The U.S. cannabis market continues to boom to little surprise, but some experts caution that growth may decline in 2022.
With U.S. sales topping $37.4 billion in 2021, according to a Prohibition Partners’ report, most see the new year as another success for pot. Still, regulations on federal and local levels could kneecap America’s full potential.
Another Strong Year Expected, But Growth Could Slow: Sources across the board told Benzinga that they agreed with the optimistic projection for 2022.
What’s in store
Jessica Billingsley, CEO of enterprise cannabis tech platform Akerna Corp, said the first week of January helped bolster optimism, noting Montana’s strong adult use opening. She also highlighted positive signs in the medical space, with Louisiana now allowing cannabis flower in medical products.
Billingsley said the U.S. would continue to provide a massive market impact, but its potential remains stymied by federal prohibition.
“An entire untapped national economy in the U.S. can come from legal cannabis, including job creation and tax revenue, that we are missing out on by not federally legalizing cannabis,” Billingsley said.
Andrew Fuller, senior market research analyst for data firm Headset hopes that bipartisan citizen support propels at least some form of federal reform in 2022.
“At a minimum, we are hoping for some progress around safe banking in lieu of more comprehensive cannabis reform including rescheduling cannabis, expungement of non-violent cannabis offenses and a focus on social equity,” Fuller noted.
Other factors have some cautioning that this year’s growth may not match previous years’ totals.
“2022 will be another strong year of growth, but the industry’s rate of year-on-year growth may be slower than in 2021,” said ᐧAlex Feldman, general manager at B2B platform LeafLink, highlighting variables like abating pricing headwinds and state marketplace implementations as factors to consider.
Potential Across Much Of The Nation: Sources mentioned nearly every corner of the nation in terms of market growth potential.
Most expect established western marketplaces, including California and Colorado, to continue leading in sales.
California grossed $1.2 billion in taxable sales during Q3 2021, down from the previous quarter’s $1.4 billion total. Colorado generated $1.9 billion in sales between January and October of 2021.
Emerging and soon-to-be-implemented markets were a topic of regular discussion as well. Headset’s Fuller predicts a substantial year for Arizona, Illinois, Massachusetts and Michigan.
“In 2022, we are excited to welcome new markets including New Mexico, New Jersey, Montana and Connecticut hopefully,” he added.
LeafLink’s Feldman expects Midwest markets like Missouri and Michigan to continue to grow, adding that Nevada could see some incremental growth depending on tourism and that Arizona should continue to see strong demand.
2022 and beyond
Looking beyond 2022, several sources also highlighted their excitement for the Northeast to come online. At the same time, states like Ohio, Florida and several others may soon pass adult use reform.
Lastly, Billingsley highlighted her Deep South roots and the incremental reforms underway in the region. If reform were to pass, she expects Southern cultivators will excel.
“Cannabis’ potential revenue per acre blows all of the south’s commodity crops out of the water, but that’s only the start of the number of economic benefits that come with legalization,” she said.
Sales aren’t the only indicator to consider, as pleas from California operators were the latest cry for help from a market struggling with regulations and the legacy market.
Billingsley didn’t touch on adult use models but highlighted Pennsylvania’s medical model as one to replicate.
“The Pennsylvania Medical Marijuana Advisory Board is driving cutting-edge research in the medicinal cannabis space, has social equity programs, and is one of the few states to have endorsed cannabis as a treatment for opioid use disorder,” Billingsley explained.
Regulations Remain A Primary Concern: Another strong sales year seems likely, but specific marketplaces could struggle as a result of various regulatory hurdles.
Marion Mariathasan, co-founder and CEO of industry regulatory and compliance software brand Simplifya, is one company attempting to help federal and local entities looking to avoid the myriad of headaches in what he called “fractured states” like California.
“We believe that as more comprehensive regulations, regtech tools and payment systems roll out into the marketplace – that too will fuel the sector’s growth,” he said.
Billingsley added that the pandemic and regulatory changes to state programs coupled with limited licensing have delayed implementation and stunted growth in several states, stressing that a slow program rollout can prove costly.
“These states risk losing out on the vast economic potentials that legalizing cannabis can bring: jobs, taxes, tourism, and more,” Billingsley concluded.