Rolling in the Green: Expectations for the Cannabis Boom

Right now someone is legally purchasing marijuana for recreational use in Colorado. Actually, lots of people are buying marijuana—more than was initially expected. Recent reports state that Colorado has raised its predicted tax revenue for the next fiscal year from $70 million to just under $100 million based on $610 million in expected sales. When Washington State starts legal sales, estimates point to $190 million in tax revenue over the next four years.

Those are really big numbers and big numbers talk—and they aren’t just limited to recreational purchases. Medicinal marijuana, which is currently available in 20 states and DC, is taxable as well.

Another big number: 30 more states are considering marijuana reform in one way or another. This includes efforts for full legalization, decriminalization and medicinal use. On top of that, experts have predicted that legal marijuana sales could reach over $10 billion by 2018.

And now, thanks to new guidelines issued by the Obama administration, it will be a lot easier for banks to provide services to marijuana businesses that have been forced to work on a cash-only basis because banks feared retaliation due to marijuana’s status as a schedule one drug under federal law.

Of course, the new guidelines for banks aren’t just a favor to the growing marijuana industry—they also set up a system in which the government can closely monitor and oversee the flow of revenue derived from marijuana sales. The federal government has always reserved the right to prosecute if they see fit, mainly if they feel businesses or banks aren’t in total compliance with the guidelines set forth. It is also unclear how banks will react to these new guidelines.

In light of these developments, now more than ever, investors and entrepreneurs are getting into the marijuana business. State governments have also appeared more eager to embrace the trend as their operating budgets dwindle. The market is there, and it is growing. Legalization in Colorado has been a success so far, and it is increasingly looking like it will be in Washington State as well. Uncertainty is giving way to certainty.

But this growing certainty is leading to an industry that is becoming highly competitive, leading some people to speculate about an industry bubble, like the dot-com boom of the 90’s. The bubble would pop as larger, more established businesses start to edge out the majority of other start-ups in the industry. However, one thing is becoming clear: marijuana is here and it’s here to stay.

Sources:

http://rt.com/business/marijuana-related-business-boom-246/

http://www.nytimes.com/2014/02/15/us/us-issues-marijuana-guidelines-for-banks.html?_r=0

http://www.startribune.com/lifestyle/homegarden/246192301.html

Photo Credit: Sakeeb Sabakka

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