2019 Cannabis Outlook and Predictions

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2019 could be another transitional year for the legal cannabis industry. Here are some thoughts and predictions for the new year: (NOTE: THESE ARE OPINIONS ONLY AND MAY OR MAY NOT OCCUR IN 2019)

  1. More Operations come online - Even though a state or country passes a marijuana legalization provision, the products are not available immediately for sale. Rules and regulations have to be passed to facilitate the sale within the state. Taxation, product testing procedures, marketing rules, etc. have to be established before a dispensary can open and sell to the public. The time it takes to adopt such procedures could take a few months to a few years. Legal states are in various stages of this process, and industry sales are likely to increase in 2019 as more markets come online.

  2. New York and New Jersey will legalize recreational use - With the midterm elections, many candidates campaigned on pro-legalization initiatives. Governor Cuomo in New York has made it clear he wants a recreational use law passed in 2019 as soon as possible. Similarly, New Jersey tried to get something done by the end of 2018 but ran out of time. So I see adult use becoming legal in both states next year.

  3. Medical states “converting” to Recreational Use states - Vermont was one of the first states to pass a marijuana bill by the legislature vs. a ballot initiative. New Jersey is trying to do the same. Such a precedent suggests broader legalization could happen faster if states turn to this means of adoption. Many medical states are already creating the infrastructure for distribution through medical marijuana programs. It would not be difficult for many of these states to “convert” from a medical only program to a full recreational adult use law with a legislative act. Given the social momentum and tax revenue opportunities, I see at least three states possibly doing this in 2019.

  4. Hemp Spinoffs - With the passing of the Farm Bill and industrial hemp being legalized, several cannabis companies are now talking about spinning off hemp divisions into separate companies. The advantage is that these companies will have access to services, such as banking and tax relief, which are unavailable to most cannabis companies at this time. This also creates an opportunity for many established foreign companies to enter the U.S. market freely and without restriction.

  5. FDA will finalize rules for CBD and THC to be included as dietary supplements - Even though hemp has been legalized, the FDA has not finalized specific rules for CBD (and THC) in products, I think this will happen in 2019 providing clarity for hemp and cannabis companies to market products where legal.

These predictions provide opportunities for demand to increase in the cannabis and hemp industries. It should be noted though that demand is only one side of the coin. “Supply” for the product must also be considered when analyzing the industry. As an example, the Canadian market has suffered shortages and compliance issues as companies have frantically tried to ramp up production since Canada approved recreational adult use back in October 2018.

The hemp and cannabis industry continues to be an emerging investment industry. It is imperative to consider the risks involved in context with your overall financial plan. Limited company data, regulatory confusion, and stock volatility are just some of the investment considerations when researching this industry.

Sources -

https://www.bloomberg.com/news/articles/2018-12-17/ny-governor-s-agenda-includes-recreational-pot-subway-fixes

https://www.usatoday.com/story/news/nation-now/2018/07/01/recreational-marijuana-use-now-legal-vermont/748793002/

https://www.rollingstone.com/culture/culture-news/new-jersey-weed-marijuana-legal-soon-january-759934/

https://www.bloomberg.com/news/articles/2018-12-11/hemp-companies-poised-to-list-in-u-s-as-farm-bill-goes-to-vote

https://www.bloomberg.com/news/articles/2018-10-26/marijuana-shortages-abound-in-canada-amid-licensing-rigmarole

Charles Freeman