Since California passed Prop 64, many other states have either legalized or decriminalized cannabis. That includes Michigan, Vermont, New York, Virginia, New Mexico, Connecticut, Rhode Island, Maryland and Missouri. As the industry expands across the country, there are a lot of questions that still remain on what to expect in 2023 and onward.
Let’s start with what is likely the single most important question in cannabis: will cannabis become federally legal in 2023? The short answer is probably not. What we can expect, however, is more states legalizing recreational cannabis in the next few years.
Another issue that impacts every single one of our clients is the issue of cannabis banking. As you all know, cannabis companies are not able to use federally-backed banks like J.P. Morgan Chase and Bank of America. Bills have been introduced in the last few years at the federal level to create access to banking for cannabis companies. In fact, the SAFE Banking Act has passed through the U.S. House of Representatives seven times since it was first passed in 2019. Access to banks means that cannabis companies can handle their money safely and securely. It also opens up the potential for lending and capital investment. Will Congress pass a cannabis banking reform bill in 2023? While it is not entirely improbable, bills like the SAFE Banking Act have a long way to go before they become the law of the land.
The most likely changes we will see in the cannabis industry will be in the research sector. Congress recently passed the Medical Marijuana and Cannabidiol Research Expansion Act, with the White House indicating that President Biden intends to sign the bill into law. Once the law takes effect, researchers will be able to submit an application to the U.S. Attorney General’s office to conduct scientific research with cannabis. We predict that this will result in a greater understanding on future medical applications for cannabis and cannabinoids.
Let’s turn our focus to industry changes. Industry players are predicting a major consolidation of cannabis companies in California in the coming year. What does that mean? It means that larger cannabis companies will continue to purchase and acquire smaller companies to expand their footprint and product offerings. This could create opportunities for our clients to be purchased by larger players or for our larger clients to start purchasing some smaller cannabis businesses across California. We have been successful in helping our clients find buyers when they want out of the industry or businesses to purchase when they start to turn their eye toward expansion. If you think 2023 is the year to expand your business – or to find a lucrative buyer – please contact our office to discuss your options.
What else can we predict for the future? A safer prediction is that prices will continue to fall. With the saturation of cannabis products in the legal and illicit market, prices for cannabis continue to fall. California could address this by reducing cannabis taxes – much like they did earlier this year by reducing the cultivation tax – but we do not see that being a viable solution to falling prices. Only time will tell what the impact of falling prices will have on cannabis companies statewide.
Last but not least, we expect to see the expansion of cannabis markets in California. We saw a number of localities pass ballot measures to expand cannabis retail licenses. In the November 2022 election, Los Angeles County passed a measure to allow for another 25 licenses and San Diego County passed a measure to allow for another 20+ licenses. For those of you eyeing an expansion into Southern California, our attorneys are happy to discuss your options and to seek out available licenses in markets all across California.