Massachusetts’s Cannabis Industry Could Grow to $1.1 Billion—But Only If the Legislature Cooperates

According to a report released by ArcView Market Research and New Frontier Data, Massachusetts may be home to a $1.1 billion cannabis industry by 2020.

“Unlike other places where cannabis is legal, Boston is within driving distance of many of the most populous places in America,” points out Troy Dayton, CEO of the ArcView Group.

Since Massachusetts’ new law also does not limit product forms or cap retail dispensary licenses, experts expect that the Boston area will soon become a popular cannabis tourism destination.  Depending on whether neighboring states legalize marijuana, the industry has the potential to become very profitable very quickly: ArcView and New Frontier project that recreational marijuana revenues will top $300 million in 2018, then triple to more than $900 million in 2020. When combined with the projected growth of medical marijuana, the final total is a whopping $1.17 billion. Though the projections are only speculative, they are comparable to current recreational marijuana sales in Colorado, which topped $996 million in 2015.

And the projection gets rosier: the ArcView/New Frontier report only includes direct sales of marijuana. Legalization proponents argue that Massachusetts’ newly-legitimized marijuana industry will create countless additional job opportunities, for companies manufacturing accessories like vaporizers to firms that provide marketing, consulting, logistics, and transportation services to marijuana operations.

“As one of only two states on the East Coast to legalize cannabis for adult use, Massachusetts represents a significant opportunity for business owners and entrepreneurs,” says New Frontier Data CEO Giadha Aguirre DeCarcer.

However, much depends on the final regulatory structure of Massachusetts’ recreational marijuana market. Although the broad parameters of the new law create an opportunity for an open and expansive market, the actions of the Legislature, local municipalities and zoning authorities will ultimately determine whether ArcView and New Frontier’s predictions come to pass.

The Legislature has delayed implementation of the licensing apparatus of recreational businesses by six months, already, with more changes to come.  License caps, lifting of the law’s restrictions on municipal prohibitions of marijuana sales, or other changes could diminish the revenue projections, and their multiplier effects.

While the new law, entitled The Regulation and Taxation of Marijuana Act, limits – without preempting – municipalities’ ability to regulate marijuana, the possibility for thorny restrictions and outright prohibition still exists. For instance, cities and towns may ban marijuana establishments altogether by majority vote. (G.L. c. 94G, § 3). They can also place reasonable time, place, and manner restrictions on marijuana establishments so long as those restrictions are not “unreasonably impracticable.”[1]

The Act also establishes a Cannabis Control Commission with the authority to license, regulate, and tax retail recreational marijuana establishments “in a manner similar to alcohol.” The three-person Commission is tasked with creating a regulatory structure out of whole cloth, including licensing procedures and fees; health, safety, and sanitation standards; packaging and labeling requirements; reasonable advertising restrictions; and enforcement regulations. How long it will take the Commission to create this regulatory structure, and what its final form will be, is anyone’s guess. As legal commentators have pointed out, the opportunity for foot-dragging certainly exists.

Come 2020, Massachusetts may be home to a $1.1 billion cannabis industry. Or it may not. Everything depends on the Legislature, the Cannabis Control Commission and local zoning authorities.

[1] Per the Act, an “unreasonable” restriction is one that “subject[s] licensees to an unreasonable risk or require[s] such high investment of risk, money, time or any other resource or asset” such that “a reasonably prudent businesses person” would not go forward with the venture. (G.L. c. 94G, § 1).

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