Report Says Marijuana Market Could Hit $18 Billion by 2021
By Ryan Velez
We’ve already seen how the legalization of marijuana in certain states has led to a financial boom for certain businesses and community, and a recent report discussed by The Root shows that this trend has no signs of stopping. Greenwave Advisors analyst Matt Karnes notes in his new report that in 2016, retail sales of marijuana in the United States were approximately $6.5 billion, which was an increase of 35 percent over the $4.8 billion in sales in 2015.
However, the most interesting projection regards its future. Even with an active challenge from the president, the recreational marijuana industry will be hitting $18 billion by 2021. Without impediment, the industry could reach $30 billion if every state and the District of Columbia has either a medical-only-market or a fully legal market.
Karnes spoke to Forbes about how he expects California to account for 40 percent of the market and that additional states will continue to come online.
“In 2017 we expect growth of 18 percent to $7.7 billion as new medical-use markets come online,” Karnes said. Forbes also notes that there is a large increase in capital investments in this sector. From 2012 to 2016, the size of the average deal jumped from $500,000 to $2.2 million. Nearly a billion dollars has come into the industry since 2012, and 38 percent of those investment dollars have come from venture capital and angel investors.
As a note, marijuana is still federally illegal, which has kept major banks from servicing customers in the industry. Due to complex compliance requirements, the profit margins are low. However, Karnes says that Trump could actually help in this regard, if he follows through with his intent to deregulate banking and loosen the restrictions of the 2002 Sarbanes-Oxley Act.
Unsurprisingly, if the market for legal marijuana continues to explode, the black market for the drug will likely crumble in the face of this competition.
“This event could free up banking resources to focus on cannabis businesses,” Karnes told Forbes.
“Based on wholesale pricing data from Cannabis Benchmarks, we estimate that currently, the illicit market in the U.S. is approximately $36 billion, which we determine based upon a multiplier of reported marijuana confiscations by the U.S. border patrol and quantities of plant eradication initiated by the DEA,” the report says.