34.23%.
California legalized recreational cannabis in 2018 and has raised over $1.8 billion in less than three years.
At the end of 2020, more than $7 billion in tax revenue was generated from just 10 states that have legalized the use and sale of recreational cannabis.
Worth noting is that New York recently legalized the recreational use and sales of cannabis. Insiders estimate that the Empire State will generate over $1 billion in tax revenues in less than three years.
My point is simple: Regardless of where you stand on legalization, the bottom line is that it can generate billions of dollars in tax revenue. And that’s why you can bet your ass that the end of federal cannabis prohibition is not that far off.
Now, if you’re a regular reader of these pages, you know I was one of the first analysts to recommend buying cannabis stocks — back when there were just two states that had legalized recreational cannabis.
Today, there are 16, plus the District of Columbia. In addition, it is entirely possible that Connecticut, Rhode Island, Delaware, and Minnesota could also legalize this year, which would put the total at 20.
That’s 40% of all states in the U.S. with legalized cannabis on the books.
My prediction…
By the end of 2022, more than half of all states in the U.S. will allow for the legal use and sale of recreational cannabis, with the federal government also descheduling cannabis and allowing financial institutions to work with cannabis companies.
Now, the cannabis market took a nasty hit a couple years ago after the market became way too top-heavy. But that actually served a valuable purpose: It got rid of all the laggards and dead weight.
Today, there may be fewer public cannabis companies in which to invest, but most that remain are the best in breed.
This year, I’m particularly bullish on Curaleaf (OTCBB: CURLF), MariMed (OTCBB: MRMD), and Red White & Bloom (OTCBB: RWBYF) — with the latter two being significantly undervalued at the moment.
Personally, I prefer those undervalued plays. They just tend to offer more bang for your buck.
Of course, no matter how you slice it, the days of cannabis being a niche market are over anyway.
The full-scale legalization of cannabis across this country is coming, and you better believe a lot of money is going to be made. So you might as well get some of that action for yourself.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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