John Kagia, New Frontier Data Cheif Knowledge Officer, joins Yahoo Finance’s Zach Guzman to discuss the cannabis outlook amid COVID-19 and the 2020 Presidential election.
Video Transcript
ZACK GUZMAN: Cannabis enthusiasts will have to wait a little bit more here to see discussions about legalizing at the federal level take place in the House. A vote was originally scheduled for the Moore Act, which would move to legalize cannabis at the federal level as well as expunge some criminal records for people tied to cannabis offenses.
It’s mostly a symbolic vote, though. As– as the Senate remains Republican-controlled, not a lot of expectations for that to move past Senate Majority Leader Mitch McConnell. But states themselves have quite a bit of power here to grow the US legal cannabis market. Five states in particular will let voters decide on that this November.
And one firm watching this play out says that it could add a total of $9 billion to the US cannabis market, and here to chat that with us is New Frontier Data’s Chief Knowledge Officer, the man behind the report, John Kagia joins us now. And, John, it’s good to be chatting with you again. I mean, $9 billion is a lot of money to boost here to the market size of cannabis here in the US. Talk to me about what you’re expecting should these ballot measures get voter approval.
JOHN KAGIA: So I think there’s a couple of reasons why we think this is going to be such a consequential year for cannabis in the US. One, you know, the– the fact that we have five states on the ballot, six that– six initiatives that are going to be voted on this November, makes this a pretty milestone year in terms of voters getting a voice in the status of cannabis in our society.
And there’s a couple of states which we’re paying particularly close attention to. We think Arizona’s adult use initiative is particularly important. You know, Arizona tried four years ago to legalize adult use. The vote lost by 2%– by 2 percentage points, and so this is going to be a return to the ballot. And with the demographic changes that we’ve seen in the state, the poll is actually looking better for legalization this year.
Second is New Jersey. New Jersey is going to be a phenomenally consequential market for the East Coast. If you think about the proximity of the state to New York, Pennsylvania, Maryland, and other mid-Atlantic states, we think in and of itself New Jersey is going to be a huge market. But once you add in that regional element to it, the state could be earning, you know, nearly $2 billion, $1.8 billion by 2025. So a huge market and a huge marker for the East Coast.
And then a third state that I think is interesting to watch because we’ve never seen this happen before is South Dakota, which is the first state that we have seen that is putting on the ballot both a medical and an adult use legalization initiative at the same time.
And what that tells us is, while we have historically seen pretty long lags between the presentation of a medical measure and then that state transitioning to adult use, South Dakota is the first state which is trying to do both of those at once. And I think it just reflects this kind of growing momentum social acceptance and public shift in attitudes that we’re seeing around this issue.
ZACK GUZMAN: It’s also a red state and a pretty confidently put red state. I mean, we’ve seen that state go red– you know, you can go back a long time, decades we’re talking here in terms of how red South Dakota is. But, I mean, talk to me about maybe how that represents the shift here in cannabis as well.
Because in– in this pandemic, we’ve heard from a number of analysts talking about how states are desperate to make up revenue, lost revenue, and how cannabis in a lot of these states would– would represent a pretty big opportunity here to bring that in. I mean, how much does that pressure along with a lot of the criminal justice reform aspects we’ve been discussing here in 2020, when you put those two things together, talk to me about the momentum that you’ve seen play out over the last couple of years on that front.
JOHN KAGIA: That’s a great question, and I think a really important part in understanding why we’re seeing these dramatic shifts. So historically, cannabis has been viewed as a largely liberal issue. So you saw legalization happen first in the Western states, which have historically been blue, and then in the Northeast, which is also historically a blue region.
But what’s notable about this election cycle is we’re starting to see– or we’re continuing to see this momentum building within traditionally historically conservative states, whether that’s Arizona, Mississippi, Montana, and South Dakota. And it’s that convergence, one, the– the general’s public’s acceptance now that medical cannabis is broadly perceived to have therapeutic value. I think that is largely settled in the American public opinion.
About 90% of Americans believe medical cannabis has value. So this is much less of a– a left-right issue. I think the science is a firm support for it. Second is the growing public awareness of the– the inequities in cannabis prohibition. The ACLU recently updated its “Cannabis in Black and White” report, which shows the racial discrepancies in prohibition enforcement.
And Black cannabis consumers, even though they consume at the same rates as white cannabis consumers, are still nearly four times more likely to be arrested for cannabis offenses, and in some states nearly 10 times more likely. And as folks are looking at those numbers, they’re just– you know, the inequity of– of that– those prosecutions, particularly given the national debate that we’re having right now on policing, I think is ringing loudly and resonating loudly with a lot of people.
ZACK GUZMAN: [INAUDIBLE]
JOHN KAGIA: When–
ZACK GUZMAN: Sorry, go ahead.
JOHN KAGIA: Yeah, the economics of cannabis. At a time when COVID has so acutely hurt state and local budgets, you know, there’s a lot more open consideration for things that might historically have been problematic. And so I think you’re seeing much more receptivity to the idea of legalizing cannabis when you look at a state like Colorado, which, in its first six years of legalization, generated nearly $80 billion in sales.
