While the voting across the nation reflected much division, one issue voters overwhelmingly supported in this year’s elections was cannabis legalization. With passage in Arizona, Montana, New Jersey and South Dakota, the number of states that have legalized cannabis for adult-use is now 15. Additionally, Mississippi and South Dakota have joined the majority of states that have legalized medical cannabis.
Unlike most other legalizations historically, the passage in Arizona and, especially, New Jersey bodes well for publicly traded operators, as many are active in these states. Arizona has a mature medical market that should be able to quickly transition to adult-use, and it is a market that traditionally attracts many tourists.
In the case of New Jersey, many believe that its passage is likely to spur nearby states New York and Pennsylvania, both of which already have medical cannabis programs, to legalize through the legislative process. The governors in both states support legalization. We recently detailed the existing operators in New Jersey, which is dominated by publicly traded companies, which is also the case in New York and Pennsylvania. Other East Coast states that could move towards legalization through the legislative process include Connecticut, Maryland, Rhode Island and Virginia.
The votes for legalization in states that traditionally vote Republican should pay dividends down the road towards addressing federal regulation. As an increasing number of legislators represent states that have adult-use and medical programs, Congress is more likely to move towards better regulation and perhaps legalization at the federal level. As we have discussed in our newsletters, there are many important steps that could take place that would fall short of legalization, such as giving financial institutions explicit permission to service compliant state-legal operators. These reforms could range from the ability to take cash deposits, a central part of the SAFE Banking Act, to the ability of credit card companies to allow transactions and major stock exchanges to permit companies to list. Additionally, Congress could move towards permitting state universities and private institutions to conduct medical research.
